Prioritizing Change on the Buy-Side Trading Desk

By Anita Karppi, FlexTrade Systems, SVP – Sales and Business Development – FlexTrade Systems

In Spring 2023, the buy-side equities trading community across UK & Europe gathered in Paris, France, at TradeTech Europe to discuss the industry’s most prominent challenges. The discussions across three packed days ranged from tightening margins and sourcing liquidity in an increasingly fragmented landscape to the practical applications of bleeding edge technologies such as AI to reduce operational friction.

Perhaps more so than ever, the common consensus from the various panels, plenary sessions, and our conversations with clients and prospects at FlexTrade’s exhibition booth was that firms must be effective across all departments/operations to navigate today’s complex environment.

To do so, they plan to optimize their operational models further and evolve their trader’s skill sets to meet today’s and tomorrow’s challenges. They are also reviewing their systems in place and understand the need to underpin both with robust, functionally rich technology OEMS platforms and innovation to automate, handle volumes of data, and efficiently access liquidity.

Of course, multiple challenges are faced on the buy-side trading desks, meaning prioritizing the initiatives that can deliver the most bang for the buck is crucial. So, from the conversations during the panels and at the FlexTrade booth with clients, partners, and prospects, what areas are the buy-side prioritizing, and what outcomes are they looking to achieve?

Harnessing data to navigate a complex, fragmented liquidity landscape  

Throughout TradeTech this year, a recurring theme was how to tackle an increasingly fragmented liquidity landscape. Not only in terms of the number of venues, how liquidity is provided, and the types of protocols used to access it but also the consequent explosion of data that traders must understand across high and low-touch workflows.

Our conversations at the FlexTrade booth focused on how we, as a technology vendor, can deliver tools and innovation to reduce friction when accessing and harnessing this liquidity data and best incorporating it into the trader’s workflow. For example, from a low-touch perspective, traders must continuously review all the sources of traditional and non-traditional liquidity available to tackle this fragmentation.

A common question asked during the event was the possibility of traditional and non-traditional liquidity data being seamlessly streamed into the order blotter to augment a trader’s workflow. It makes sense. With all options available in a blotter, traders can view alternative liquidity options directly alongside traditional market data sources and order routing, improving decision-making and control.

Reducing operational friction via bleeding-edge technologies

Over the past year, OpenAI driven-solutions such as ChatGPT and its latest version, GPT-4, which apply natural language processing to large language model (LLM) systems, have been in the spotlight. Consequently, it is of little surprise that many of the conversations at TradeTech focused on how internal technology teams are prioritizing initiatives to understand the various practical applications of AI for the buy-and-sell side trading desk.

The discussions we had during the conference at our booth were around showcasing a new AI layer using ChatGPT, which sits across FlexTRADER EMS and can simplify the interaction between the trader and their trading technology platform. Through deployment, traders can intuitively work with vast swathes of information outside the more traditional 2D grid visualization and input devices currently used.

Traders using such a solution can apply natural language to interrogate and control their OEMS via voice commands or a text-based chat interface, meaning verbal or written questions can be asked to quickly and easily achieve a deep situational awareness of orders within their blotter. For instance, using a combination of specific criteria or characteristics, they can ask questions  like “Give me a breakdown of value by portfolio manager” or “Send all orders under 1% ADV to the GS VWAP”

An additional use case we showcased was the layering of AI over historical trade data. Using AI, traders can request ad-hoc reports on historical trading with specific visualization formats, including tables and charts, to assist with pre-trade decision-making. It removes the need to formulate complex search queries. Instead, it enables traders to use natural language to rapidly interact, interrogate and understand data in the manner that makes the most sense to them. For example: “Summarise traded venues for UK stocks in Feb” or “Pie chart of brokers in December by value”.

The rise of AI and the innovative areas it can be leveraged to augment traders’ use of their solutions and workflow will be fascinating over the next 18 months. The solution we have launched, with the working name of “FlexA” represents a glimpse into the future of trading technology. It offers the ability to erode the barriers created by traditional input devices such as keyboard and mouse, enabling trading teams to work quickly to understand and optimize their pre-trade decisions. Furthermore, it allows the user to be in-tune with technology, and due to the nature of AI solutions, offers the ability to input back and refine immediately.

Following the launch of FlexA, we are working with traders and other market participants to refine and train the solution further – It will be exciting to see where this space goes.

Optimizing the Trading Tech Ecosystem – Elevating the User Experience

Finally, many of our discussions during the conference focussed on improving the various components which come together to form the overall User Experience (UX) and the impact improving it will have for the next generation of trading teams. At TradeTech 2023, the areas flagged as a priority for the senior traders we spoke to included interoperability via FDC3 2.0, APIs to create seamless integrations between OMS and EMS, and using new technologies to reduce the friction between traders and technology.

For example, taking integration as a starting point, many discussions focussed on seamlessly bringing together OMS and EMS solutions and the outcomes tighter integrations can deliver. In particular, partnerships like our recent collaboration with SimCorp or deploying a seamless OEMS solution like FlexONE are driving transformation initiatives. At a minimum, the next generation of traders will expect flexible, integrated workflows and to be able to work from a single order blotter. As a result, time can be saved by removing the need to work between different screens or solutions, and operational risk is greatly reduced as the need to re-key order information is eliminated.

Taking things a step further, initiatives such as FDC3, which aims to develop an operating system that functions like iOS or Android on mobile phones, allow disparate applications to talk to each other and will enhance seamless interactivity UX for the traders. For example, using FDC3 2.0, chat applications such as Microsoft Teams or Symphony can be integrated into the order blotter and populate messages to brokers or internal PMs with a single click.

Finally, leveraging bleeding-edge technologies like AI to reduce friction when interacting with solutions or machine learning to understand large volumes of order data quickly will provide further efficiencies. Using Large Language Models to convert human speech and instruction into commands will be a seismic shift in optimizing the user experience across all technologies. For instance, the use of AI can allow a trader to filter and sort order data within their blotter which could typically take 10 or 20 clicks. Ultimately, the goal when using technology in this way is to reduce the workflow to a single action, for example, doing it in one sentence or command.

Interested in learning more about FlexA?

The FlexTrade team is now looking to roll FlexA as a beta test to clients and other key industry participants to get initial feedback. If you are interested in learning more, or working with us on this initiative, please contact myself, or your local account manager directly.

Contact: Anita Karppi FlexTrade Systems, SVP – Sales and Business Development  – Anita.Karppi@FlexTrade.com