Head of Automation and Analytics at Bloomberg LP
What is separating the best in class Fixed Income leaders from the pack in terms of efficiency?
Firms leading the way show a genuine desire and aptitude for adopting new tools that can accelerate productivity and create greater workflow efficiency across their trade execution workflow.
They have an acute awareness of the available technology, internal or external, and are taking action to identify areas across the trading process that they can automate. This means they can free up time for more complex trades and client relationships. Time is a rare, precious commodity on the trading desk.
In five years’ time, what will Fixed Income traders wish they'd invested more into?
The market is evolving and moving at a faster rate than ever before, which has resulted in increasing cost pressures, competition and new entrants taking on incumbents. Firms that are strategic with key investments in innovation and automation won’t regret it in five years.
Unless there's a drive to constantly evolve that comes from senior leadership, firms are going to struggle. Whether this is driven internally or by the pressure to stay ahead of new entrants replicating their model at a much lower cost base, the firms leading the pack have figured out that there isn’t time to stand still.
How should firms approach the implementation of automation?
There are so many opportunities for automation that it can be difficult to know where to start. To escape the ‘analysis paralysis,’ the easiest way to begin is by running a pilot. Start with something which is liquid, like US Treasuries, and start with small size orders, then create simple rules and monitor them carefully.
For instance, if an investment firm takes on a significant new mandate, it can use automation to optimize the trading process alongside a targeted number of human traders. Complementing human traders with automation can help deliver measurable productivity gains for the business. The use of automated trading augments the role of human traders who can focus their time on high-touch, more complex orders and more profitable relationship building tasks. It’s human nature to fear the unknown, but automation doesn’t happen overnight. By phasing automation in systematically and closely monitoring progress, firms will greatly mitigate risk.
What is the biggest challenge facing Heads of Trading who are seeking to implement automation, and how should they approach it?
One of the biggest concerns is of unintended consequences through the deployment of automation in what is a highly complex environment. This can be mitigated through the appropriate use of software and planning. The trading desk has a lot of moving parts, so implementing automation requires a long-term plan.
By comparing the first few automated trades to manual trades, you can find out whether they were optimally executed. You can analyze how a human trader would have acted differently, and feed that information back into the rule that you created. While managing risk across the desk is a highly iterative process, the investment in establishing a strong framework can give traders greater confidence and control, enabling them to apply more complex logic to fully realize the benefits of their automation strategies.
To help clients implement fixed income automation strategies, Bloomberg has developed automation tools, including Bloomberg Rule Builder (RBLD), which enables fixed income execution traders to create rules that facilitate fully automated trading on Bloomberg venues. With complete control, Rule Builder can break down orders into high and low touch, augmenting the trader’s role and freeing you to focus on more strategic activities.