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We observed that lower program trading volume and increased short-term volatility might be products of fear that could leave as the “A” team rode back onto Wall Street. Or not.

September order flow resulted in no easing of tension. We observed lower Wholesale order flow (suggesting that buysiders continue to shrink their brokerage relationships and adopt direct-access models), higher Speculative trading (statistical arbitrage and other largely market-neutral trading), and a dearth at boutiques known for tying trading to research.

We don’t know if the low volume at research and trading shops means these firms are on the brink of disappearance – and by no means are we suggesting that – or simply that they’re farming out desks to trading specialists. We’ve heard that more firms are now trying to unbundle research from trading -- but a full step beyond Fidelity's push two years go, jettisoning trading rather than simply separating costs. It's a competitive business, complicated and regulated and ever more the domain of structured products, prime brokers and pure traders.

With the sellside conference season underway on Wall Street, Executives and Investor Relations Officers have been packing bags, staying in hotels and generally consuming the IR budget on gigs hosted by Bear Stearns, Citigroup, Bank of America and other sellside titans. It may be that these features of conventional IR have mostly gone the way of the NYSE specialist in significance, if not practice. To be blunt, we don’t see much trading correlation.

Consider this: If the buyside controlling the bulk of liquidity “invests” across the balance sheet with quantitatively driven black boxes, maybe it's better off to adopt some different strategies and tactics too, just like the buyside and sellside have. Consider narrowing and specifically measuring your sellside relationships against trading activity, focusing on different kinds of investors (different investment theses) on one side or the other of options expirations and FOMC meetings, and shaking up the timing of your investor-targeting activities for better measurement of results.

There are some things we do simply for relationships. But you may want to consider weighing this season what impact all that conventional time and effort had on your IR program.

About Author
Tim Quast is a fifteen-year Investor Relations veteran and founder and managing director of ModernIR.com, which parses and categorizes over a half-billion shares per week with its trading intelligence system, Equity Analysis. For more information please visit: modernir.com.

source:searchwarp.com