During the TradeTech FX conference in Miami in February 2022, our Director, Head of Product Solutions, Reena Raichura was a speaker at the Multi-Asset Trading Keynote panel together with Stefano Pasquali (MD, Head of Liquidity & Trading Research, BlackRock), Irina Issakova (MD, TD Asset Management), Liakos Papapoulos (Senior Investment Manager, Treasury, MN Investment Management) and Travis Schwab (CEO, Eventus Systems).
Moderated by Audrey Blater (Senior Analyst, Coalition Greenwich), the panel focused on sharing recipes for success in building out an effective multi-asset class trading desk as well as looking at some of the challenges. Portfolios have become more complex in recent years and managers have looked to scale technology to be able to deal with differences in how FX, FI, equities, and other asset classes are traded. This article provides a summary of the insights during the discussion.
Topic 1: Technology challenges
Topic 1 focused on discussing some of the technological challenges that the panelists had experienced when trading a multi-asset class portfolio.
Unsurprisingly, there was consensus from the panel on the challenges that were highlighted:
- Lack of data centricity and accessibility – Siloed data sets make it difficult for portfolio managers (PMs) and traders to get access to quality and contextual data. This means that it is hard for PMs and traders to get a holistic view of a portfolio’s contents and its associated hedges. Poor decisions based upon missing vital information can have a direct effect on fund alpha.
- Fragmented desktops and workflows – PMs and traders typically use a number of different applications to get their jobs done but none of these applications communicates with each other on the desktop. This results in disjointed workflows and business processes that are slow and inefficient.
- Technology stagnation – It is difficult to build a best-in-class multi-asset trading desk from legacy technology stacks, some of which are 20 years old. The panelists questioned how you can integrate best-of-breed applications if they are built using different technologies.
- Are OMS/EMSs truly multi-asset? – The question arose around whether third-party OMS/EMSs were truly multi-asset. The consensus was that OMS/EMSs still favor one asset class over another even though they claim to be multi-asset. This means having to put up with systems that underperform for certain asset classes.
Topic 2: Cloud adoption and data centralization
Topic 2 focused on cloud adoption. How can it enable data to be shared for multiple purposes and how can firms make the journey to the cloud easier?
The emphasis was on the points below:
- Cloud adoption must be seamless and invisible to end users. They don’t care if they are accessing the cloud for a particular application or data set. From a PM and trader perspective, they want to be able to receive contextual data from anywhere at any time and cloud adoption allows them to do exactly this.
- The pandemic and working from home have accelerated cloud adoption and digital transformation in general.
- To make the journey to the cloud easier, collaboration and partnerships are key and Big Techs such as Google, Amazon and Microsoft are leading this space across the buy and sell side.
- While the move to the cloud is important and data centralization is key, Reena stressed that you do not have to wait for data to be normalized and in the cloud to access it now. Her key message was that business value could be gained much earlier by augmenting existing legacy technology stacks. She went on to say that there are a number of important data points on the desktop that PMs and Traders miss just because they have to navigate between so many applications. “A desktop integration platform like interop.io revolutionizes this by streamlining existing workflows, bringing data sets together and providing users with the right data in the right windows at the right time,” she said. At the end of the day, it’s all about separating data from those applications in which they reside.
Topic 3: RegTech in FX
Given this was TradeTechFX, topic 3 zoomed in on the FX Code of Conduct and the concern that it was being ‘adopted in stages’ since it was voluntary rather than compulsory regulation. When moving to a multi-asset trading setup, the question was raised as to whether the transition would influence or hinder the adoption of the regulation.
The panelists all agreed unanimously that transitioning to multi-asset trading would influence the adoption. Some of the panelists went on to mention that they had already adopted it in full given the similarities with MiFID II, e.g., greater market transparency and record-keeping.
Reena emphasized the importance of firms future-proofing their technology and thinking about their data strategy holistically and planning ahead for the code of conduct to become formalized.
Topic 4: How does the journey to a multi-asset trading setup begin?
Audrey asked the group about the most important things to consider as part of the multi-asset class journey.
Workflow efficiency was a hot talking point and Reena underlined a number of key points where interop.io can help:
- With disruptive technologies like interop.io, firms have real options today to build out a best-of-breed platform and build their platform of choice regardless of the underlying technology.
- Firms do not need a heavy lift. interop.io provides simple workflow solutions to start small, such as embedding a best-of-breed pre-trade analytics platform with an existing OMS/EMS. These types of solutions can deliver business value in a matter of days.
Some of the other panelists agreed that starting small with simple workflow acceleration and building upwards was a strategy that they were using successfully.
Topic 5: Final thoughts
The final topic discussed what multi-asset class firms needed to consider in terms of their technology strategy. Reena highlighted her vision and strategy for transitioning to a multi-asset trading setup and modernizing the trading desk in general:
- Take a 360-degree approach to modernization from ‘data to deployment to desktop’, i.e., think about your cloud storage, think about web-based services, and have a desktop integration strategy in place. Don’t leave the front end behind!
- Take a buy, bond, and build approach to modernization, i.e., collaborate with FinTech andBig Tech vendors to build a best-of-breed platform.
- For firms with in-house development teams: Stop working in application development silos. Think about workflows and business processes first and then build an ecosystem around these. No application is an island.
- Remember that digital transformation is a journey. Embrace your legacy technology stack and adopt simple workflow solutions. Now you can implement them within days and provide the quickest path to business value and then build from there.
Reena left the audience with her final thoughts which were that the risks of not solving the technology and data challenges would mean:
- That the road to transformation would become harder the longer technology stagnation continues.
- It would be hard to attract new talent. Digital natives expect their desktops to be as smart as their cell phones.
- There would be a direct impact on the business in terms of remaining competitive.
In short, she said, “Technology is the enabler for change in processes and people.”