Herald Online – According to the eighth annual benchmark study from TABB Group, “US Hedge Fund Equity Trading 2013: Better Practices for the Age of Transparency,” regulatory scrutiny by the SEC and the brutal dogfight for scarce alpha are pushing US hedge funds to implement a more rigorous and formalized trading process. At the same time, hedge funds are working with their sell side counterparts to bring additional cost-efficiency to an industry seeing revenues fall for the fourth straight year. The industry needs head traders to continually act as evangelizers for better practices.
According to TABB, each decision in the trading process must be empirically defensible and contribute positive value to alpha capture. Where possible, an electronic trail of decisions made by portfolio managers and buy-side traders as well as the surrounding communication should be captured and analyzed, everything from the broker vote and the timing of trades, to the use of dark pools and commission-sharing agreements (CSAs).