Finance Hive Takeaways

Equities Digital Boardroom Series 2020

TCA Providers

Everyone is using technology and data to solve problems and make trading strategies more efficient.

Everyone is at different stages in their trade analytic journey but are we all trying to achieve the same goal, albeit with different budgets and resources

Sharing insights on providers we had used or looked at was really useful

Make sure to look at some of the smaller providers – they may have the functionality and flexibility to fit into your workflow where the bigger names may not

People are looking to move towards proprietary systems so they can have something more bespoke, but few have the resources to do so

Keep your in-house tools in check by validating against external providers

It’s interesting to hear what people want from TCA and what they use it for.

We will re-consider PM profiling as it seems like a quick win to get some value-add out of your TCA

The idea of one TCA for clients and compliance and one TCA for traders is interesting, and something we had never considered

There is a lot of value in having multiple benchmarks.

We all have a responsibility for the whole investment process

Big XYT – we had them in really early stages but having heard the feedback we should check them out again.

We will follow up with Babel Fish and get that rolling

Nice to see everyone is actually focused on trying to improve trading – there was a lot of passion on the call

We are going to look back at our PM consultancy and have a look and see which investigations and which PMS this worked well with

Trading from home and managing remote teams

Significant challenges are being overcome adapting algos to current market conditions, especially when multiple people are involved remotely to test and distribute daily updates

Now is the time to lean heavily into the resources and expertise of your third-party providers to guide you through the turbulence

Today, people who are so far away feel the closest! Joining together globally is so important and it’s fantastic we’re able to do this

It’s great to connect with peers and get away from our misery of order processing and sourcing liquidity!

Building the network is powerful and together we can overcome the challenges we’re all facing

The market has proved to be resilient and adaptable

Now is the time to lean on your providers! They’re available to help with contingency planning.

The interaction from the trading floor is missed. How can we bring that buzz home?

Virtual coffee breaks and happy hours can help motivate your team

There’s a real sense this situation will promote well-being and bring about much needed diversity on the trading floor. It’s possible to efficiently trade from home, opening up the floor for flexible working for different time zones, more time with loved ones, and for working parents to return to the desk

Trading in Volatile Markets

Everyone is getting less matches in LIS venues

Maintaining strong communication lines with PMs is essential

Some buy side are shifting to more high touch trading strategies… but not everyone!

TCA is difficult in these scenarios but has its role in preparing for future crises and explaining/demonstrating increased transaction costs.

Manage expectations by staying in communication with the investment team and senior management around WHY trading costs have increased so much

It’s hard to say when current market volatility will revert

Short selling bans are an emotional reaction by regulators that harm the normal functioning of markets by removing liquidity

Great to see the resilience of the industry

Certain systems and algos are not designed for the conditions we are in

Trading costs will be high across the board

Data captured now is best left as anomalies, but can be helpful explaining what happened and preparing for any future crisis

The industry has been robust in the move to remote working

Some desks saw moves to higher/lower touch trading on an individual trader level

When markets are moving so quickly it can be useful to harness tools on desktops that you know are going to perform well

Low touch strategies can be adjusted based on what algos are performing the best in volatile conditions if you have the data and ability to analyse it properly.

Automation Opportunities

Most participants had human oversight or a one touch trading system, but as you start to trust the systems this human interaction can be scaled back

Take baby steps – it will seem like an unbearable project if you try to automate lots of orders for lots of accounts in one go – plus you won’t have the data to be able to do this

Everybody has different business mixes and different workflows, so you have to take a lot of time to work out what you want on a firm by firm basis – but tech providers are there to make this easier.

Pre-trade analytics are crucial for automation to become scientific

Removing trader bias is a huge positive of automation

There are two types of automation:

  • Binary automation where you make simple decisions for simple trades
  • Dynamic automation where you are using data to inform the rules for routing and adjusting accordingly

Communicate WHY you are automating to traders and senior management

Make use of existing systems to help you automate more workflow

EMS providers are doing a great job supporting the buy side when it comes to innovating their products to allow further automation

Fears that automation will replace traders are starting to be dampened – automations role is to empower traders

Traders are always being asked to be more efficient – being pro-active with automation can help demonstrate that.

Embrace the fresh perspective that new talent entering trading for the first time can offer. They might be able to see things that you have grown blind to.


Next gen algos will move towards investment algos vs execution algos, higher up the decision tree

There is very little value add in an execution algo

You need a large data set to effectively measure algo execution in house

AI ok to aid alogs, but not going to change the world

AI has limited alpha on a micro level – macro level output may be more useful

Next-gen algos can lead to more intelligent decision making

Algos can help facilitate “robocop” automated trader

Need to look upstream of the algo for performance benefits

Algos are becoming generic – automation is the way forward

How much discretion and guidance should you give brokers

Clusters are in force to determine the parameters and the thresholds as to how an order is routed

Difference understanding of what a wheel means? Routing or pre-trade?

Clustering and routing seem to be the most active areas for AI usage

The management of brokers in/out of wheels is still a sensitive topic – how do you do it effectively

Look into products for strategy selection before sending to algo wheel

The output from the wheel is your pre-trade tool

Promotion/ Demotion of brokers in wheels is challenging

AI/ ML can be useful to help allcoate order flow and with execution but needs lots of data

Big gap between the buzzwords of AI and ML and reality of who actually has it

Limits to potential performance pick up by using AI and the execution space

Very few AI alogs actually exist, but clustering is the most interesting development

RBC are worth a look for AI algo

Not many real providers yet

Need more real-time analysis

Get data to deal with PM micro-management of orders

We need to better educate PM’s

Exception based trading is possible with next-gen algos

Controls / Oversight are paramount