Trade Automation


By Vaibhav Sagar, Senior Technology Consultant, Open System Tech

A tech consultant reviews JP Morgan Asset Management’s Curt Engler’s recent article about trade automation.

The article on “Automating the Trade Process”, by JP Morgan Asset Management’s head of equities trading (Americas) examines the gradual, systematic and incremental automation of different steps and stages of trade process for the buy-side.

Since this process involves replacing human touch and interaction with technology, the system needs to be constantly monitored and have fail-proof checks, according to Curt Engler.

These are required to better manage and mitigate technology related risks. Once a given incremental stage is tested and confirmed – both time and functionality wise – it becomes the foundation for the next iteration of development. Engler is spot-on when he points out that “at all levels, the technology is first used experimentally, tested and, if suitable, is then applied more extensively while constantly monitored and checked for any deficiencies.”

The article explains how the incremental approach is being used in the daily workflow by giving examples of the steps that have been replaced by carefully tested and gradually introduced technology. For the purpose of automation and efficiency, JP Morgan Asset Management synchronized OMS and EMS systems, and automated mechanical steps such as order acknowledgement and execution reporting.

Data based decision-making removes human biases and emotions and also helps to improve broker selection for different asset classes in different market conditions. Data collection leads to more data mining and predictive analysis which can help make smart trading decisions to avoid overall transaction costs (TCOST).

It would be helpful to know how, in practice, both broker selection and cost reduction is achieved. In addition, more details about performance matrices would be useful.

Significantly, Engler also highlights that although automation is clearly being adopted extensively, it is not completely replacing humans. More and more technology experts and quantitative developers are being hired by buy-side firms. This shows how man-power and machine-power can be combined to build efficiency, speed and competitive advantage in today’s high-speed trading world.

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