The proliferation of data and technology has given rise to a number of solutions which aim to optimise the sales and trading experience of the buy-side and the sell-side trader. Over the past few years, the ubiquitous Bloomberg terminal has seen competition for desktop real estate from a number of vendors and sell-side firms aiming to provide rich data and information sets to help buy-side clients make informed trading decisions and improve performance. The integration of such tools to achieve a smart desktop strategy, however, remains elusive, according to a recent roundtable on the subject hosted by Adaptive. I moderated a discussion with representatives from some of the leading global buy-side and sell-side firms in which they shared their views on the current barriers to optimising their desktop strategy. This article aims to summarise those views and pave the way for a discussion on the solutions needed for the smart desktop of the future.
While there are differences in how the buy-side and the sell-side approach the available solutions, both face the same central problem – outdated legacy applications which do not always communicate with one another. Their most pressing need is therefore improving the communication between these applications and updating the workflows and user experience of traders or portfolio managers without necessarily having to re-engineer the entire infrastructure.
Beyond this common problem, there are some differences in the priorities of the buy-side and the sell-side when it comes to optimising their desktop strategy for alpha generation.
For the sell-side, connecting and integrating to different liquidity providers, platforms and solutions – be it pre-trade, during trade or post-trade – while maintaining the bilateral connectivity to clients without too much intermediation is becoming increasingly difficult. To achieve this in a simple, effective and economically viable way requires a degree of standardisation and automation of protocols which will ultimately allow the sell-side to focus their resources on trading and not on systems maintenance.
For the buy-side, the aspiration is to bring all the information available to a single decision point for the multi-asset trader to execute on. While there are many vendors providing interesting concepts or data, there is a view among the buy-side that little consideration is given to how to deliver the data in a way in which it becomes consumable and useful. In particular, the more sophisticated buy-side firms are interested in the data and a systematic way of accessing that data to enable them to turn it into usable information which can be integrated into their workflows. In this respect, the voice of the buy-side is loud and clear – they do not need more products which create more silos; it is the content that matters.
Against a backdrop of the rise of big data and alternative data sets, most firms had adopted an approach to have as much information as possible, however, this proved to be far from useful as information was often being delivered in a way which was impossible to process. The next step for both the buy-side and the sell-side is therefore to achieve the right balance of information - avoiding pre-packaged solutions while having the right amount of data that is useful to a particular user. This doesn’t necessarily mean that the firms will need and consume less data, but they will require data to be delivered electronically in an API which allows the client to filter and consume it in a systematic way and integrate it into their workflows.
In an environment where you have dozens of sell-side firms providing data to their clients and hundreds of buy-side firms consuming the data, the main issue to avoid is having too many integration points. This is the role of a successful desktop strategy – one that takes into account the hierarchy of information which includes platform or vendor data and then APIs that they can programme against, all the while avoiding duplication and integrating seamlessly onto their workflows. An effective desktop strategy should further take into account and integrate the role of the human sales trader, who will continue to provide rich information via voice which is critical to enhance the price discovery process for certain assets where electronic information may be stale.
The future of desktop strategy will require an ecosystem – a data exchange with a low barrier to entry in integration costs – one where others can plug into and deploy their product within. The mentality shift needed to enable this collaboration is already there. The solution may take a little longer to implement.
This article is part of a three-part series which explores the desktop strategy of buy-side and sell-side firms, looking at the challenges faced today and exploring possible solutions.
Article II "Small steps towards a smart desktop strategy" Click here >>
CEO and co-founder,
Adaptive Financial Consulting Ltd