Part three
When asked about the largest catalyst for automation adoption, the most significant reason for our respondents was the desire to use AI, ML and more advanced algorithms. The possibilities for fixed income traders using automated technologies are boundless, especially as they continue to reach new levels of maturity.
According to our survey, the biggest challenge faced in delivering the benefits of AI and ML is the lack of qualified staff with the ability to research, develop and support the trading algorithms. In the aftermath of the automation explosion which has hit almost every major industry, employees with the skill set to implement automation, especially AI and ML, have found themselves in high demand. The so-called talent crunch is a key focus for hiring managers in fixed income.
With greater automation comes a change in the role of the fixed income execution trader. 60% of our respondents said that automation would mean that they would become more involved in the technical implementation of the automation itself; 51% said automation would free up a trader’s time to focus on the more important and complex, less liquid trades and 46% said that the trader would also be responsible for overseeing the automation tools.
There are no limits to automation where there is maturity in electronic trading for a given product. The industry is awash with buzz around AI, the reality is much more different than the hype would tell you.
– Ravi Sawhney, Global Head of Trade Automation and Analytics, Bloomberg L.P.
Think about retail shopping and the massive disruption it has been through. The trajectory was set almost 20 years ago. My own sense is that AI and ML will cover all aspects of trading in the future. It is now just a matter of time before mass adoption.
– Carl James, Global Head of Fixed Income Trading, Pictet Asset Management
Best execution has started to become more automated as more firms are using technology with TCA tools. It’s something that’s widely debated, so I would say that it’s likely to evolve a lot in the future. There’s still ongoing debate as to what are the best automated tools to use.
– Lauren Harrison, Conference Director, Fixed Income Leaders
AI is a very vague and evolving concept but in the long term, if it lives up to expectations, there is no reason why it couldn’t complete most jobs that are done via technology. In contrast, real applications for ML already exist today. I agree with the survey response: the biggest gain will come from more accurate pricing of fixed income securities and the ability for the sell side to more effectively hedge their positions, thus reducing the cost of trading.
– Sam Knight, Trader, Fidelity International
The recent ‘talent crunch’ is already being responded to. Many desks are looking for individuals with different skill sets than those that were required five years ago. Having a computer science or data background can be valued above the number of years the individual has been trading for.
The use of AI and ML is still very much in its formative years. The journey of discovery will inform and illuminate us all and we can then define the path ahead of us.
“In five to ten years, we can expect some monumental changes when it comes to including technology for research, perception and auctioning trades by and far. Automation technology should be even further along with precise procedures and formats.”
“The fixed income trading desk would be more in demand for the quicker execution patterns and paired with lower transactional costs due to regulated input from solid background analysis and polished technical status.”
“Technology will revolutionise how fixed income trading is perceived overall, curative risk analysis with liquidity standings and preservation levels could be developed with more accuracy using consulted technological parameters.”
“Fixed income investment will create more of a personalised experience in the future. Multimodal interactions through voice, vision and haptics will be a general feature of the system.”
“The interface of the trading desk will be more interactive and will understand the human context better than the current systems.”
“The desk will be able to create more value for the business by bringing down the operational costs and expanding the operational boundaries through the use of digital tools like robotics and AI.”
“With the speed and excellence of AI and ML, the executive at the trading desk will be able to make highly qualified decisions and tap into unknown sources of liquidity.”
“Smarter systems that can cut through data traffic and choose the best data and execute trades that will always remain within the regulatory and compliance structure.”
“Desks will have the flexibility to deal with changes in trading patterns and will also have the ability to predict trade future with greater accuracy.”
“Manual labour-intensive work wouldn’t be existent when you are talking about the fixed income desk five to ten years down the line. ML will simplify the tasks to a certain extent and control of numbers would be the only thing that would require maximum interface."
Automation augments the ability of human traders and is a natural evolution of performing a process electronically. The use of automation also enables us to ensure there is a manifestation of the efficiencies that the buy side is always looking to gain. The benefits are numerous, such as reduction in errors, ensuring best execution is consistently met or capturing market opportunities faster. However, the biggest benefit that we see is the trader bandwidth it frees up that can be reallocated to high-touch orders and more profitable relationship-building tasks.
