The New Trader: Adapt or Die

Advanced Trading: How has the life of the buy side trader changed in the past 10 to 15 years? Things are more automated now and algos do the actual trading so what does a hedge fund or buy side trader do these days?

Megan Costello, Fidessa: Over the last 10 to 15 years, automation in trading has significantly changed the role of the buy-side trader. The goal of automation has always been to improve the efficiency of trading and to provide value for the trader. By using automation to take some of the volume out of the trader's hands, the trader can now give more focused attention to adding increased value to more complex trades. This includes making sure they are executing them in the right venue from a value perspective and understanding the market complexities that affect trades. They also need to interpret much more information in real time than they did a decade ago.

Advanced Trading: What skills does a new member of the Buy Side need these days? Should they know programming as well as have an MBA?

Costello: I wouldn't say that a new member of the buy-side needs to be a programmer. To be successful, a buy-side trader needs to be comfortable with the technology being used and have a high-level understanding of how it can assist with trading; however, they don't need to be a down in the details programmer. If a buy-side newcomer has an appreciation for technology and an awareness of how it can assist with the different venues and opportunities available, a honed skill in programming is not necessary.

Advanced Trading: Does every buy side trader need to be a quant?

Costello: Today's buy-side trader doesn't need to be a quant, but in terms of a dependency on algos, he or she does need to understand how the technology works to facilitate trading, and they must have the resources to drill down into the full details of the trade as necessary.

Advanced Trading: With automation do firms need fewer traders and more sales people? Is this more of a client management role these days?

Costello: Buy-sides might need fewer traders to perform the same functions due to the benefits of automation, but the value placed on client relations will always be there. When looking at what differentiates a buy-side firm or a trader, I think the client management piece is an important aspect of it. Whenever you introduce automation, some redundancy will happen; that's part of the efficiency that comes with the process. But that efficiency can never overcome the requirement to have strong relationships.

Automation also means a lot more can happen in a smaller period of time, and this has changed client expectations. Clients now want things done immediately and they want to see results immediately, which makes client management more important than ever. Traders are spending more time and emphasis on setting expectations with clients. With the amount of change going on in the industry at present, it is crucially important to educate clients on things like regulatory changes, for example, and how they will impact the trading relationship going forward.

Advanced Trading: Do young math grads even want to work for Wall Street these days or would they rather work at Google or Facebook? Have the capital markets lost their luster with smaller bonuses and Occupy Wall Street?

Costello: What's happening on Wall Street right now is a correction that goes on in every industry. It's much like when the tech bubble burst and Silicon Valley was affected for a short time. The same thing is now happening in the financial markets. In the long term, a career on Wall Street will not lose its appeal, but for now, other industries might grow while the capital markets continue to find their footing.