Trading Floors Must Integrate Voice and Data

The latest technological developments in voice technologies and desktop interoperability are opening the door to innovation in trading floor design, according to a new report by Celent.

The report Future of Front Office: Voice Activated Trading?, commissioned by IPC, identifies trends driving convergence of voice/electronic workflows and trading platforms, reviews the key enabling technologies, and discusses the competitive advantage and efficiencies offered.

The response to the pandemic proved that the capital markets industry is capable of a step change in culture and technology.

Celent believes the trading floor must move beyond its legacy-based distinctions of voice and data.

“Using voice to control our environment is a natural and highly efficient way of driving action. Application-based voice-driven actions could equally find a home in the front office,” the report said. 

“Meanwhile, financial institutions looking for increased efficiency and data-driven analytics are embracing multi-asset trading. To accommodate these changes, a true integration of voice and data systems is required across the trade lifecycle.”

Currently the tech stack is differentiated across different asset classes and product types due to the variations in market structure resulting in executions varying from low touch to high touch, according to Celent.

Differentiation in tech stack is also a factor of rate of digitalization across various phases of the trade order lifecycle.

“As decisions are made about which layers of the tech stack are common across all asset classes, the traditional separation of voice and data workflows should be reexamined,” the report said.

Trading is becoming increasingly data-driven, and this trend is impacting areas such as the embrace of multi-asset investment, according to Celent.

“This trend, coupled with regulatory requirements to link and audit trades throughout their lifecycle, means that next-generation trading technology will have to enable trade data extraction and linkage throughout the full trade lifecycle. For all but the lowest- touch, fully STP trades, this will require the ability to link voice, chat, and electronic channels.”

Today’s trading floor typically separates systems for voice communication from electronic information such as market data and news.

Voice is delivered through a range of specialized devices, including the trader turret and other telephone, intercom, and voice broadcast devices, according to Celent.

“This legacy approach limits the value of voice data, which is one of the most important but unstructured ways of communication information within financial markets,” the report said.

According to the findings, forcing voice and electronic information onto separate infrastructures is an artifact of legacy technology, which restricts innovation in trading workflow.

Celent believes a new paradigm of integrated voice, data, and unified communications technologies will radically change the way trading is done. 

Celent argues that step one in realizing the front office of the future will be to “tear down historical technology and cultural silos—including those developed around voice and electronic trading.” “Step two will be to leverage the possibilities a coalesced environment offers. Apps can exist on a turret (physical or virtual), while turret capabilities can be embedded within workstation-based trading apps.”

Telephony solution providers now support multimedia and unified communication approaches encompassing voice, instant messaging (IM), chat, and even videoconference calling. 

Meanwhile, “modern cloud-based delivery models were field-tested this past year, successfully enabling trading from home throughout record market volatility”.

“Today, the technology exists to create a next-gen trading environment where integrated communications and information flow between front, middle, and back office support data-led analytics, highly collaborative workflows, and new trading paradigms,” the report said. 

“With financial institutions looking to increase revenue generation and effeciency, the competitive advantage of a voice-activated trading floor is well worth exploring.”