Trading Technology

01:11 PM
Ivy Schmerken
Ivy Schmerken
Commentary
Connect Directly
Facebook
Google+
Twitter
RSS
E-Mail
50%
50%

Where is the Innovation in Trading Technology?

Complaining about the sluggish state of innovation in trading technology, market participants pointed to cost pressures and low volumes.

Attending a conference recently, market participants bemoaned the lack of technology innovation in trading. With equity trading volumes depressed, downsizing of sales traders and reductions in IT spending, innovation has taken a back seat to saving money and retaining market share. Firms are coding for new regulations, rather than breaking new ground.

“Most desktops look the same. [Trading] Screens look the same for the past 10 years. No one has gone out and made a step change,” commented Rishi Nangalia, head of Redi Technologies, Redi Technologies, Goldman Sachs, which encompasses the RediPlus execution management system (EMS) and other activities.

“The real innovation is still ahead of us,” said Nangalia, who spoke on a panel about “Why Trading Technology Still Matters” at the June 11 Tabb Forum conference, “The Fate of U.S. Equities..” Other panelists spoke about opportunities for improving productivity, consolidating information through visualization technologies, such as heat maps — even clicking a picture to open a trade ticket.

As sell side firms undergo cost pressures, there is more of a need to be productive, panelists noted. Some brokers are looking at consolidating their high-touch and low touch sales-trading functions. Others are reviewing whether they need separate sales traders for cash equities, program trading, convertible bonds, noted panelists.

“There’s been a massive innovation gap,” said Alfred Eskandar, CEO of Portware, who spoke about ways to boost the productivity of sales traders on the buy-and sell sides. “There [are] a lot of workflow inefficiencies preventing a trader from covering an account. They have to gather information from so many different sources, distill it and deliver it,” noted Eskandar, who added, “The time for decision making is going down.” For a coverage person, we’re giving tools to the sell side coverage guy so they could be more effective. Eskandar said there’s still going to be conversation with the high touch trader, “We’re just helping the trader have that conversation faster.” Eskandar also reminded the audience that technology is not just for automated trading, and can be used as a collaborative tool and communications tool.

[To submit your nomination of a technology leader in the financial services industry, fill in the information on our Gold Book 2013 Nomination Form].

Still others contended there is room for innovation in financial services. Palak Patel, Global Head of Equity Trading Product Development, Bloomberg LP, said there are “tons of ways to innovate with an EMS.”

While algorithms and the proliferation of strategies were once associated with innovation, one panelists suggested the industry had gone too far with slicing and dicing orders. Still, John Consenza, Co-head of Electronic Trading, Cowen Group, emphasized that big advances have been made on the analytics front over the past four to five years. Citing venue transparency, where firm’s can measure every child order and see where it’s executing and measure toxicity as examples of progress. For Cowen, which is focusing on equities, the future is forward looking analytics, to help a trader predict what is going to happen in 2,3,4,or 5 minutes and how that impacts the trading decision, shared Cosenza. As fixed income moves to an exchange model, the systems that firms built for other asset classes are being repurposed, as firms look to noted Brendan Carley, Global head of Elektron and Enterprise Platform, Thomson Reuters.“A lot of what we see is spreading horizontally across asset classes,” he noted.

Yet Redi's Nangalia, suggested that putting an RFQ button on a platform, referring to the request for quote model, was not innovation. So far, Nangalia said the industry has made incremental changes, not step changes.

“When was the last time you saw come cool algos or cool market structure changes?” Nangalia challenged panelists and the audience. “Where does the courage come from? ” he asked. Nangalia, who is charged with building a stand-alone business unit for Redi to strategically grow as a financial technology company, urged people not to stay in their own firms, but to go out and break the mold. He added, “Thirty blocks south of here, a young industry is brewing,” as if pointing in the direction of where fintech startups are based in lower Manhattan.

But we all know that innovation is alive and well on Wall Street in many different ways. We are accepting nominations for Wall Street & Technology’s GoldBook 2013. Perhaps there is someone within your organization who deserves recognition for spearheading a project. We want to know about that CIO, CTO or SVP in charge of a line of business at a brokerage, asset manager, hedge fund, or exchange who is making a difference. As we did last year, we will profile this exclusive group of tech innovators in our October 2013 GoldBook issue.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
JaredB432
50%
50%
JaredB432,
User Rank: Apprentice
6/16/2014 | 5:30:54 PM
re: Where is the Innovation in Trading Technology?
Apologies Ivy only just saw your reply; QuantConnect is a backtesting and trading environment with a community of thousands of algorithm writers. Individuals can design and trade their algorithms on their personal brokerage accounts. We give them access to TICK resolution data, FOREX markets and a CLOUD processing power - all unseen before by our competitors.
Becca L
50%
50%
Becca L,
User Rank: Author
7/8/2013 | 7:20:38 PM
re: Where is the Innovation in Trading Technology?
Productivity boosting technology seems to be lagging behind traders' expectations to deliver. As you mention, sales traders are largely trained to go go go, and the available time to make decisions is always going down. We have to wonder, with new innovations, will traders use their freed-up time to better examine their trades, or use it to make more decisions with a similar degree of inefficiencies?
IvySchmerken
50%
50%
IvySchmerken,
User Rank: Author
7/3/2013 | 6:17:18 PM
re: Where is the Innovation in Trading Technology?
How will thousands of algos be tested/vetted to ensure safe interactions? Do you offer a backtesting process? Or are you saying that algos will evolve, survive or die through the process of natural selection?
JaredB432
50%
50%
JaredB432,
User Rank: Apprentice
7/2/2013 | 11:18:47 PM
re: Where is the Innovation in Trading Technology?
Hi MedicalQuack, we believe we are truly innovating in the financial space and are bringing more strength to the markets through diversity. Bad things happen when a large billion dollar fund (E.g. Knight) has a single rogue algorithm. A community of thousands on QuantConnect brings enormous diversity which evolution shows is more resilient. -- Jared, Founder @ QuantConnect
Medicalquack
50%
50%
Medicalquack,
User Rank: Apprentice
7/2/2013 | 6:14:09 PM
re: Where is the Innovation in Trading Technology?
I saw this on Twitter from physicist Dr. Sean Gourley about "Quant Connect" and the question posed, will anyone be able to just dump algorithms out on the markets? Might be a good question and how safe is this? Quant trading and cloud computing?

https://www.quantconnect.com/
More Commentary
OptionsCity To Launch Customizable Trading Experience
The Metro Now platform breaks tools down into downloadable build or buy widgets for faster deployment and a more customized trading style.
US T+2: All Thatís Left Is the Execution
T+2 settlement is right around the corner for the US. What will it take to get from where the industry is now to implementation?
Is There a Watson in Your Financial Future?
How artificial intelligence might affect financial services.
Survey Shows an Urgency to Automate the Back Office
Confluence reports numbers are trending up across the board when discussing the need to automate back-office processes.
7 Pillars of Market Surveillance 2.0
Compliance officers are facing flash crashes, insider trading, market manipulation, and more. Here are seven market surveillance and risk management steps that will help compliance officers sleep better at night.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.