Data and automation were unsurprisingly central to Tuesday’s Fixed Income Leaders Summit Europe 2023 panel exploring the direction of travel for market structure in fixed income for the coming years.
The fixed income markets have undergone a total transformation as of late, with more volumes than ever being executed electronically, particularly for smaller sized flow. Behind many of the electronification and automation initiatives brought to market is the growing supply of data available to both the sell-side and now increasingly the buy-side.
Creating a cyclical pattern, increased automation and electronification has subsequently meant firms increasingly need more data to feed into decision making processes when deciding which protocol to use.
Enter stage left artificial intelligence. As a key buzz word of this year’s conference, artificial intelligence has been discussed at length across several panel discussions with varying levels of support for its use in the execution process.
However, speaking in Tuesday’s market structure panel, panellists were united in their stance that despite the buzz around the concept, “artificial intelligence is just a tool” and the future of the trading desk remains centralised around the role of the human trader.
“The future of fixed income is focused on the human trader. There has been a huge fragmentation of protocols. Evolution is not about equitisation but instead about the future mindset and the philosophy of the trading desk,” said one speaker.
This was corroborated by other speakers who agreed future developments should be centralised around how the trading desk adds value through humans to bring value to investors.
Future success will be defined by having human traders armed with explainable data and technology solutions, said one speaker.
“There is a lot of data coming onto the desk. It’s all about efficiency and how you make it all work. Data and automation mean nothing unless you can explain how they work. It’s about using data to make a strategy better,” they said.
While championing the role of the human trader, panellists unanimously agreed that arming them with new data and automation developments was essential to ensuring future success.
Several new uses cases for data and automation were listed by speakers, some of which panellists claimed were already in the development stages including new tools around liquidity scoring in the RFQ process and defining low touch from high touch flow.
With new tools coming to market regularly, the fixed income market is in the process of rapidly overhauling its workflows, but amid this evolution human traders are still the ones holding the cards.