New York - Execution services are considered the top differentiator by 87% of broker-dealers, exceeding liquidity management and algorithmic trading, according to a report by Aite Group.

Mark Palmer, CEO at StreamBase, said it was "remarkable" that execution consulting had eclipsed the importance of broker-supplied algorithms.

"With automated trading levels at an all-time high, broker-dealers now must differentiate themselves based on the real-time insight they can provide buy-side clients. This is a new way of thinking for many firms, and ECS groups will demand a new kind of real-time analytics platform as a result."

Nearly four out of five respondents believed active alerting was the most important service of execution consulting services. More than half the respondents identified the other key elements as pre-trade and post-trade analysis, a single view of client data, and real-time trade analysis.

Regulatory changes and the growing demand for transparency have imposed considerable requirements on sell-side firms, leading to expectations of real time risk management, reporting and surveillance, Aite said.

The majority of respondents said current service levels were unacceptable. Many had a 3-5 day turnaround time to buy-side inquiries and most expected near real-time support and responses.

"The main challenge for tier 1 and tier 2 brokers is that the decentralized trading infrastructure creates complexity and latency for firms seeking to identify and address issues during the lifecycle of a trade," said Sang Lee, managing partner at Aite.

"Many brokers have dozens of systems connected to various liquidity venues, data sources and databases. The key to building a scalable and sustainable execution consulting service is to effectively integrate these systems and deliver customized and relevant information to sales traders, quants, risk managers and analysts in real-time." he continued