Traders Cannot Rest on Electronic Laurels
Generational differences continue to play themselves out on the credit desk between experienced relationship-based traders and their younger and more tech-savvy counterparts.
Panelists at the WBR Fixed Income Leaders Summit in Boston had simple, blunt advice for those wondering which personal traits and skill sets are and will be in demand in the coming years: evolve or die.
The panel did not target their advice to a particular generation of traders but those who chose not to evolve to meet the changing demands of their roles.
“This should have been weeded out during the interview process,” noted Lee Sanders, head of FX execution, FX, fixed income & CDS Traders at AXA Investment Management. “Traders want to develop. When presented with a new trading system, they want to lift the hood and see how it will help them deliver something they could not before.”
For global asset manager BlackRock, the up-and-coming generation has influenced the processes of the more experienced traders from a technological perspective, according to Iseult Conlin, vice president, trading and liquidity strategies, at BlackRock.
“But at the same time, more experienced traders have seen more cycles and different volatility environments, are influencing the younger traders to do something one way instead of the other,” she said. “I’ve seen that a lot.”
However, both generations are in danger of getting too complacent as technological innovation keeps removing tasks off a trader’s plate.
“Tools that did not exist ten years ago have made trading much easier,” said Zachary Ellison of Ellison Capital Management.
As a result, Ellison has seen the “juniorization” of the buy- and sell-side trading force.
“Execution has gotten much better and people have gotten much more efficient in regards to using tools to get better execution,” he explained. “I think that investment thinking, however, has not improved similarly.”
The move to greater electronification of fixed income trading should improve a trader’s critical thinking, responded
Greg Heller, director of global fixed income trading at MFS.
“I think the process of pushing through everything that could go electronic, is the right way to go,” he noted. ” It has a way to go, but it should free up the trader to work on the pieces that need attention.”
Electronification of the municipal bond market also presents a large opportunity.
The success of Northbound trading showed electronic execution is way forward for the bond market.
Algorithms have become more prevalent in the spot FX market.
Increased electronification has created useable and accessible real-time and historic trade data.
Buy-side firms can discover liquidity more efficiently and execute on Turquoise.