Live from Miami, Florida as we head into the Equities Leaders Summit (ELS) 2024, the head of global trading at T Rowe Price talks exclusively to BEST EXECUTION about his top trends for 2023, his outlook for the coming year, his concerns around the pace of regulatory change… and the defining dominance of data.
What were your top trading themes for 2023, and what are the pressure points for the trading desk this year?Â
Volume and liquidity are not the same. Getting size done was a challenge across asset classes last year. However, market volatility presented an opportunity for traders to demonstrate enhanced value to the investment process. ETF growth and positioning also continues to shape price discovery.
But the volume of regulatory changes proposed in the US strained the ability of market participants to keep pace in providing input via comment letters.
How is the equities landscape looking as we move into 2024?
Many of the above themes will continue in 2024. The pace of change will remain elevated in 2024… and for years to come. Achieving optimal resource utilization is an ongoing challenge, and platforms unwilling (or unable) to evolve and scale will struggle.
How do you work with your desk to best locate liquidity in difficult markets?Â
I strive to work with the teams to deploy technology to enhance their access to liquidity and help foster strong relationships with our sell-side partners and emerging liquidity providers. I also seek to create environments to have the team benefit from the collective experience of desk. We have some seasoned professionals as well as some newer emerging talent, so sharing best practices and lessons learned from impactful trades provides valuable knowledge transfer and pattern recognition.
What was the most disruptive development you saw last year, and how did it change things?Â
The most interesting development with disruptive upside would be the explosion in Generative AI and large language models (LLM). The ultimate impact on trading is evolving but GenAI will undoubtedly have impact on how markets operate going forward.
Related is the ongoing journey on blockchain and tokenization. Widespread adoption has yet to materialize, but seeing some peers launch tokenized products is noteworthy. We also saw continued growth in active ETFs.
On the downside of disruption, the pace and scale of regulatory change around the globe is an ongoing concern. Given my background, I appreciate the need for regulations to evolve with changes in market dynamics. However, the sheer volume of proposed rules looking to be implemented in short order could have unintended consequences for liquidity. One could argue for a phased-in approach to see how markets adjust to each new rulemaking.
In addition, responding to the onslaught of new regulatory requirements can have a dilutive effect on some firms’ ability to keep pace with market innovation, particularly the smaller market participants. This could impact liquidity.
What areas of technology or innovation do you think are having the biggest impact for the buy-side right now? Â
We are continuing to enhance our tech stack with combination of internal/external vendors and optimize our data. Emerging new vendors as well as enhanced capabilities of incumbents require us to stay informed on an ever-evolving landscape. We need to be engaging with new platforms and pushing our current vendors.
Prioritizing the buy vs. build decision and optimizing data are key to driving innovation and enhancing workflows.
You’re speaking on a panel about the importance of data science – how is the intersection between data science and trading evolving, how do you use data science on your desk, and what could the future hold?Â
For sure, GenAI and LLMs are dominating the headlines. GenAI is most useful when pointed at unstructured data. In early use cases, first movers have been making portfolio managers and analysts more efficient – getting summaries of internal research or scanning earnings releases/conference calls nearly instantaneously.
Trading data is highly structured. We have been using machine learning and algorithmic technologies for years to access markets. To be clear, I don’t plan on using anything called generative anywhere near our trading processes until the technology has comprehensively demonstrated that it can meet our regulatory requirements. However, I may use GenAI to streamline a few of the administrative aspects of my role – such as my self-evaluation and commentary for annual budget reviews.
What are your top focus areas for 2024 and beyond?Â
Data, data, liquidity, regulatory changes, interoperability, scalability, and more data.
What are you most looking forward to at ELS?Â
Connecting with market participants from across the ecosystems is always the highlight. Hearing about common pain points or emerging innovations makes ELS a valuable investment of time. Many of these folks have become friends over the years and it provides an opportunity to reconnect on industry evolution and personal updates.
On the personal front, we have a son who is a sophomore at the U, so being able to get a coffee with him is an added bonus.
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