--- title: The Buy Side Isn’t Buying It (by Bill Harts, Modern Markets Initiative) description: The Buy Side Isn’t Buying It (by Bill Harts, Modern Markets Initiative) --- ![websites-group](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/new-MMG-01.svg) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-new-marketsmedia-logo.svg)](https://www.marketsmedia.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-traders-redlogo.svg)](https://www.tradersmagazine.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-bestexe-logo.svg)](https://www.bestexecution.net/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-menu-fidesk-logo.svg)](https://www.fixglobal.com/) [![](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/dropdown-fixglobal-new-logo.svg)](https://www.fixglobal.com/) - [*Facebook*](https://www.facebook.com/MarketsMedia/) - [*Twitter*](https://twitter.com/marketsmedia) - [*Linkedin*](https://www.linkedin.com/company/markets-media-llc) - [Newsletter](https://articles.marketsmedia.com/buy-side-isnt-buying-by-bill-harts-modern-markets-initiative#popup-newsletter) #### Want the latest news on securities markets -- FREE? Sign up to receive exclusive articles on topics including: - Equity market structure - Profiles of buy-side investment firms - The evolution of multi-asset-class trading - Regulation and its implications for markets - The search for liquidity in fixed income markets - The convergence of fintech and capital markets Select one or more newsletters you would like to receive: menu [![Markerts media](https://articles.marketsmedia.com/hubfs/raw_assets/public/MarketsMedia_August2021/images/header%20logo.svg "Markerts media")](https://articles.marketsmedia.com/) - [Contributors Corner](https://articles.marketsmedia.com/tag/contributors-corner) - Contributors Corner - The Buy Side Isn’t Buying It (by Bill Harts, Modern Markets Initiative) Search - [Home](https://articles.marketsmedia.com/) - [Trending](https://articles.marketsmedia.com/tag/trending) - [Featured](https://articles.marketsmedia.com/tag/daily-email-feature) - [Sectors](https://articles.marketsmedia.com/tag/sectors) - [From The Markets](https://articles.marketsmedia.com/tag/from-the-markets) - [AWARDS](https://articles.marketsmedia.com/tag/events) - [Newsletter](https://awards.marketsmedia.com/newsletter-sign-up) - [Newsletter](https://articles.marketsmedia.com/buy-side-isnt-buying-by-bill-harts-modern-markets-initiative#popup-newsletter) Hide search Search - NewsLetter ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/trading-up-occ-iex-select-board-members-citadel-lands-lieblich-573x379-Jul-07-2022-09-34-11-57-AM.jpg) [ON THE MOVE: Citi Hires Artie Ambrose;...](https://articles.marketsmedia.com/on-the-move-citi-hires-artie-ambrose-natalie-a-brown-to-mesirow) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/Depositphotos_445735906_L.jpg) [Trading Adapts to ESG and Sustainable...](https://articles.marketsmedia.com/trading-adapts-to-esg-and-sustainable-investing) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/iStock-917493152-Jul-07-2022-09-34-19-09-AM.jpg) [Focus on FX Execution Connectivity](https://articles.marketsmedia.com/focus-on-fx-execution-connectivity) ![](https://articles.marketsmedia.com/hubfs/Imported_Blog_Media/Depositphotos_333839538_L.jpg) [TRACE Turns 20](https://articles.marketsmedia.com/trace-turns-20) 11.16.2016 By John D'Antona Contributors Corner # The Buy Side Isn’t Buying It (by Bill Harts, Modern Markets Initiative) 11.16.2016 By John D'Antona [Share](https://www.facebook.com/share.php?u=https://articles.marketsmedia.com/buy-side-isnt-buying-by-bill-harts-modern-markets-initiative) [Tweet](https://twitter.com/intent/tweet?text=US+ETFs+Have+Record+Net+Inflows&url=https://articles.marketsmedia.com/buy-side-isnt-buying-by-bill-harts-modern-markets-initiative) [Share](https://www.linkedin.com/cws/share?url=https://articles.marketsmedia.com/buy-side-isnt-buying-by-bill-harts-modern-markets-initiative) If you’ve listened to the market structure debate over the past few years, you’d think large, institutional investors — the “buy side” — desperately need ‘speed bumps’ and other barriers to protect them from high frequency trading (HFT). The discussion has been more about demonizing than data, except that it ultimately led to a well-publicized regulatory exemption for intentional delays that has only served to make the markets more labyrinth than linear. But in the background, a quieter and more important development is changing the buy side/HFT relationship and it is redefining the nature of liquidity provision. Despite lots of ‘Chicken Little’ warnings, large asset managers are realizing the benefits of HFT tools – and the liquidity providers that use them. They are forging new partnerships while choosing to ignore what famed investor [Cliff Asness calls](http://www.wsj.com/articles/SB10001424052702303978304579475102237652362) the “fusillade of hyperbole about HFT practices.” And it is easy to see why. As [Bloomberg reported](http://www.bloomberg.com/news/articles/2016-10-26/ignore-the-anti-hft-crowd-wall-street-s-speed-demons-are-heroes) in its story *Wall Street’s Speed Demons Are Heroes,* “Since 2013, positive research (on the role of HFT in the markets) has outnumbered negative by a 2-1 margin.” A steady stream of news tells of greater collaboration between the buy side and HFT intermediaries. Daniel Coleman, CEO of trading firm KCG, [said](http://seekingalpha.com/article/3966737-kcgs-kcg-ceo-daniel-coleman-q1-2016-results-earnings-call-transcript) his company continues “to grow algorithmic trading among the leading U.S. asset managers.” Citadel Securities has [become a leader](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2745367) in the interest rate swaps market, streaming prices directly to institutional clients. And high-frequency trading firm Virtu launched a “[velvet rope](http://www.reuters.com/article/virtu-fincl-execution-idUSL2N15J322)” service to execute trades for “select institutional investors” and has partnered with [J.P. Morgan Chase](http://www.wsj.com/articles/high-frequency-trading-firm-virtu-partners-with-j-p-morgan-chase-1470237145), [T. Rowe Price](http://www.wsj.com/articles/t-rowe-price-tests-high-speed-trading-1430426757), and German asset manager [Union Investment](http://www.efinancialnews.com/story/2016-10-17/hft-firm-virtu-in-talks-to-partner-with-union). State Street recently [released a report](http://forms.itracmediav5.com/statestreet/liquidity/forms/register.html) that found 48% of buy side institutions say they will increase their use of electronic trading platforms in order to access more liquidity. Many of these firms would even consider becoming market makers themselves, but we suspect the technology costs and complexity of market structure keep them away. So why not “outsource” market making to the firms with the best HFT tools? Perhaps the biggest factor weighed by any market intermediary when supplying liquidity is the fear of getting run over by large, unforeseen institutional trades. It seems reasonable that if that risk could be tempered through a closer relationship between the buy side and HFT intermediaries, more liquidity could be deployed. When institutions send orders directly to HFT firms, both parties know who they’re dealing with, fair terms of engagement can be reached and institutions will likely end up paying less. This is the logical evolution for the markets and a good supplement to the more traditional strategies of trading on exchanges and ATSs. On those venues, HFT market makers create much of the liquidity that keeps trading costs low for the buy side. It’s why we have the best markets ever for investors. While there will always be a place for institutions to find natural block liquidity amongst themselves, in most cases they will need the help of HFT intermediaries. Judging by the news lately, it seems to be an arrangement that is working well. Perhaps that’s why the buy side isn’t buying the anti-HFT talk anymore. [Share](https://www.facebook.com/share.php?u=https://articles.marketsmedia.com/buy-side-isnt-buying-by-bill-harts-modern-markets-initiative) [Tweet](https://twitter.com/intent/tweet?text=US+ETFs+Have+Record+Net+Inflows&url=https://articles.marketsmedia.com/buy-side-isnt-buying-by-bill-harts-modern-markets-initiative) [Share](https://www.linkedin.com/cws/share?url=https://articles.marketsmedia.com/buy-side-isnt-buying-by-bill-harts-modern-markets-initiative) ![email](https://articles.marketsmedia.com/hubfs/Markets%20Media/email.svg) ### NEWSLETTER SIGN UP And receive exclusive articles on securities markets ### Related articles 1. 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