The latest innovations were highlighted, such as the growing importance of AI to make sense of data.
There was no shortage of topics to be discussed and debated at this year’s TradeTech in Paris. A recent Liquidnet study found that costs of trading in the Euro STOXX 50 rose 45% from lows at the end of January to a peak in late March, while the effects of the war in Ukraine, changing macro economic landscape and a spike in volatility has kept market participants on their toes, as European equity markets struggle with poor liquidity.
The role of data and how to best leverage information took centre stage at the conference as one potential solution. Data aggregators are enabling trading firms on the buy- and sellside to better access information that can increase the efficiency of trading and strategy development.
As Laurent de Barry, director of hardware trading solutions, Exegy said, “Aggregation is the first step that we provide, if you need to go faster, then we have a whole offering that goes down to FPGA-based trading. So if you underperform, trust me, there’s always someone that’s trading faster than you and our role as a partner to our customers is to make sure that we have that offering laid out, so when they’re ready to progress to the next step, we have something that’s easy for them to step into.”
The latest innovations were highlighted, such as the growing importance of artificial intelligence (AI) to make sense of the data.
Daniel Leon, global head of trading, treasury management & global solutions at HSBC Asset Management best summed it up by saying, “We love to talk about machine learning, but ultimately, it’s about data and advanced analytics. Having the capacity to make decisions which are going to help find liquidity or a provider of liquidity. The big question to discuss with AI is around natural language; how can you use AI in order to assess liquidity through unstructured data?”
However, data should not only be confined to the pre-trade space but also be recognised for the actionable insights generated in post-trade transaction cost analysis, according to Victoria Bryan, senior data analyst, capital markets at Northern Trust, who noted the feedback provided can give a greater understanding of where the pain points were and how performance can be improved.
One of the most important takeaways from the event though was that equity traders cannot just slot in a new piece of kit to fix an issue but need a much more holistic technology approach order to mitigate the risks and leverage opportunities in the current market conditions.
This includes, as Ashwin Venkatraman, global head of equity trading technology at JP Morgan Asset Management notes, embracing open platforms such as FDC 3 which aim to provide an open standard for interoperability between applications on the financial desktop.
“This technology will make the greatest impact because it enables more seamless workflows and a cost effective way to connect the buy- and sellside,” he says. “It also provides a more holistic view of a trader’s workflow and not just the low- or high-touch trades but, for example, it allows market colour to be sent via the order management system so a trader saves time by not having to cross the floor to speak to the portfolio manager.”
The need for a bigger picture was also echoed by Rafael Lopez-Espinosa, COO of international business at Point 72, in a panel exploring the best ways to build the trading desk of the future.
He noted, “We have seen a lot of blurring of the lines across different strategies, instruments and even types of investment. We have a systematic business, and we have a discretionary business. We are trying to amalgamate more things together [because] it’s better when you have a higher view of everything that is going on, and given the increasing correlations, and what is going on in the market, or how things move, especially during dislocations, there is somebody to take the overall view of the entire portfolio.”
In some cases the skill sets across trading and technology and also converging.
“We’ve been training everyone to write Python,” says his fellow panellist James Munro, CTO of Man AHL. “We’re quite multicultural but actually our second language is Python. It is a bit controversial but we’ve had really good success with it because it really breaks down barriers. It does require training, it does require being responsible about your coders – so this is not code going into production – but there’s a real win there, if you can get it right.”
One of the other main themes dominating the conference was regulation and its unintended consequences. The impact of MiFID II on equity liquidity in Europe was highlighted and given as one reason why the region was lagging behind the US and Asia.
“When an investor looks at the European market versus the US market, there’s a lot of noise in Europe in terms of regulation, and not having consolidated tape,” said Emil Framnes, global head of equity trading and transition asset strategies, Norges Bank Investment Management. “At the end of the day, investors don’t really have the confidence that they can get into the positions that they want, or more importantly that they can get out of the positions when they want, and I have a feeling that a lot of investors are pulling back; they are not really wanting to risk going into the market.”
Regulation was however also seen as a force for good, driving market participants to integrate environment, social and governance (ESG) practices into their business models. This ranged from the front- to middle- and back-office as well as scoring counterparties.
As Christoph Hock, head of multi-asset trading at Union Investment notes, until recently, many of the initiatives, regulation and collaborative efforts have been focused on the products within the fund management industry.
“Trading was left aside and missing from these conversations, ” he says. “We are now looking at it in a dedicated way and looking at sustainability of our brokers in our review [process]. We also think it is important to put an ESG layer on top of our regulatory and fiduciary duties to deliver best execution for our clients. This helps create an awareness of the topics. We are at the beginning of the journey but are making progress.”
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