The buyside faces an array of challenges heading into 2012, including regulation, compliance and transaction headaches that are forcing funds to change they think about trading and costs.

As trading technology has evolved and advanced, execution speed for large hedge funds and other time-sensitive buyside trading desks has become paramount. Gone are discussions of seconds and milliseconds – we are living in a world where discussing “sub-300 microsecond trades” is rapidly becoming the norm.

But microsecond execution and technology aren’t the proper fit for all firms. There are two major factors at hand that force the decision of what type of execution is best for a fund: cost and investment strategy.

“Everything is different and everyone has a specific need,” a consultant who spent 20 years at a major hedge fund told Markets Media. “For instance: you have a small fund that’s under $20 million and while they essentially day trade, they’re not a market maker or quickly capturing spreads. They don’t need to shell out the high cost for low-latency trading and infrastructure up front.”

“On the other side, however, you have a larger fund like the one I spent time at where they will throw every dollar into technology and compliance because of the amount of power they wield in the markets. That buying power combined with increasingly strict oversight from regulators means they have to have top-notch, best execution,” he added.

Executing brokers competing for business are finding that sometimes, being the fastest isn’t what a client wants. Price and quality of execution are critical for flow traders and desks that are trading volume.

Despite the technological advances in the exchange world over the years, there’s a clear reason why the New York Stock Exchange, Chicago Board Options Exchange and even the Philadelphia Stock Exchange still maintain a floor trading operation. Large, complicated orders that need to be executed at a specific price require high touch methods. “It all comes down to what the client needs,” said the consultant.