TradeTech 2019: The key takeaways

The rise of artificial intelligence and new data sets dominated discussions at this year’s conference, while Brexit casts a long shadow over future plans.

This year’s TradeTech conference has closed its doors and the stands have been packed away, but there was plenty to take away from all the discussion panels, keynote speeches and working groups across the two days in Paris.

With the arrival of MiFID II now seeming like a distant memory (for some), the industry is looking to the future, and it was of little surprise to see that artificial intelligence and data were again some of the main talking points throughout the event. Buy-side firms have clearly jumped on this train with gusto, but are still cognisant that changing market structures and the great unknowable of Brexit mean nothing can be taken for granted.

Whether you attended and stayed until the very final session or were unable to make it Paris this year, here are some of the key talking points from this year’s TradeTech event.

  • AI will transform the industry, just not yet

Artificial intelligence (AI) was once again one of the key topics of discussion throughout the conference, a continuation of last year’s trend, although now the excitement has been dampened by a sense of realism about how much work participants must put in to these technologies before seeing quantifiable results.

Automation of manual processes has been a staple of trading processes for some time now, but advances in machine learning are undoubtedly opening new possibilities for buy-side firms. Speakers across several panels and interviews on the subject outlined their own projects with these technologies, but the message that significant investments of resources and time are unavoidable and that firms must be prepared to play the long game came across loud and clear.

However, there are those on the buy-side that believe that AI will become a necessary part of trading and that underestimating this requirement will be a fundamental mistake. Clearly the industry is awoken and alert to the benefits that AI and machine learning can bring to trading beyond simple automation processes, but it will be case of good things coming to those who wait.

  • Buy-side still grappling with the data

Similarly to the potential around AI, the buy-side is finally making in-roads into extracting value from the vast quantities of data that is available to them. This has been a historical issue for asset manager, at least compared to their sell-side counterparts that have larger budgets and teams to dedicate to this, but firms have been making strides to source new data sets and dig into those sets already available to them to improve trading performance or seek out new opportunities.

More asset managers are now hiring data scientists to work with their trading teams to provide greater insights to the desk for both in-trade and post-trade, while the importance of data analytics is also growing. However, the caveat to this is the struggle to not only acquire the human expertise, but to retain it – a challenge not just restricted to the buy-side.

Alternative data – such as social media feeds and blog posts – has been held up as one of the more lucrative new data sets for the buy-side to dig in to, but, much like any emerging technology, those that have been working in this area for years have had to warn asset managers that this is no silver bullet and that significant investment in this space will be necessary to derive the greatest value from it.

  • MiFID II is now just another fact of life

Last year’s TradeTech conference found that the industry had, for the most part, accepted the new regulatory regime and were adapting their processes accordingly to adjust to the new trading environment. There were of course some contentious opinions thrown around, particularly concerning new trading venues such as periodic auctions and systematic internalisers.

This year, on stage at least, there was little by the way of controversy to be found at the event. For the most part, buy-side firms have acclimatised to the new regime and are now cracking on with the task at hand – optimising execution strategies, reducing cost pressures and wringing the highest possible value out of investments in technology.

It was left to the trading venue operators to continue the fight against regulator’s aims to move liquidity and trading onto lit venues, although the rise of periodic auctions and systematic internalisers so far under MiFID II has gone some way towards alleviating that ire.

How this trend will continue will be interesting to watch play out, but for now, the majority of the industry is clearly more focused on getting back to the daily tasks at hand.

  • Shifting market structures mean Brexit is a big cloud on the horizon

The big cloud hanging over this year’s conference was, of course, Brexit. The question in the weeks leading up to the event was whether the UK would have fulfilled its objective of leaving the EU by the end of March (and then mid-April) and how that would be addressed by the speakers.

With Brexit’s delay, market participants still find themselves in a state of limbo, having to enact certain contingency plans early and put other strategies on ice until a sense of clarity emerges. The shifting market structures, partly resulting from the introduction of new regulatory regimes, means that many market participants are simply treading water for now, aiming to get through the headwinds as best they can while making incremental improvements to their trading processes and technology stacks.

A keynote address on the topic of Brexit by provided a number of insights into the political process and how it affects wider economic activity, but when it came to how the event of Brexit will directly impact the capital markets in the here and now, the answer could only be summed up in a baffled shrug.