Today’s trading environment is ring-fenced by problems, but there are solutions and technologies that can revitalise trading and make it fit for purpose for next generation traders who are already immersed in technology. Presenting a keynote address at A-Team Group’s Intelligent Trading Summit, Steve Grob, director of group strategy at Fidessa, described what is going wrong in trading, solutions to solve the problems and the emergence of intelligent trading.
Noting today’s problems as regulatory requirements, limited use of varied data and an erosion of trust in trading, Grob explained: “Regulatory requirements have caused cognitive dissonance, which means real understanding of the complexity of trading markets has been replaced with beliefs. This needs to be challenged. In terms of data, traders need to look further afield at emerging events and unstructured data. Structured data can be believed, but everybody has it. Unstructured data is gold, but the question is how to mine it and check it for accuracy. The erosion of trust in the market is making buy-side traders unsure about pressing the button on trades.”
Finding solutions to these problems, Grob said the need is to move away from single point solutions that solve single point problems and move towards an holistic view of the pre-trade, at trade and post-trade cycle. He also promoted the importance of combining structured and unstructured data, and the need to encourage collaboration between the buy and sell sides. These changes, he said, would eradicate what is wrong with the market today and lead to intelligent trading in action.
Going on to describe the details of intelligent trading, Grob discussed the need for transparency, not only in regulatory compliance, but also in timely feedback to clients; highly graphical solutions that are integrated in the trading workflow and will satisfy next generation traders; and proactive exception handling including in-flight alerts, information on why something has happened rather than simply what has happened, and self learning for traders based on feedback on what they are doing.
In an asset converged world, traded on lit markets and cleared centrally, Grob also noted the need for more system flexibility, which could be provided by libraries of downloadable tools and would deliver customised views of trading, as well as support for those providing, taking or matching liquidity. On the thorny issue of restoring trust in trading, his suggestions included sharing apps and trading interests within and between firms. He commented: “The need is for real liquidity backed up by real merchandise. Children build trust and relationships electronically, but this has not yet happened in the trading environment.”
Aggregating these ideas, Grob said: “If you think things are complicated now, just wait, there will be huge changes in how technology evolves. Products for the buy or sell side will become irrelevant and the need will be for asset class agnostic tools that work in a robust workflow, although tools will still be only as good as the people who use them.”
Answering an audience question about next generation, tech savvy traders and how investment banks will accommodate them, Grob concluded: “This could be a problem as the last thing investment banks want is people bringing in their own devices, but they will have to find a way to support this. Banks need to make sure that trading on all devices is audited and acknowledge that traders may use the same devices to watch television on the train home. Next generation traders won’t accept anything less.”