BlackRock's Head of Global Trading Supurna VedBrat said buy-side investment managers can take on an alternative role in disclosing prices as opposed to making markets, according to a report in The TRADE.
Buy side firms are increasingly challenged to find liquidity in certain asset classes, such as fixed income and derivatives, given that traditional sell-side liquidity providers are capital constrained and can't warehouse risk like they used to.
“You are seeing some of the proprietary trading firms becoming more active market makers. I can see the buy-side taking a more active role as a price maker,” VedBrat told The TRADE Derivatives.
“A price maker is different from a market maker – as a price maker you are willing to declare the price at which you will buy or sell a security," she said. "Being a price maker can be beneficial if there is a market event or for liquidity constraint products.”
VedBrat has not ruled out using new entrants as market makers, in which the global asset manager “will look at all forms of liquidity.”
“If the proprietary trading firms provide liquidity in markets under certain conditions and it is beneficial to our clients, we will explore using it, especially in products or markets where there are liquidity constraints,” she said.