With industry wide efforts to improve data quality and transparency, the buy side are now seeking smarter ways to make more informed decisions across every asset class. Even the regulatory experts at the 7th annual ATF Global Summit verified their perspectives that, no information such as the RTS27 should be considered to be excluded from the scope of improving the buy-side’s execution arrangements, however it is up to each buy side to find smarter tools to be ahead of the game.
For every asset class, the discussion should start with the quality and availability of pre-trade, price and volume data. Then the next step is about the independent aggregation of such data before discussing the various analysis and visualisation tools. Ultimately each trading desk will seek hard facts as supportive justification to their decisions which often rely on experience and expertise combined with elements of gut feel.
From a regulatory perspective, we received confirmation from the authorities that the ESMA reference data repository is not going to fall under the definition of consolidated tape even for equities. Transition challenges with European Parliamentary elections and Brexit is going to be the priority for the near future. The market participants will have to look for commercial data solutions over the next few years.
The discussions at the 7th annual ATF Global Summit were upbeat with expectations of a hectic year for data and analytic vendors presenting how they can give each buy-side trading desk an edge in pre-trade decision making. The asset management community is currently working on accessing and normalising trade data first and K&KGC foresee the increasing interest in Machine Learning (ML) and Artificial Intelligence (AI) as the next step.
Without access to normalised trade data, the buy-side head trader will no longer be competitive by the time the ML and AI is widely used by the rest of the market.
While the buy side had an opportunity to articulate many of the technology challenges at the 7th annual Alpha Trader Forum (ATF) Global Summit, K&KGC also received buy-side feedback that the discussions with the selected technology sponsors, later in the day, unveiled new solutions of which they were previously unaware. While some well-funded desks have taken the initiative to build their own execution management systems, third party technologies are slowly catching up with more complex buy-side needs. The buy side are already adopting various solutions to start automating bond trading. The buy side want to continue to be in control to prevent signalling issues therefore, only a small share of trading are expected to go to zero-touch. Conditional rule-based automation tools are already available but better access to holistic market data and firm prices would be needed for true smart order routing. The buy side are increasingly engaging with non-traditional liquidity providers for smaller trades.
Positive developments to access forwards data was presented at the 7th annual ATF Global Summit. Comparing year-over-year statistics the buy side seem increasingly positive to start using exchange traded futures as an alternative. There are already analytic tools capable of delivering answers to complex challenges and the data and analytics discussion unveiled further solutions. With an increasing number of buy-side firms understanding the importance of dedicated FX trading desks, we are eagerly looking forward to follow the rapid evolution of the buy-side FX trading over the course of the next few years.