The Post-Pandemic Future of Trading

It was originally believed that the work-from-home scenario would be temporary; we are fast learning that this is no longer the case, writes Joshua Walsky, CTO, Broadway Technology.

The trading floor has changed forever. While some observers might point to the pandemic as a catalyst, the move to working-from-home only accelerated developments that were already well underway.

Over the last two decades, trading pits have given way to electronic trading, physically separating trading firms. This trend progressed within the trading firms themselves as trading floors grew larger and global, leveraging technology to allow trading and sales to sit farther apart. Although the driving cause today is different, traders, sales, support and operations staff are dispersed. Technology is filling the space in between.

Evolution presents new opportunities for sell-side trading operations. Those firms that shift towards digitized workflows, lean into partnerships and unlock the value of data will be ahead of their peers as the new physical trading floor takes shape.

Outsourcing will be at the heart of tomorrow’s trading

Outsourced trading, be it outsourcing risk, outsourcing particular trading workflows, or outsourcing staff, will grow.

Many banks were already evaluating functions for outsourcing before the pandemic. These banks were also creating digitized trading workflows, leveraging technology to drive and mediate interactions between multiple parties inside and outside of the firm. When disruption hit, the attention turned towards ensuring business continuity. Now, sell-side firms are examining areas where they can hone their individual strengths.

Central to performance is technology that enables staff to stay connected and work together seamlessly, sitting at desks across the globe. Technology must mimic the complex workflows of trading in order to supplant the human, in-person interaction that is no longer possible. To support virtual coordination at a global scale, trading technology must be incredibly complex, flexible, and customizable.

Trading workflows must shift with the constant tide of market changes. Human, in-person interaction adapts to this easily and almost subconsciously. Technology, however, needs to be structured and programmed. Banks will need to leverage others to manage the myriad of changing trading protocols, new products and internal processes.

This is where outsourcing to trusted partners is a logical move. Adaptation at such a broad scale is taxing. Partners are well-equipped with the scalability that bank trading teams need to adapt on the fly, freeing up banks to focus on other areas where their IP can generate new business opportunities and support revenue growth.

Keeping Ahead of Regulatory Change

Regulatory challenges are nothing new. What has changed in the ability to address them in a new working environment.

It’s well known by now that regulators have raised concerns over institutions’ capabilities to adequately monitor trader communications while they work remotely. Fortunately, the same process and approach of digitization of interaction provides the transparency and access that such monitoring requires.

To adequately comply with regulatory monitoring requirements, voice and electronic communication workflows must be built on a foundation of structured and accessible data across various applications.

The availability of this data opens new doors. Data transparency and accessibility plays not only an important role in a firm’s observance to internal and external compliance rules, but its overall productivity. When data is accessible, discoverable and logically structured across an organization it is now open to digitization of workflows of which will empower better remote connectivity, integration and regulatory awareness.

Workflows and data will be even more hand-in-hand

Physical distance between various aspects of trading operations means increased complexity. To streamline operations, workflows must become increasingly digitized and well-defined. Those built on well-structured and universal data accessibility will prove strongest.

Digital workflows and data transparency will entirely replace the physical interaction between teams – including client management and idea generation. The barrier towards modernizing trading workflows is identifying where data sits, its logical business purpose, its structure and its relation to other relevant data. Data sitting across both new and legacy systems need to be surfaced and rationalized to create one clear picture of activity. Banks must leave no piece of their infrastructure unexamined. Unlocking the value hidden within legacy systems (instead of simply trying to replace them) by integrating their data into digitized workflows will be integral for success.

Once more, this is where the right partner adds value. Banks are realizing that integrating legacy, third-party and in-house technology into one agile ecosystem is essential to their evolution – yet, doing this all themselves is beyond what their resources may allow. Technology partners have the capabilities to integrate and unlock various systems, without trying to usurp or diminish existing investments. Technology partners also build a natural expertise across a variety of technologies and uses. Additionally, banks may not have the time to tackle this all on their own, as the looming threat of further lockdowns and economic instability creates the possibility of further disruption.

Positioning for future success

It was originally believed that the work-from-home scenario would be temporary; we are fast learning that this is no longer the case.

Focusing on restoring normalcy misses the opportunity ahead. Digitized and interconnected workflows, outsourcing and leveraging the power of data will reap significant benefits for trading teams well into the future.

For bank trading operations, the aim should not be on how to restore the physical trading floor – but how to connect traders, workflows and data in a manner that enables them to thrive, especially as the market continues to evolve.

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Joshua Walsky is CTO and Co-Founder of Broadway Technology, a provider of high-performance financial trading solutions for top-tier global banks and hedge funds.

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