Traders could be losing out on five working weeks every single year simply from switching between different applications on their desktop, finds Gill Wadsworth. So what can be done to improve efficiency?
Research published by The Harvard Business Review (HBR) last year found that what might have become second nature for those working across multiple systems, websites and platforms, amounts to significant ‘toggle tax’ on business, and has a detrimental impact on operational efficiency.
HBR’s researchers explain: “As business needs evolve, new applications are brought in to address them, and CIOs and managers struggle to retire old ones and keep numbers down. In large organisations, there can be thousands of applications, and smaller ones regularly have tens if not hundreds. As a result, employees spend their days constantly switching from one to another.”
Not only does this toggle tax mean time wasted that could be better employed in trading, but it also translates to a missed opportunity for highly-skilled individuals to be putting their talents to more profitable use.
Dan Schleifer, president and co-founder at Interop.io, says: “Whenever I talk to the buyside they tell me they want traders to be more involved in the investment management process. Executing orders is important but it’s low value. The high value role is taking the knowledge they have about what’s going on in the market, where the liquidity is, where the market is trending and feeding that back to the portfolio managers making them a more a valuable part of the investment management decision making process.”
This, Schleifer says, is dependent on traders moving from working with a fragmented user interface to one that offers seamless integration, known as interoperability.
Research shows that it is increasingly important that the buy side attempts to apply interoperability into their organisations, at least if they want to avoid losing key staff.
A 2022 survey of 3,000 office workers in the US and UK from OpenFin, found almost two thirds (61%) of US office workers and almost half (46%) of UK office workers would be tempted to work for another employer if they offer better apps to make their working lives easier.
This is a particular issue for traders working across multiple asset classes.
Michael Loggia, global head of workflow technology at Virtu Financial, says: “[Toggle tax] is less of a problem for more vanilla type of workflows within equities. The markets have evolved pretty substantially over the last 10-15 years with plenty of integration across applications and traders can access a lot of information without needing to leave the front end. Where I do absolutely think that we’re seeing a lot more operational inefficiency is on the forefront of newer trading protocols and asset classes that are being brought into the execution management systems (EMS) space.”
However, efforts to unify disparate apps into one system have thus far achieved mixed success.
Schleifer says the problem lies in attempting to find a single provider which, while able to offer multiple integrated apps, is rarely best of breed in any one discipline.
“The temptation is to build one giant application to rule them all; a single unified application that has everything that users need, and it’ll all work together. I’ve yet to see that succeed. No one vendor is going to be great at everything and that’s not a failing of those companies it’s just inevitable.”
Schleifer adds that even where the majority of applications are encompassed by one or two providers able to integrate, there are invariably countless other applications that still do not fall within a single interface meaning the toggle tax persists.
Justin Llewellyn-Jones, head of capital markets at Broadridge, agrees that attempting to simplify applications into a single solution will likely result in a system that is “not fit for purpose”, especially for those trading multiple asset classes.
“The simplest thought process focuses on how to consolidate or rationalise those applications into a single system. So, you’ve seen lots of trading applications, trade settlement applications, middle office applications across multi assets and if you’re not careful, you end up with a homogeneous solution that is not fit for purpose.”
A second approach that Schleifer says has been ineffective in the pursuit of interoperability is data integration. The argument in favour is that if all the applications can talk to each other in the same language, this at least minimises the rigmarole of translating information between different systems.
However, Schleifer says this is time consuming, expensive and ultimately fails to resolve the issue of time wasted in toggling between applications.
“Synchronised data is very important and good master data management is useful, but I have yet to see that type of project ever get finished. It can work, but it’s very slow, it’s very expensive and it is focused on data integration, not workflow integration. It doesn’t solve for the actual user experience problem of fragmented user interfaces.”
The alternative, Schleifer says, is to accept that applications are fragmented, that they talk in different languages and in some cases rely on archaic software, and attempt to connect them behind the scenes.
“We’re not going to replace the user interface, we’re not going to change the functionality, but behind the scenes, we’re going to connect them in a way that it looks as if they all came from the same vendor. You’re still in control and we are not automating away the trader’s or the portfolio manager’s job. We are basically connecting them as if they all came from the same vendor in that monolithic approach.”
This is what Loggia calls the Holy Grail of interoperability, but he notes that new applications and ways of working will continue to arise which may not be compatible with such a ‘monolithic’ model.
“The hard work has been done; we have created a framework that enables applications to work in one place, but there are always going to be cutting edge applications popping up here and there that might not fit in that framework.”
He adds: “I’m still confident that a lot of people will move toward that model because it wouldn’t make sense not to.”
Llewellyn Jones says this approach has been “quite successful” and although there remains some element of toggling since not all applications can be integrated, time wasted has been notably minimised.
Among the buy-side organisations already using this kind of interoperability is LSEG’s Turquoise Plato which in September 2021 connected to OpenFin “in response to the industry need for workflow efficiencies, application interoperability, and a more unified desktop experience for the buy side and member firm users”.
In what is a rather jargon-heavy description OpenFin says it “delivers an insightful data feed directly into trader workflows to support liquidity discovery and decision-making processes leveraging OpenFin’s open architecture. The API passes FDC3 compliant Context objects and makes use of OpenFin’s message bus to pass that data to OpenFin-enabled applications including visualisation tools, in-house and third party applications”.
In other words, most of the apps the traders need are in one place and they can talk the same language.
Complete interoperability seems neither likely nor desirable since the tech available to traders is in a constant state of flux, and finding one approach to rule all others would suggest market stagnation. However, there is a clear and advantageous move towards unity which ultimately reduces the toggle tax and improves best execution.
©Markets Media Europe 2023
