Can the buy side deliver on prices?

This year's congress promises to see many active panel debates and seminars on the key issues affecting the market structure as seen by the buy side. The event comes at a poignant time, with markets in a state of flux, as evidenced by the skyrocketing trade volumes, which have outstripped records set since last August at the spark of the US subprime mortgage crisis.

The congress hopes to tackle a huge array of issues facing the industry, including how the evolution of electronic trading across multiple asset classes has changed the buy side/sell side relationship. No doubt, some buy-side firms will question how sell-side firms still provide value-added services given this evolution.

Certainly, the list of demands could span a range of services, from proprietary research and capital introduction to technology, and credit and distribution networks. Chiefly, however, it will include market-making ability.

This raises a different wider question. Over the past few years buy-side traders have been campaigning for equal rights to participate across interbank platforms and contribute towards industry committees such as the New York Foreign Exchange Committee. They claim that the distinction between the buy and sell side has become blurred, as the buy side actively makes markets on platforms.

But initiatives to leverage this market-making capability have so far remained unsuccessful as seen by the failure of the recently launched anonymous trading platforms to blow away the industry with their explosive volumes one year on. This might have something to do with banks trading on platforms using interest-only application programming interfaces. Instead, at this time of heightened volatility and uncertainty, the platforms seeing record volumes are those that nurture the old relationship-based model of foreign exchange trading, where banks have to provide prices.

Understandably, there are questions over whether banks deserve this level of trust and credibility given last month's sale of Bear Stearns to JP Morgan. But banks will make prices when a price is needed - whether the same can be said for the buy side is an issue that should be addressed.