Is technology causing shifts in buy- and sell-side relationships?
Technology is transforming the industry including buy- and sell-side relationships. On the buy-side, ongoing market fragmentation in trading is forcing a continuous optimisation of sell-side relationships to reach all relevant liquidity pools available and guarantee best execution for their clients. This development is leading to more electronic interaction between buy-side counterparties, which requires the sell-side toward greater specialisation in order to deliver value. Also, AI will enhance this trend and the changes coming could be quite significant or even paradigm shifting.
How can you maintain relationships in a tech driven world to promote transparency, collaboration and market resilience?
Maintaining personal relationships is essential in a tech driven world both to establish a bond of trust with a client and grow that relationship. Real-time responsiveness, 24 hours a day, is most important. And tech tools enable that. But they also promote transparency which is key to trust building. For example, high quality TCA solutions enable the systematic review of the quality of trade executions, and that promotes a continuous conversation/discussion with sell-side counterparties to optimise execution outcomes.
Ideally, tech-driven solutions should also help to optimise and simplify workflows and create a systematic approach that benefits counterparties and achieves the best possible execution outcome.
What sort of technologies are needed/exist to mutually benefit buy- and sell-side participants?
There are a number of useful tools available today. For example: Block-Crossing Network (BCNs) helps connect different counterparts and achieve the best possible price and at the same time minimise overall market impact; improved FIX versions help to exchange as much useful information as possible between different market participants; TCA solutions help achieve trade transparency, best execution controls, and at same time enable, continuous learning from the data created and improve the trading processes.
Technology enables trust building by promoting instant connectivity and transparency. Today, more data is available for all sides to analyse, discuss and optimise execution outcomes.
How do you pick and choose the right tech for your desk?
Our view is that the best way to pick and choose technology is to build it yourself – it ensures that it is built to your exact specifications, as we have done over the years with our own global OMS Bedrock. With the advent of AI that should be more easily done in the future but most firms don’t have that ability now and need to rely on traditional vendors. Engaging with software providers and keeping abreast of new modalities as well as getting client feedback on best in class trading technology is the way to gain knowledge to consider new trading software.
Does increased technology mean the buy-side relies on the traditional sell-side less?
Already electronic execution and direct market access has reduced the reliance on sales traders to source liquidity. AI will likely cause an increase in the use of sophisticated technology where trader’s jobs are supplemented by machines and trades will simply be monitored by human traders. The reliance of traders as we know is likely to reduce over time as one trader will be able to efficiently handle a large number of transactions.
What is the ideal structure for a trading team in today’s world?
A trading team needs to be cohesive across time zones and work together and not have a siloed approach. This is paramount. The global team increasingly needs to work 24 hours as exchanges are likely to be open for longer hours – there is a possibility for exchanges to open 7 days a week!
Although hours of trading per week will likely increase, as trading tools improve, trading decisions can be made by rules-based programs, leading to reduced number of traders involved. Having said that, human traders will still be needed although their focus will be titled towards monitoring.