March 30, 2012

Sometimes disruptive technology changes life so profoundly that we can hardly imagine how we did things before. The automobile. The telephone. The microwave. This weekend, I had to show my seven-year-old how to open an envelope. He handed a bill to me with a rather confused expression on his face. "Remember this moment, Tim," I said. "You may never need to do this again."

The modern trading desk is lightyears ahead of desks from just 10 or 15 years ago. But as the rise of black-box trading has transformed the industry, buy-side traders have had a tough time trying to remain relevant. Walk around any trading floor today and you'll see well-scrubbed young men and women staring at a wall of screens filled with an array of spreadsheets and market data feeds. But with most executions occurring electronically, what do buy-side traders do all day?

Chances are they're watching algorithms do most of the firm's trading. More than one industry expert told me while I was reporting the April issue's cover story, "Meet the New Trader," that today's buy-side traders work difficult orders — perhaps 2 percent of all daily transactions — helping them reach completion.


Meet The New TraderNavigating the complexities of today's capital markets requires an entirely new set of skills, but many on Wall Street have struggled to adapt. Advanced Trading's April digital issue breaks down what buy-side traders need to know to survive on the modern trading desk.

Another source told me they stare at screens and, well, scratch their noses. According to the asset manager, traders often are there only for the edification of the hedge fund manager. When institutional investors do their due diligence, he explains, they expect to see a proper trading floor, complete with traders staring at screens and furrowing their brows. (Perhaps Harvard Business School should offer courses in 'Emotive Spreadsheet Scanning' or 'The Lexicon of the Bogus Trading Floor'?)

So are the buy-side trader's days numbered? In the April digital edition of Advanced Trading we look at the changing role of the buy-side trader and what skills the next-generation trader will need to survive. Even in the Age of Algos, it seems there is still plenty of value for the buy-side trader to add.

Also in the issue, associate editor Justin Grant reports on the exchanges' efforts to slow down high-frequency traders, and he explores the costly burden of Form PF reporting. Former AT editor Kerry Massaro checks in with Stephen Davenport of Wilmington Trust for his views on how the current economy and Dodd-Frank are impacting the roles of the trader and risk manager, and Tabb Group analyst Laurie Berke explains why it's a quant's world on the modern trading desk.

I've been reminded lately that not all innovations are for the better; I've been reading Saul Bellow's "Letters," and it's been a revelation. The author won countless awards for his big, teeming novels, but I prefer these letters. They're funny, intimate and much more human. They also take you back to a time when words on the printed page mattered. I wonder if anyone will ever publish the tweets of a famous author? Or if anyone misses hand-written order tickets?

ABOUT THE AUTHOR
Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining ...