Communicating the Trade Life Cycle
For a financial institution, the investment process — from idea generation to trade settlement — involves multiple steps and multiple constituencies working together to minimize friction and maximize return.
Data management. Risk management. Portfolio management. Trade execution. Middle and back office.
Meetings and conference calls have their utility, but planning and scheduling can take hours, days, or weeks. In today’s fast-moving, highly regulated, 24/7 electronic markets, having a robust, noise-damping, configurable and compliant instant-communications system is critical.
Providers are stepping up their games. “It’s an exciting space right now,” said Matt Howell, senior trader at T. Rowe Price in London. “There is quite a lot of innovation going on, both from the new platforms and also from the incumbents.”
The desktops of Howell and his trading colleagues at the $813 billion asset manager host multiple communications platforms. “The ecosystem is quite fragmented,” he said.
Without more hours added to the day, traders’ overriding need is efficiency, especially as easily manageable email inboxes are a relic of the 1990s. “Over time that has turned into the mess that currently exists,” Howell said. “New communication channels open because email is no longer efficient, but then what happens is those channels quickly fill with noise as well.”
“We’re hoping that channels leverage technology to allow us to filter through the information that we’re presented with, in a more efficient fashion,” he continued. “So rather than me sitting there going through 90-plus chat rooms looking for the nuggets of information that I’m interested in, we’ll be able to scrape, or lift, or maybe use bots, to identify the right information and content. It will be presented to us rather than us having to go find it.”
Howell said electronic-communication platforms are moving towards this ideal, “but really there’s still too much noise on the trading desk. We have to lower the level of noise that our traders have to sift through.”
“Streamlining communication is key to productive internal and external outcomes,” said Sashi Dias Valtz, Head of Sales – Americas at secure messaging-system provider Symphony. “It is relevant for all participants in the trade lifecycle to connect in a unified manner in persistent chat-room environments, whether that be one-to-one or one-to-many.”
Communication within the trade life-cycle spans two broad realms: internal, which occurs primarily between the sales and trading teams or between analyst, fund manager and trader, and external, i.e. when a sell-side broker communicates with his or her buy-side client.
“Trading and portfolio-management workflows, while very interconnected, can be very different in terms of communication priorities,” Dias Valtz told Markets Media. “The challenge with bringing everyone within financial services on the same communications platform is the need to have some common features that work for everyone, but also can be heavily customizable.”
Today’s systems go well beyond just enabling online chat. Real-time alerts and notifications with customizable filters “allow for key information signals to reach the decision maker and bifurcate that flow from noise, in order for users to make actionable investment and execution decisions,” Dias Valtz said.
“This is all at the same time remaining within the compliance parameters of their firms, as well as regulatory compliance requirements,” she continued. “The front office needs to concentrate on their core role, and trust that their communications platform furnishes them with the necessary security, compliance and information barriers. Frictionless access is key.”
Regulation is a primary concern of proprietary traders when it comes to their electronic communication, said Dennis Dick of Bright Trading LLC.
“We are heavily regulated in this area — everything is tracked,” Dick said. “Really, most traders use messaging to share trading ideas and brainstorm. But you never know when a regulator might come in and misinterpret what you said. So you have to be careful in how you communicate.”
Howell of T. Rowe said full security and compliance with the firm’s internal policies is a prerequisite for a communications platform to even be considered for use.
Custom execution strategies are key to optimizing results.
It's about providing actionable insights to the buy side.
Aim is to optimize trades of more than 10,000 shares.
In an electronic market, personal relationships still matter.
Majority of managers say off-the-rack options don't cut the mustard.