Strategising Trading And Technology

Matt Howell, Trader, T. Rowe Price examines how trading and technology are evolving their relationship.
At the start of the year a small group of traders and technologists from across T. Rowe Price were given the task of organising an event to explore the relationship between trading and technology. Our remit was to explore new possibilities, try not to be restricted by our current capabilities, and here management particularly encouraged us to take a radically different approach from how this topic has been tackled in the past.
We started with a blank sheet of paper which had “trading and technology” written on it and not a lot else. We then got out there and talked to our peers, technology guys on the sell-side and different vendors to try and get a sense of how other people have been approaching new technology and strategy and what lessons could be learned from their successes and failures. Historically the approach of trading towards technology has always been short term and practical; “I’ve got a problem, fix it now regardless of implications down the line”. Whilst acknowledging that some issues are short term in nature, we increasingly believed that this approach stymied innovation while increasing complexity, and that a more strategic approach was going to be required.
At the beginning, there was no expectation that this was going to evolve into anything more strategic but as we worked on it, it became apparent that with the current environment there was a real opportunity to make a difference because the rate of technological change is accelerating. There is an opportunity for T. Rowe Price’s trading to develop a competitive advantage and improve its service clients, both internal and external.
Traders need information
To help us assess where we could have most impact we sent out a questionnaire to the entire global trading team. We asked them where they thought technology could make the biggest improvement to their workflow, and what questions they thought technology could provide the answers to. There was a surprising degree of homogeneity across geographies and asset classes. Traders said they wanted help making their workflow more efficient, reducing manual processes, filtering/sorting data and solutions needed to recognise the high value on desktop real estate. But the most powerful finding was that when we examined the results in aggregate, looking at the words most frequently used in the responses three words topped the table. In isolation none of them were a surprise but when you put them together it really sums up what technology can do for us as an industry sector: the three words used most often were “Traders Need Information.”
So we decided to organise a conference specifically geared around longer-term objectives. We collected together a group of technology vendors (both start-ups and incumbents), industry specialists and a couple of thought leaders from outside the world of finance to help us set the tone. A wide group from within T. Rowe Price was invited to come along and share their thoughts on these presentations and then a smaller group met to discuss our findings and start to formulate post conference strategy.
In order to best leverage input from the conference attendees we set up an internal “Livefeed”. This was a social media style intranet site where we encouraged all the participants to engage during the 2 days. We really didn’t know how people would end up using it and we deliberately didn’t leave any strict guidelines on how to use the site. Although we had a couple of people in the room who committed ahead of time to contribute content throughout the sessions in general we left the forum to develop as organically as possible. Would people use hashtags? Would people contribute questions or just make comments? Would the feed end up looking like Twitter or more like the nested conversations that happen on Facebook?
During the event we had more than 200 associates from around the firm visiting this site and contributions from nearly half of them. We had status updates, longer blog posts, and some associates searched the web to find relevant material while presentations were ongoing. The content generated was an invaluable source of material for follow-up sessions and the approach promoted global connectivity by allowing associates from any location, not able to attend in person, to follow and join the conversation, see the presentation materials, and speaker bios. It also enabled the team attending the forum to collaborate their thoughts, questions, and comments in real time. The Q&A sessions of the forum were noticeably more interactive and insightful because often they were already being discussed on the “LiveFeed”.
Trading and technology in the future
The challenge associated with trading is that traders are conditioned to be methodical and meticulous in the way that we approach things. The nature of the market itself is such that we look for short term fixes to immediate problems. In order to innovate, trading needs to change its mind-set and to start thinking about things over longer periods of time. This is going to be one of the biggest challenges. We need to keep trading engaged over those periods where it might not seem much progress is being made. That is one of the reasons that we have started some small project teams to try and keep a higher level of ownership of some of our projects and use these to keep the whole group engaged on the longer-term target.
For example, one of the technologies we are assessing at the moment is a social media insight platform. We want to look at how financially relevant social media might be useful to us, but rather than deliver the platform as a fully developed solution to our traders, we have set up a small trial group. We will see how they progress, write up the findings and keep the dialogue open during the assessment. Social media content, particularly Twitter, has elements that are relevant to short term trading but less relevant for our fundamental investment process, which is much longer term. The idea of getting something off Twitter really quickly and then trading off the back of it isn’t something that works for us. However, when the analysts come and talk to the trading team about ideas, we could certainly learn something from what’s going on in social media: maybe that’s where trading could partner with research? There is certainly an opportunity to use some of the social media tools that we use in our personal lives to enhance the way we collaborate in our business life to make communication more efficient.
Prioritisation remains one of the biggest challenges. When we started looking into the topic we realised that we didn’t want to focus on fixing/mending short term workflow issues around our existing technology. We already have a pretty robust process for attending to these requirements and for dealing with the immediate challenges thrown at us by regulation and market structure.
Our purpose is to challenge technology with a vision of where trading wants to go. Still in the very early stages of pushing this vision through to realisation, we acknowledge that the process will be a three to five-year road with many bumps along the way. We do at least now know what trading wants. We have a vision we can point people towards and a viewpoint that we’ve carefully articulated to provide some structure around the ways to approach things going forward.
Hopefully the days when the business dictates which platform to use are gone. In this new partnership, we’re going to acknowledge that technology and technologists will be better equipped and able to respond to the challenges presented to them. We can say: this is your area of expertise, here is the vision of where we want to go but we want you to assess the technologies available and come to us with solutions rather than trying to shoe horn in solutions that the business is giving you.
Because of this there has to be a much more committed approach from trading towards technology. So far, trading has helped developed the vision, but it doesn’t stop there. Both groups need to work together towards finding the best solution. The next step is for technology to take away the ideas generated and start to come back to the business with suggestions. These ideas will be assessed using small flexible teams across both trading and technology and the results and lessons learnt fed back into the wider group. The vision we developed will be used as a roadmap to ensure that we remain on track but there will also be flexibility within the governance structure to reassess the goals periodically and check they are still relevant.
Collaboration, both internally and externally is going to be key to making all of this a success. We hope to have open discussions regarding our progress and use those discussions to find the people who can help us to learn. By using the platform that we used for the “Livefeed” we are already having conversations with a much wider group of individuals that we ever could have using e-mail and we aren’t cluttering up anyone’s inbox.
Some of the design principles we agreed on also help us address this issue. Going forward we plan to deploy small pilots, test and learn and make development more of an iterative process. Implicit in all of this is a willingness to fail occasionally and use those failures to improve solutions going forward.
There is also a commitment towards more effective data architecture and reducing complexity. This should help us make solutions more modular and stop them becoming bloated and inflexible. Data management and big data are where the real challenges lie. This is very much on the longer term horizon and clearly going to be a technology-driven project but here trading can provide some impetus and support for the process. We work with a large number of different sources of data: there’s definitely a place for some kind of aggregation of that data and once you start thinking about getting data into one place or just getting data together, then you can start thinking about imaginatively tying it all together.