By Peter Waters, Managing Editor, GlobalTrading
On the 29th of September GlobalTrading hosted an executive industry roundtable in New York. The discussion was moderated by Donald Bollerman, Head of Markets and Sales at IEX, and featured a range of senior business executives, traders and technologists from across the buy- and sell-side. The event was kindly sponsored by CameronTec.
The primary discussion throughout the luncheon was spent drilling down into the following areas:
• the development and implementation of technology in electronic trading throughout the last three years,
• how the changing budgetary environment has impacted development cycles and implementation,
• the changing desires of those using the technology.
A principal concern was the changing requirements of those developing the technology, and how responsibility for technology is shifting between technologists and the business side of the firm, and the effect this has on buy-side, sell-side relationships.
The financial services industry in general, and electronic trading specifically, are in a time of massive flux in how technology is developed and applied.
Throughout the debate the participants, coming from a range of buy-side and sell-side firms, discussed that while headcount reductions are continuing to take place, firms are hiring more people in technologist and compliance roles. The onus and responsibility is shifting between firms and departments, but it is continuing to build. Further, there is a growing realisation that financial technology is increasingly competing with other industries. The ability of financial firms to attract the top graduates and most innovative brains is ever increasing, and money is no longer the only motivator that new talent requires.
This is especially true in the US, primarily with competition coming from start-ups and Silicon Valley, but also this trend is impacting Canada, Europe and the emerging markets. The challenge is to make the most of the staff and resources a firm has, and the table quickly agreed that both are rarely sufficient. The true differentiator between many firms is in finding a unique competitive edge, and this is an area that will continue to remain paramount. As a consequence, it was put out that the business side should remain in charge of the competitive edge of the business, while the technologists build the common stack. There was consensus however that those boundaries are breaking down and evolving.
As a result of this shifting competitive edge, it was agreed that standardisation is a key area to look at. The parties discussed the potential for standardisation in areas as disparate as data for analysis, time stamps, wider technological standards and how exchanges bill their clients. There is a growing need to standardise data and the input that firms receive, so that they can better understand their trading and compare like with like. Whether this ongoing drive becomes the role of a self regulatory organisation or the regulators themselves remained subject to debate. All those present agreed the buy-side will start to generate and analyse more of their own data; how the sell-side continues to provide a competitive edge to those buy-side remains to be seen.
As ever though, the divide between theory and practice continued to move around the table. In a time of infinite budgets and no sudden regulatory changes, there might be time to work out many of the standardisation issues that continue to plague the industry. But while each firm has to remain competitive and drive itself forwards while reacting to the wider market environment, it continues to be difficult to get the necessary cooperation. Again this loops back to the discussed theme of how the buy-side want the ability to manage more of their own data, and to do their own analysis. The ability to control, standardise and manipulate data to suit a firm’s own end is far more powerful than being fed that analysis by another firm. But there is considerable cost involved in the development of the technology required to perform that analysis.
The discussion evolved into a wider dialogue around where firms should cooperate and where they should compete, and how vendors can remain adaptable to these changing and disparate needs. The table agreed that the future remains uncertain, but there is a growing need for the buy-side, sell-side, exchanges and vendors to standardise where possible so that the industry can continue to develop and compete.
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