By Peter Waters, GlobalTrading
On the 25th June, over 25 representatives from the buy-side, sell-side, vendor and exchange communities met in London to discuss the changing role of technology in breaking down silos and processing between asset classes.
The discussion included traders from across the asset class spectrum, and some with specifically multi-asset roles.
One difficulty that immediately became apparent and would stand as a constant barrier to true integration was just that markets are still very specialised. Fixed income traders that cover certain corporates need constant communication and effort to stay up to date on who holds what security. Conversations with brokers are paramount to capturing that knowledge. No electronic platform can replace certain esoteric asset classes and trading, and nor do the traders even want it to. But, what can technology achieve? The room debated the use of EMS technology and its potential role in combining multi-asset trading. However, the conclusion was reached that the buy-side doesn’t mind having different systems with specialist applications, as long as they work together and there is some cross functionality.
A perceived exception to this is the hedge fund community. As a specialist and nimble group of firms it was generally agreed that hedge funds were much more likely to request specific technology that allows them to build out multi-asset trades, including derivative elements, and want the functionality to do so on a single platform. Whether this technology then migrates upwards towards the larger asset managers remains to be seen. The room seemed to suggest that the buy-side doesn’t want it even if it were available, and the sell-side may not be willing to invest to scale the technology without specific demand.
One major area where all agreed more work was needed was in extracting the data from these systems. With increasing buy-side ownership of trading, and more questions being asked of the buy-side with regard to how they analyse their trades, the extraction of data from systems that sit on both the sell-side and buy-side desk remains a major challenge. As does finding ways to combine and manage that data and cross asset class boundaries to calculate proper TCA. This area would be worth exploring from a collateral management and overall risk position management perspective in the context of regulatory consequences as this appears to be an area of focus in Europe at the moment. It was generally agreed that the back office was an area that could benefit from multi-asset processing and technology, were such areas to be developed.