Below courtesy of excerpt from front page article by Dan Strumpf “Markets Keeping Faith in Humanity” in July 29 WSJ Money & Investing section.

“After years of ceding ground to trading via computer programs, buying and selling stock the old-fashioned way—over the phone or its modern equivalent of instant messaging—is holding its own…

“…Last year, about 55% of stock trading by dollar volume took place in a “high-touch” fashion, among human beings communicating one on one and agreeing on the price, according to consulting firm Greenwich Associates, which surveys hundreds of large investors every year. That is still down from the past two years, but only slightly. The figure was 57% in 2012 and 56% in 2011. In 2004, before the introduction of new trading technologies and the proliferation of high-speed trading, the number was 71%….

“…Big money managers cite several reasons for continuing to keep human trading in their tool kits, even though it costs more than computer trading. They include the bewildering spider web of stock exchanges, concerns about aggressive high-frequency traders, and the downturn in volumes that has made it challenging to complete larger trades. And, in many cases, investors say they value the color on how, where and why a stock is trading that only human traders can provide…”

Noted Michael Wallach, CEO of agency-only execution firm WallachBeth Capital, the institutional brokerage specializing in ETFs, institutional options and a provider of independent equity research within the healthcare sector, “The WSJ article underscored important talking points voiced by a broad universe of investment managers who we speak with, most notably their recognition that while screen-based markets provide context, those markets are not only fragmented, but are 1-dimensional when considering the trading landscape is always 3-dimensional.”

Added Wallach, “Managers who position themselves as fiduciaries should require their brokers to conform to best practices, which includes providing both color and navigation skills away from the screen in order to source true liquidity at the best available prices.” Continue reading →