What’s Next In Fixed Income Trading? AI

Artificial intelligence has established a toehold on institutional fixed income trading desks, but the real action will be in coming years.

“Data, data science and AI,” BlackRock Head of Global Trading Supurna VedBrat said when asked what’s next in fixed income.

Speaking Thursday morning at WBR’s Fixed Income Leaders Summit in Philadelphia, VedBrat said emerging technology has the potential to change trading strategies on the buy side as well as the sell side.    

Supurna VedBrat, BlackRock

Supurna VedBrat, BlackRock

“AI gives us the ability to truly augment human intelligence with computing power, and be able to do that at scale,” VedBrat said in a conversation with Tradeweb President Billy Hult.

BlackRock, which VedBrat likened to a microcosm of the buy side as a whole, is in the preliminary stages of deploying AI, with much of the focus so far on small, “low-touch” transactions.  

“You don’t need human intelligence to click trades,” VedBrat said.  BlackRock has automated some trading functions, which has evolved the role of human traders to more like risk managers who oversee trading flow.

AI stands to gain with the proliferation of data, and the move to the cloud that will strengthen computing power. The new landscape will feature data and AI overlaid onto current business processes — a combination of humans and technology rather than a ‘versus’, VedBrat said.

Relationships

As technology drives efficiencies on the trading desk, personal relationships still underpin the business.  

“Relationship management is very critical, especially if you want to stay relevant and be a driver of change,” VedBrat said. 

With $6.5 trillion in assets, every vendor of technology and brokerage services would want a direct line into BlackRock, but VedBrat explained its not feasible to connect to everyone. Instead, BlackRock has close connections to a manageable number of broker-dealers — perhaps a half dozen — and connects to others via electronic trading platforms such as Tradeweb, which can aggregate the next 100 biggest liquidity providers. 

VedBrat said the one-stop-shop vendor model has faded over the past few years, and firms instead compete on different business models. “We want to to partner with people based on their strengths,” she said. “We don’t want to spend time and energy” working with firms that offer many products but may not do anything especially well. 

Regarding talent management, BlackRock looks for people with different experiences, from diverse areas, and who represent different age groups.

“I try to create an environment in Global Trading that’s much more about innovation and agility —  mixing up different ways of thinking to be able to solve problems,” VedBrat said. “It’s important that you are passionate, and your purpose is aligned with the firm’s purpose.”

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