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Buy-Side Multi-Asset Trading: Challenges and Opportunities
Traders Magazine Online News, October 24, 2018
For the buy side, multi-asset trading offers the promise of efficiencies, cost savings, and closer alignment with an increasingly interconnected global marketplace.
But how far do large investment firms wish to go to amalgamate legacy siloed trading desks? What is the blueprint? And most critically, what are the risks and rewards?
Those questions were among topics explored at a September buy-side roundtable in Boston, hosted by the GlobalTrading Journal and sponsored by TradingScreen.
As the buy-side universe is expansive, with an abundance of investment models and strategies, each journey toward multi-asset trading is unique. But there is one common denominator that’s vital in driving the process forward: the underlying technology.
“All of the consolidation and activity in the trading-technology space highlights the need for integrated workflows and increased automation across asset classes,” said Varghese Thomas, Chief Operating and Strategy Officer at TradingScreen. “Leveraging established and trusted technology partners are necessary to help bridge the gap between current solutions, fintech platforms as well as new emerging asset classes.”
At a TradingScreen-sponsored roundtable in New York in June, participants noted that the buy side was shifting to buying technology rather than building technology; interoperability of systems and ‘big data’ management were core challenges; and automation of processes, while a key ingredient in the evolution of a buy-side trading desk, has its limits.
The Boston discussion addressed the latter point.
“The reality is that not everything in multi-asset trading can be done programmatically -- there will still be a need for human oversight," said Joseph Bacchi, Head of Multi-Asset Trading and Investment Operations at Acadian Asset Management. "There isn’t one venue, one strategy, one platform or one relationship. That’s the foundation of multi-asset trading.”
Market Recon
Some senior traders and technologists who attended the roundtable event said they were there to gather market intelligence, i.e. assess industry trends and vet what an individual firm is doing versus what the broader marketplace is doing. In multi-asset trading in particular, there is ample opportunity to learn from earlier movers.
“Firms are at varying stages in the migration to a multi-asset class environment – some are just starting, some are fully multi-asset,” said Rob Hegarty, Managing Partner at Hegarty Group and roundtable moderator. “Others prefer to keep equity separate from fixed income and currency, at least for now.”
As drivers of the migration to multi-asset trading, Hegarty cited increasing cost pressures; opportunities for collaboration; the availability and ubiquity of data; the rise of quant resulting in cross-asset strategies; advancements in available technologies such as Execution Management Systems; and new asset classes such as cryptocurrency.
One roundtable participant noted that consolidation of trading technology across asset classes is a lengthy process, and there is the question of whether technological products are mature enough to support multiple trading scenarios.
This person said one approach to technology is to leverage vendor platforms to handle ‘plain vanilla’ tasks, which frees up traders to concentrate on higher-value, more strategic workflow.
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