Is the Buy Side the New Sell Side?

In an exclusive article by Richard Balarkas, a renowned independent consultant and former Global Head of Electronic Trading at Credit Suisse, find out why he thinks the buy-side is overpowering sell-side trading. Read the full article to learn more about what a ‘liquidity bear’ is and why Richard thinks it is the root cause of stress in the financial markets today.

"In 2012 Angela Merkel said the Euro crisis would last another five years. In 2011 she said the European debt crisis would last at least a decade. Other commentators speak of the debt crisis lasting 20 years. Yet just five years on from the events which marked the start of the near disintegration of the global banking system a casual observer might be forgiven for thinking that the only crisis now worth worrying about is the next one.

The mood music is predominantly upbeat. Indices globally have been nudging record highs. Spain is showing signs of recovery, Berlusconi’s attempt to demolish any remaining credibility in the Italian political system has failed, and there are even headlines about hedge funds buying into Greek banks. High profile IPO’s like Twitter and Royal Mail have helped to rally sentiment, and emerging markets havehad time not only to rally but to fall out of favour again. To cap it all the IMF have just endorsed Osborne’s austerity plan and upped its estimates for UK economic growth, and to celebrate the UK government are going to guarantee mortgages for people who otherwise wouldn’t be able to afford them. If the financial crisis gave Osborne a hangover, then this surely qualifies as “a hair of the dog”.

Yet all this is of little relevance to traders. The bulls may be shouting loudest, but what matters to trading firms is that the markets are stuck in a long term “Liquidity bear”. The fundamental problem is simply that there is not enough trading taking place."

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