Speaking at TradeTech in Paris, Marc Wyatt, global head of trading at T Rowe Price, neatly summarised the priorities and dynamics that buy-side trading desks face today.
“Liquidity is down, regulations continue to go up, ratcheting the risks in the system, and fees are going in one direction and that is down, which means we all have to do more with less,” he said. “Internally, I think optimising data is a key for us, then prioritising the tech stack, dealing with legacy technologies and other priority for the buy side is to continue to diversify our talent pool.”
In discussion with Rafa Lopez-Espinosa, COO of international business at Point 72 and James Munro, CTO of Man AHL, about the ability of trading desks to adapt to growing multi-asset demands, the group assessed a path for their teams to increase efficiency and better serve investors.
“With liquidity being constrained, we might not always be able to express the trade in the exact instrument that we would like to, for the lack of liquidity in it,” Wyatt continued. “So therefore, we might have to come up with a different way of expressing that trade. And that, that requires a cross asset discipline, knowing how you can express that trade in other parts of the market.”
Wyatt noted that the multi-asset approach made it more important that information is shared across the desk.
“Historically, if you had a terminal and you’re watching the market, you would say this is the asset class I’m focused on,” he said. “We see that as a view of the world to share across our platform. So if you see something unique or evolving in your marketplace, share it so someone can see where else implications may lie from a hedging perspective and an alpha perspective.”
That need for a bigger picture was echoed by Lopez-Spinosa, who observed, “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.”
Supporting the trading team to capture these insights had led Man Group to train traders to code, and to understand the firm’s data lake, so that they could access and change technology as needed, rather than always relying on the technology team.
“There’s a lot of conversations about low code/no code approaches to things and people on the team spend a lot of time designing users interfaces (UIs),” said Munro. “We’ve actually taken a high code approach. We’ve been training everyone to write Python. 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.”
Allowing the trading team to set out the specifications, expose the data with the development team, then without asking permission or scheduling time with the team, a traders can get the data out and plot it themselves.
“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,” he said.
The question then arose of defining a trader’s role – Munro acknowledged a mid-career, high touch trader was not going to transform into a data scientist.–
Lopez-Spinosa said, “I feel it depends on the profile of the trader and what do you want the traders for. Such a big component of the traders’ job needs to be with a broker community to understand the trading environment, who is unhappy, things like that. If you only profile traders as data scientists maybe they lack those skill sets, or the skills to negotiate in voice trading.”
Wyatt said that technology was already helping to take out low ADV trades from the traders’ to do list and pushing data to human traders in order to help them make better decisions, which in a multi-asset environment helped to bring focus on more challenging trades.
The actual development of technology was also being supported in a similar way, said Lopez-Spinosa, as out-of-the-box systems could be deployed to allow in-house resources to focus on unique technology development.
“We can free up our time to build the things that are not available in the market, that will make us unique,” he said. “There is something compelling out there that we can buy, we’re going to buy it, because the time of our developers is so precious that I want them being focused to build something that nobody else has.”
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