The Multiplier Effect: Increased Trading Efficiency Through Outsourcing

The asset management industry is undergoing a shift, driven by the desire to reduce operational silos, control costs, and adapt to rapidly evolving market conditions. In this landscape, asset managers are increasingly re-evaluating their operational frameworks, seeking ways to simplify their service provider relationships while enhancing their strategic alignment.  

One key trend emerging is the drive to consolidate service providers. Rather than relying on various providers for individual services, managers are turning to strategic partnerships that can streamline workflows, integrate services, and offer holistic governance across multiple aspects of their business. This 'multiplier effect' enables asset managers to bundle services, creating opportunities for a balanced operating model that can leverage fewer partners, ultimately fostering a more efficient and agile operating model.

We spoke with Stephanie Farrell, Head of Integrated Trading Solutions, Americas, Amy Thorne, Head of Integrated Trading Solutions, EMEA and Robert Arnott, Head of Brokerage, APAC about the added value asset managers can achieve by evaluating their current service provider stack.

How can asset managers benefit from an outsourced trading solution that goes beyond basic execution to encompass the entire trade lifecycle?  

Stephanie Farrell: Leveraging a solution that encompasses the entire trade lifecycle, rather than one that stops at execution, enables greater efficiency. A comprehensive outsourced trading desk with 24/6 “follow-the-sun” global coverage across equities, fixed income and options offers continuous market access. Additionally, having robust middle-office capabilities, from comprehensive trade settlement support to streamlining post-trade processes, helps reduce operational burdens on managers. And finally, a provider that supports global foreign exchange (FX) is essential for managing base currency exposure and enabling seamless cross-border transactions.  

Rob Arnott: Traditional trading models often focus narrowly on execution, with limited integration between pre-trade, execution, and post-trade processes. This fragmented approach may require asset managers to coordinate multiple providers, which creates operational silos and inefficiencies. Asset managers should consider full trade lifecycle support, including pre-trade analytics, post-trade settlement and trade cost analysis (TCA) to streamline processes and improve operations.

Northern Trust’s Integrated Trading Solutions (ITS) combines all these elements, extending beyond traditional trade execution to deliver a holistic solution that simplifies workflows, enhances efficiency, and provides strategic value at every stage of the trade lifecycle.

What unique or regional challenges are asset managers facing and how can an outsourced trading provider help? 

Arnott: A key regional challenge is the differences in global market structures. For example, in the APAC region, where markets are bundled, asset managers should consider outsourced providers that support service adoption in a way that aligns with this bundled approach. In addition, the ability to facilitate commission sharing agreements (CSAs) is vital as it allows asset managers to collect soft dollars for research within these bundled markets, enhancing value without disrupting established practices.

Amy Thorne:  Another market structure challenge from an EMEA as well as APAC perspective has been the shift to T+1 settlement in the U.S. The reduced settlement cycle increased the pressure on asset managers to execute trades quickly and accurately. By outsourcing, firms in these regions can efficiently tap into the U.S. markets without the burden of expanding their internal capabilities. They gain access to experienced traders and advanced infrastructure, ensuring timely execution and the ability to adapt swiftly to market changes, all while focusing on their core investment strategies.

How can consolidating service providers help asset managers build a more effective and efficient overall operating model? 

Farrell: Asset managers are increasingly evaluating their service provider relationships, seeking to consolidate and form strategic partnerships where multiple aspects of their business flow through a central provider. This creates what I like to call the ‘multiplier effect’ which helps improve operating models. By working with a single provider across the trade lifecycle – including middle- and back-office functions – managers can streamline workflows, reduce operational complexity and enhance governance.

This integrated approach can optimize operations by aligning processes, enabling better oversight, greater efficiency and strategic alignment. It also reduces the time and effort required to manage multiple providers, allowing managers to focus on driving value across their organization.

Thorne: Asset managers should look for an outsourced trading provider with a holistic approach that is modular and scalable, so they can leverage the specific services they need while maintaining flexibility as their business evolves. This approach reduces the reliance on multiple providers, streamlining operations and making it easier to adapt to changing market conditions and business needs.

Can you share a specific example where Northern Trust’s approach led to a significant positive outcome for a client?

Farrell: Since joining our platform, one of our clients has completed three acquisitions. These acquisitions have expanded their market presence and as a result increased their need for our solutions. They've expanded into options trading and have been able to seamlessly transition onto our options trading desk. They have also entered new markets, including energy and master limited partnerships (MLPs), which was possible by the depth of expertise and infrastructure of our trading team, enabling us to effectively support their growth. This has been a great example of an outsourced trading relationship that has expanded into a more holistic partnership, beyond just trading, where we support their overall strategic initiatives.

Thorne: We’ve also experienced more interest in our trading solution from clients who had been focused on equities-only but wanted to enter fixed income. For them to expand into this new asset class on their own would have required increasing staff, expanding expertise and upgrading technology. However, they were already a part of our outsourced trading platform and were able to simply leverage the other sides of our desk. They were able to enter the fixed income market efficiently and quickly, reaping the benefits without having to build new capabilities or hire fixed income traders. This resulted in a much quicker go to market, allowing our clients to be more offensive in their decision-making.

Arnott: In APAC, a Global Family Office (GFO) client with complex trading needs across multiple markets chose our ITS solutions to streamline their workflows and enhance execution. Unlike traditional asset managers, GFOs often operate with lean internal teams while managing a diverse range of asset classes and global markets, making operational flexibility and efficiency critical.

Their key challenges were managing workflows when their offices were closed on public holidays and needing additional support matching trades. With our global, 24/6 desk, staffing gaps and trade allocations are no longer an issue for them. Trades are pre-allocated, and our matching and clearing services enable seamless settlement. This has been especially beneficial with the transition to T+1 settlement in the U.S., as we manage SWIFT messaging and custody integration as part of our service.

They were also concerned about costs associated with services like research and corporate access. To address these concerns, we implemented a CSA for their Australian and New Zealand trades. While they originally requested payments to 12 brokers, we suggested they conduct an analysis of their brokers to determine if there was value in keeping relationships with all of them. As a result, they refined their list to three, significantly reducing their overall commissions while maintaining access to the insights they needed. Ultimately, outsourcing provided them with a more streamlined, cost effective and resilient trading solution tailored to their unique needs.

Reimagining operational efficiency

In today’s evolving market, outsourced trading is increasingly seen as a strategic move because it enhances execution efficiency, reduces operational complexity and allows asset managers to focus on core investment decisions. Asset managers are also recognizing the benefits of consolidating providers, fostering a more holistic relationship with a single partner where they can leverage their scale, expertise and market access.

Managing multiple relationships can lead to operational inefficiencies, higher costs and fragmented workflows that can hinder agility and decision-making. By streamlining to a single, integrated provider, asset managers can gain a clearer, more coordinated approach to their operations and entire trade lifecycle.