BUSINESS PROCESSES & TECHNOLOGY
K&K GLOBAL CONSULTING RESEARCH
Key takeaways from 1H 2017 Alpha Trader Forum (ATF) regional buy-side debates:
Areas of business processes that has drawn the attention of heads of trading is the trader’s choice of counterparty for each trade and whether there is a need to remove the possibility for bias? Do the traders understand how to correctly use the algorithms and let them perform its objectives? Is there a need for automation to ensure that choices are made based on proven performance instead of subjective gut-feeling? Some buy side thought leaders argue that a well optimised machine will perform better than the human in the long run, at least for low touch types of trades.
A major challenge within the fixed income asset class is the increasing fragmentation of liquidity and how to prove best execution. Traders are manually collecting quotes and market data from multiple sources for each deal to prove their due diligence around each trading decision. This proves there is a strong need for an aggregation technology, such as an execution management system ("EMS"), to make the job easier by consolidating reference prices with time stamps to reduce administration.
Within foreign exchange it is interesting for the buy-side to understand how they can start to leverage non-traditional liquidity sources and smarter pre-trade TCA systems. Will all banks sign up to the Global Code of Conduct?
A core part of the discussion, relating to business process change, is the choices of trading technologies including EMS and OMS (order management system). Should you opt for one central solution or best-of-breed and is it important to go for an independent solution? What if you were asked the question by your auditor “what type of due diligence did you do in the selection of your technology for this asset class?”. Answers of which all require some deep thought and tough decision making.