Buy-Side Traders Look Ahead
Developing regulation, the evolution of ESG, and improving and standardizing data and analytics are among front-burner topics for buy-side traders in the second half of this year and beyond.
That was the takeaway from the â€śNext Steps for the Industryâ€ť panel at the June 23 FIX EMEA Trading conference.
The first, and most tangible, order of business is managing the post-pandemic return to the office, and how the ‘new normal’ will look different from the ‘old normal’ of 16 months ago.
â€śThere will be a new flexibility which we all have to maneuver,â€ť said Eric BĂ¶ss, Global Head of Trading at Allianz Global Investors. â€śThis can improve trading performance and resilience. (COVID-19) has been a fire drill for trading infrastructure, and across the industry. One of the most positive surprises is that the number of negative trading instances has been so low.â€ť
Joe Collery, Head of Trading at Comgest, said there are no hard and fast rules about how people will return to the office — rather, decisions will be made by locality, firm, and even teams within firms. â€śThe commute has not been missed, but what weâ€™ve lost in person-to-person meetings, weâ€™ve gained in the fintech vendor space,â€ť Colliery said.
Christoph Hock, Head of Multi-Asset Trading at Union Investment, said a key challenge for both the buy side and sell side is raising the bar on how firms collect raw data and then leverage analytics to deliver best-in-class execution.
â€śThis is all about partnership and collaboration,â€ť Hock said. â€śAsset managers and the sell side all have the same goal — to ensure that we serve investors in the very best way.â€ť
With regard to regulation, Hock said the MiFID review is an area to watch, as there needs to be a pragmatic approach to improve market structure without burdening the functioning of markets.
Another area where a balance needs to be struck is the proposed consolidated tape for European bond trading, BĂ¶ss noted. The end goal must be enhancing transparency while minimizing adverse selection in trading.
â€śThe level of standardized data we all can use is at the core of the issue,â€ť BĂ¶ss said. â€śData is the language of financial markets; we need more standards in how data in fixed income markets is collected and used.â€ť
BĂ¶ss estimated that there is broad agreement on 90% of what needs to be done in this area; the industry needs to focus on the remaining 10%.
Regulatory fragmentation, due to Brexit and other situations such as U.S. sanctions on China, is a headache for financial institutions. â€śWe are used to capital markets with too many platforms, but now regulatory fragmentation is more of an issue,â€ť BĂ¶ss said. â€śIt is making our lives increasingly difficult, and expensive.â€ť
Another area that requires industry collaboration is ESG, which Hock said has recently moved from a discussion for portfolio managers, to one that has also become highly relevant for the trading desk.
â€śThis topic clearly affects the industry as a whole — buy side, sell side, platform providers, exchanges,â€ť Hock said. â€śWe need to work together to define the very best standards.â€ť
Overall, panelists expressed optimism about how the financial industry weathered the unprecedented disruption of the pandemic, and what lies ahead.
â€śThis is such an exciting time for our industry,â€ť Collery said. â€śWe have a lot of work to do, both in FIX working groups and collectively. But the onus is on us as a community to go forward and keep innovating. We can propose solutions in a collaborative manner with regulators.â€ť
â€śWe talk a lot about data and technology and automation, but we also need to recognize that weâ€™re in a business where humans interact,â€ť Hock said. â€śPeople are happy to get back to the office.”
Buy-Side Traders Look Ahead first published on GlobalTrading.
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