DWS Group’s global head of trading discusses the ways in which trading, talent and tech come together, the war for talent and the need for data.
What is the ‘secret sauce’ for a successful trading desk in a multi-asset trading environment?
While you have got to have traders that specifically trade equities, trade credit, trade rates – and I would not necessarily divert from this makeup – I think you need to have talent, and traders, that are able to distinguish between assets and have a high-level view of procedures, processes and technology.
You need to have traders that are able to leave their silo, and think in terms of new technologies, because there is a lot of potential when it comes to automation and creating efficiencies with nascent and up-and-coming technologies.
You need talent that has the right training, the right ‘DNA’, and also a certain technological skill set as well. Perhaps they are not afraid at looking at code, or even coding themselves. They can work across various asset classes and they can think process, not just execution. I think those sorts of talents are critical. And it is not just more experienced and senior traders that are able to do this.
I think those are all good targets for an agile for a large trading desk, to identify those traits. Mixing those traits with traders that possess decades of experience can really help desks confront and deal with whatever type of crisis comes their way.
Talent is clearly a substantial part of any desk’s success – what hurdles or barriers are there for getting the right people on to trading desks?
There is certainly a war for talent, especially across Europe and other developed hubs. Finance is not necessarily the number one destination for smart, driven people nowadays. Somebody with a natural interest in financial markets, combined with good quantitative and IT skills is what many sectors are looking for. These days, this skillset is in high demand, not just for trading desks, but for technology firms, too.
And there are certain requirements for working on a trading desk – you are bound to market hours and you may not have the flexibility that is afforded to you by working in Big Tech, for example. You need to synchronise your off-desk time, you need to make sure that the desk is properly covered, and therefore the hybrid working model is simply not always possible. These requirements may act as hurdles or barriers for potential talent. Even working from home may have limitations as communication is absolutely key, not to mention governance and supervision concerns. Because Big Tech firms can offer this flexibility and ‘work-life balance’, the needs of financial services firms and trading desks may act as a barrier to potential talent coming into the industry.
How can trading desks future-proof their strategies and technologies?
On a trading desk it is important that you have technologies that are programmable. Whether you have direct access, or you have the skills to adapt and change the technology, or you have a very agile IT department that understands your changing needs and is able to keep up-to-date with technological advancements – you need to be able to evolve the technology at your disposal.
Secondly, access to data. Particularly creating a golden source of truth for transaction data that is enriched by all sorts of additional data, whether that is transaction cost analysis (TCA) data, outside market data, data from venues – enriching your transaction data to the largest degree possible. And then to make that data accessible and visual so traders can learn from it. Especially for a large desk such as our own, with more than 2 million transactions a year, the amount of data you are creating is an asset. There is so much information in data that you can learn from, draw conclusions and adapt your execution style in order to increase the quality of execution.
Lastly, having proper documentation in place is important, especially if you are embracing automation. Bringing all that together – having the right technology in place, continuing to have the right talent mix at the desk, having a proper change process in place, which includes the whole governance and control framework, all of those moving parts – is important. Taking that, and understanding the importance of both pre-trade workflow and post-trade workflow, recognising that you must not only invest in the execution piece of the puzzle, will help future-proof trading desks.
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