Are Asset Managers using KYB to CYA?

Updated February 25, 2021

By: Bill Stephenson

Asset managers are coalescing behind a new standard questionnaire in Europe and the US as part of their KYB (Know Your Broker) process. No, this isn’t just for electronic trading when they directly access a broker’s algorithms, dark pools, or DMA pipes.  Asset managers are thinking more broadly around transparency and accountability for how their orders are routed within complex market ecosystems, including the broker’s internal crossing mechanisms.  This is causing a deeper look at best execution protocols.  Some brokers, especially those that are primarily ‘high touch’, have been caught flat-footed by these requests as they have never needed to respond to such detailed requests from their institutional customers.   

For instance, asset managers want to better understand how their brokers utilize automated surveillance, manage information barriers, leverage volume tiers in routing tables, and maintain client confidentiality.   As achieving best execution becomes more complicated, the need to be able to document, audit, and centralize this process becomes an exceedingly important part of the process.  Asset managers know that this isn’t just about CYA but about understanding their broker’s practices and capabilities that will ultimately create better performance outcomes for their clients.

Plia will help brokers centralize requests from their institutional clients and scale responses across all their clients. It will also help asset managers organize and compare capabilities that align with their process.  For more on KYB, visit: Know Your Broker to Achieve BestEx