Best Execution looks at how smart order routing (SOR) has become an integral part of best execution.
As the US markets began to fragment, SOR technology rose in importance as traders sought to find the best price for their trade and began to shop around on a variety of lit and dark markets. GreySpark maintains early on in the article that SOR is no longer a optional extra for traders, and should form part of the standard offering by brokers if they wish to remain competitive to their clients and provide them with direct market access and quality execution services.
GreySpark has picked out a trend entitled “SOR Squared” – the idea that fund management execution desks route orders between several brokers based on the quality of execution they receive from each broker. The emphasis therefore now lies more on getting the best service, rather than the best execution in the popular sense of the word.
For large buy-side firms who spend great deal on execution services, this makes a lot of sense. According to GreySpark, the infrastructure is available in SOR technology packages, but the difficulty comes in using that to select the correct routing decisions.