The Value Of The Human
Daniel Bisaillon, Head Trader, Equity Markets, La Caisse examines the ongoing role of the trader.
There are limits to human intervention as even the best traders can’t watch everything at once. When crashes happen – if everyone is on the same side of the trade and algos react in the same way – human intervention can be very important to slow it down.
On single trades one of the most important skills is finding market colour and what’s going on in the name and sector. The human is intelligent and has the instinct and the knowledge to build the complex data together. Then the decision has to be made about how to execute, whether to use a broker, to use an algo, or whatever. You can use a machine to do the trade, but a human is needed to make the decision about how to trade in the first place.
It varies by market but certainly in Canada you need to make the phone calls, use the right broker, find the right clients, and it can be difficult. The human is a must in that process in a market of this size.
Finding the right price, finding the liquidity, working with the PM for their views on the market, requires more inputs and complexity than a program can handle. Computers are becoming more capable, but there are limits. They often react to the same inputs in the same way, which leads to events like the Flash Crash. People can calm it down and take that step back.
There are a lot more actors in the marketplace now, and you need technology to interact with the other technological elements of the markets, but then we need the humans to interact with the other human elements, which is what allows us to get the best trades, especially in illiquid trades. If the inputs for the machines are hidden by a lack of liquidity, the machine has nothing to go on. People have to do that digging and build the colour. I don’t want to compete with the computers buying a single lot of shares, I want to do blocks and bigger trades, which is more difficult to get purely electronically. And if I were to rely on purely electronic means, it is much easier to give away my intentions and the size of the positions I am trying to build. I can work it more subtly as a human and get the best execution. There is an ever growing role for technology, but the fundamental importance of the human remains.