Street Smarts: Electronic Distribution-The Smart Future of Wall Street

May 6, 2016

Electronic Distribution – The Smart Future of Wall Street is the final article installment of a four-part Brokerage: Analysis and Execution series that explored the rise of electronic trading, the commoditization of execution and the future of Wall Street. Read the previous posts: Rise of Trading and Equity Research, Commoditization of Electronic Trading and Content Advantage, Adding Context to Trading Execution. Street Smarts insights are written by Blair Livingston, Chief Executive Officer and Founder, Street Contxt.

At Street Contxt, we believe electronic content distribution is the next ecosystem shift that will shape the Street over the next 5-10 years. Content will continue to grow in importance to both the brokerage and the client. The ecosystem will evolve with the support and assistance of powerful new technology.

Brokerages will become more intelligent about how they cover the bulk of their clients. Machine learning assistance and automation will guide the right content to the right client across the entire firm, making every touch point a client has with a brokerage exponentially more intelligent and impactful. Each interaction will influence future activity based on the reception of the interaction, and will drive further engagement and services such as a corporate access or conference invitations that will be based on the previous engagement.

Select clients will still have human coverage and interaction, but it will be the exception not the rule. Technology will grow smarter in mapping predictions of client interest to get the right information in front of the buy side without delays caused by human limitations.

Advantages of the New Data Set for BrokeragesEquity research and trading

Brokerages will use this new dataset to not only give each individual client an exceptional and totally customized experience, but also to make smarter business decisions across the firm. They will be armed with information on when to hire and expand coverage, where to cut back, what resources to invest in, or other day to day activities. The Street will experience a new level of sophistication and data-driven scale. Brokerages will be able to customize and personalize the experience for every single client they engage with – automatically.

The data will help brokerages understand client consumption, in order to have objective discussions founded in metrics related to consumption and payment. As content and analysis becomes the dominant service over execution, measuring and understanding consumption will be important to understand a client’s economic relationship.

Evolution of Technology to Manage Content and Commision

For clients, as content becomes increasingly important but also abundant, they will need new systems to manage commentary. This will include creating layers to manage content across various teams, geographies, and even funds. Setting custom filters and alerts, giving users a totally personalized and easily updatable experience. This single funnel will also enable intelligent content recommendation and deep personalization for each individual consumer.

Additionally, they will need new technologies to help them manage what they are consuming, and make them aware of what they haven’t yet consumed, but likely should – whether from a new brokerage, geography, or source. Finally, as content and analysis become the dominant service over execution, they will need new ways to measure the relative value add of all content (across the spectrum of content types), and tie it into their commission allocation reasoning and process.

Fundamentally, content and analysis is becoming the dominant service on Wall Street, as electronic execution becomes commoditized. Content management and smart distribution is perhaps the greatest source of revenue for brokerages, and the greatest available source of alpha for funds. Brokers will need to find new scalable ways of creating and distributing content, with less human involvement on the later part. Funds will need to find smarter ways to manage all the inbound content to drive returns, and reward positive contributors. Much of this will be done by applying best in breed practices and philosophies from the electronification of execution era (ex. Trade Cost Analysis) to content and content distribution and consumption.

A new ecosystem is emerging on Wall Street, with content at its core. Over the coming years, we’ll see how that the ecosystem takes a step towards an electronic and intelligent infrastructure, and how that changes the experience for both sides of the street, and the broader industry as a whole.

Read all the articles in the Brokerage: Analysis and Execution thought series.

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The Street Smarts insights are written by Blair Livingston, Chief Executive Officer and Founder, Street Contxt. Mr. Livingston has committed his expertise in market structure, financial technology, financial commentary and communication practices to shape a new, more effective capital markets system. Street Contxt helps to clarify an increasingly fragmented marketplace, connecting sell side content with the preferences of buy side participants. Connect with Blair Livingston on LinkedIn.