Advances in trading tools and technology have proven the greatest positive change to buy-side dealing desks in the last decade, results from theTRADEnews.com’s March poll have shown.
On the tenth anniversary of The TRADE’s launch, readers were asked what has been the most positive change for buy-side traders since 2004. An overwhelming majority of 87.18% of respondents selected ‘better tools and technology’, with ‘a deeper skill set on the dealing desk’ claiming 10.26% of responses and ‘greater autonomy over dealing decisions’, 2.56%.
Paul Squires, head of trading for AXA Investment Managers, told theTRADEnews.com that asset managers had incorporated a wealth of technology into the dealing desk, but expressed surprise at the skewed results. In particular, he thought autonomy would score higher, as buy-side traders have reduced their reliance on the sell-side.
Despite an industry focus on algorithmic trading, he said, broad advances in electronic trading in the last decade, including order management systems (OMS), have emerged as the greatest technological driver.
“Automation of trading generally has enabled the buy-side to accommodate exponentially more numbers of orders and a major factor of this is adopting an OMS with FIX capability that makes a small number of traders relatively volume insensitive,” he said, adding that the modern role of the buy-side trader encompassed far more than it ever had before.
“The changing trading landscape has meant that traditional execution-only dealers are now much more involved in client presentations, regulatory considerations and technology projects,” Squires said.
Matt Samelson, principal at research consultancy Woodbine Associates, agreed greater knowledge and skills on the buy-side has broadened the traders’ core function, and said this was felt most keenly with bigger asset managers.
“Larger buy-side firms have enjoyed more through control of the client-broker relationship,” he told theTRADEnews.com, commenting on the results. “They are more sophisticated and now run the show with their sell-side counterparts,” he said.
For small buy-side shops, the use of technology has enabled an increase in both quality and volume of trades executed, Samelson added.
“Access to markets, tools, and technology have become better and more readily available to smaller firms,” he said.
As the results indicate, greater access to more advanced tools appears an element of the modern buy-side that will only increase.
David Hagen, vice president, Global Trading Technologies for Linedata, which provides the buy-side with OMS software, said the poll results were not surprising. He suggested asset managers’ push towards ‘big data’ solutions would further elevate the importance of technology on dealing desks.
“The advent of big data and the tools to meaningfully mine that data to deliver actionable results, coupled with the innovations in data visualisation techniques, will be standard fare in the investment process going forward,” he said.
Hagen also played down developments in algorithmic trading and insisted that a dependency on technology did not equate to a reduction in importance of sales trading or broker relationships.
“High-touch, low- touch, no-touch, one-touch, and technology are all tools that today’s buy-side traders have at their disposal. Finding the right mix and knowing when to deploy which strategy or combination of strategies in each situation is the key,” he said.
Similarly, Scott DePetris, President and COO of Portware, a vendor offering an execution management system (EMS) and analysis tools for buy-side traders, said algorithms could be thought of as a starting point for the technologically advanced buy-side.
“Today, buy-side trading desks are being supplied with platforms that offer incredible automated capabilities across assets, intelligent decision support tools, real-time visualisation applications and predictive analytics,” he said.
“These results reflect a reality of today’s global market structure, where technology is a necessity and the rate of change is happening at a more rapid pace than ever before,” he said.