Finance Hive Insights

Jim Norcott from FX Connect summarises the Automation discussion from a recent meeting of our West Coast members:

A checklist of key findings from an intimate meeting of US Head Traders:

• Automation has an obvious role to play when looking to net more effectively, but managing incoming orders and ensuring they are granular in their formulation is important to be able to take full advantage
• The level to which different buy side firms are happy to embrace technology varies across the industry
• There is a role for AI and machine learning to play in making vanilla automation more sophisticated – but that data is not always easy to access.
• For automation to develop further on the buy side pre-trade tools need to improve to the point where they are outperforming the trader, but we need richer data for this.
• The future of automated trading is quite clear, what remains unclear is how long it will take the buy side to fully embrace the machines and adapt their roles to become more like liquidity managers as opposed to traditional execution traders
• It is important to define what automation means for your firm, so you have a clear idea of what you are trying to do
• Take small steps – there is a logical order to your automation journey, and you shouldn’t try and do everything at once
• Think about what problems you are trying to solve and how automation might help you deal with them. Automation should be seen as a tool to help your desk, not as an objective in its own right.
• Take care surveying the vendor landscape – there are many pre-built tools that can help you
• Embracing automation should empower traders to make their roles more “value-add” and form closer relationships with investment teams
• Automation of forwards is definitely more difficult than spot, but solutions are improving and becoming more robust
• Trading desks need to be more forward thinking to avoid being left behind
• Early adopters report significant benefits, so less advanced desks should spend more time thinking about how automation can help them achieve their objectives
• What you can automate and how you do so depends on your specific workflow and trading style
• For automation to drive alpha generation it is essential that you have access to rich, granular and reliable data
• Traders are not at risk of losing their jobs due to automation – our value lies in idea generation, and ability to think on our feet in tricky situations. Automation allows us to do more of this.
• Automation is a business enabler and a relationship enhancer
• Every firm has a slightly different workflow, that’s why it’s important for automated trading tools to be highly customizable