With the number of traditional equities franchises shrinking, brokers are looking to cash in on this gap in the market and drive up equities revenues by white-labelling prop trading tools. Richard Partington, Financial News, looks at the brokers that are doing this and how white-labelling works in practise.
An increasing complex trading environment and dwindling equity volumes have forced brokers to look at alternative ways to drive up their revenues. Some banks are reportedly making up to 20% of their revenues from white-labelling, and Bradley Wood, Partner, GreySpark, supports this strategy demonstrating that in reality this garners liquidity for both them and their clients.
Bradley explains that the banks can provide low-cost execution services to anybody who wants these services as it brings in additional flow, meaning more liquidity. He outlines how white-labelled algos are used to manage the execution of large orders selling into the market, allowing firms to manage the size of the trade without its true volume being disclosed to the market.
The article goes on to list the benefits which are being felt by the recipients of the products, including the mid-tiers organisations.