Businessmen trading stock looking at graphs indexes and numbers on multiple computer screens

Buy-side firms are spending more on their trading desks, with technology costs driving the growth, according to new research from Greenwich Associates.

The Stamford, Ct.-based research firm reported that the budgets of buy-side trading desks rose by 4% last year in the U.S. and Europe.

Despite the increased spending, however, head counts on institutional trading desks remained steady year over year — indicating that higher tech spending was behind the growth.

Greenwich also found that firms devoted greater shares of their spending to technology in less liquid asset classes.

For instance, Greenwich reported that fixed-income trading desks allocate 41% of their budgets to tech, versus 36% in equity trading.

“This trend could indicate that when it comes to sourcing liquidity, the buy side finds that a marginal dollar spent on technology returns more than a marginal dollar spent on talent,” said Brad Tingley, analyst at Greenwich Associates.

At the same time, the firm also said that its data shows “technology and automation continue to augment human traders rather than replace them.”

It noted that 44% of buy-side traders are now active in multiple asset classes, and that more than two-thirds of them trade multiple instrument types.

“Clearly, traders are seeing benefits from having more flexibility in how they achieve desired exposures and this flexibility has contributed to improved [profit and loss] performance,” said Tingley.

The research also found that market data terminals are the largest tech cost for trading desks, accounting for an average 35% of total tech budgets.

“Interestingly, order management systems represent a smaller expense for trading desks today than in 2016, yet are more common now than before,” Greenwich said.