Trader Workflows in Focus
Algorithms and synthetic order types have gained in importance for institutional buy-side traders, as slimmer sell-side desks move to combine low-touch and high-touch trading services into a more streamlined offering.
“Advanced trader workflows will continue to be hot,” said Justin Llewellyn-Jones, chief operating officer at Fidessa. “There is concept about the sell side being able to service the buy side as a kind of one-stop shop. The buy side is not necessarily into that idea — they like the concept of relationships and expertise and so forth — whereas the sell side thinks to themselves, my sales traders are quite expensive and if I can get rid of a few that would be quite nice.”
“Technologically, the idea is to produce a system that is multi-asset and allows you to trade across different segments and financial instruments,” Llewellyn-Jones continued. “But now, the idea of actually combining high touch, low touch and no touch, manual and electronic, care and algo, is a more fundamental discussion around the technology economics which we find interesting.”
Llewellyn-Jones, who is scheduled to speak on a panel at Markets Media’s Summer Trading Network in New York on July 10, cited three other hot-button issues for traders: compliance, finding actionable data within ‘big data’, and outsourcing.
Compliance “continues to be a pain point for everybody” across multiple asset classes, Llewellyn-Jones said. This is the case “especially since most of it hasn’t really been thought about, or it’s getting pushed back, or there are geographic interdependencies that people haven’t thought about.”
Regarding big data, “if you drill down into and actually look at what people are interested in, its actionable data — business intelligence,” he said. “There are a lot of conversations around extracting information out of a combination of trading activities”
“On a macro level, I think the conversations around outsourcing are still quite hot,” Llewellyn-Jones added.
Managed services including software and infrastructure which had been fairly standard in small and mid-sized financial institutions are now drawing interest from larger players, Llewellyn-Jones noted. “There was more of a ‘build it, own it, control it’ mentality at the top end of the stack, (but) a lot of institutions have come to terms with the idea that they could use a vendor for parts of their operations and technology,” he said.
On the flip side, Llewellyn-Jones noted that high-frequency trading has lost some luster, at least as far as new entrants to the business.
“I don’t think there are that many people looking to pursue HFT strategies,” he said. “It still makes up a fairly significant percentage of market volume, but there is a lack of interest in moving into that kind of business.”
“Latency and the conversation around latency has become quite commoditized,” Llewellyn-Jones added. “For most people, you either realized that you were pursuing a trading strategy that was not as latency-sensitive as you thought it was, or your vendor caught up with everyone else anyway, so your latency profile was sufficient for what you wanted to do. In general, that has become uninteresting.”