THETRADETECH DAILY THE OFFICIAL NEWSPAPER OF TRADETECH 2021
FRÉDÉRIC PONS :
the second phase of systematic trading
Deputy equity head of dealing at Amundi , Frédéric Pons , tells the TRADETech Daily that as automated and systematic processes become a larger part of the trading landscape , adding alpha will be the second phase of this trend .
This year , you are scheduled to speak on an all-star panel about systematic trading . What are the key issues on this topic that you are hoping to address in the discussion ? Put very basically , the state-of-the-art technologies and best practices in systematic trading . It ’ s important we address the issues around best practices that the industry and our peers are facing and ensure we are all heading down the same path . Taking that further , what is the road map going forward and what are the next steps ? Which technologies are supposed to be involved in automation ?
Automated workflows have clear benefits for participants as we have seen during the market volatility in 2020 . But what risks do they hold ? The risks are held within the benefits and mirror them in many ways . As the workflow is automated , it ’ s on a no-touch basis and there ’ s no human intervention . The main element is to make sure that you have all the controls and checks in place to ensure risk doesn ’ t increase in more volatile periods . This includes hard and soft checks across automated workflows . For me , that ’ s the most important thing .
Can automated workflows minimise trading costs and slippage ? When we implemented automation at Amundi , the main purpose was to avoid negatively impacting our execution performance before we thought about adding any value . There ’ s scrutiny from clients to make sure we don ’ t adjust execution performance to minimise trading costs and slippage . Adding value and alpha in general , however , will likely be a part of the second phase of the future of automation . We could also potentially onboard more analytics on a pre-trade basis and customise the algorithms we apply in the automation process .
What role do you see automation playing in the future and are there areas that it could expand into ? I think that it ’ s going to be a big part of
“ Sharing experiences through conferences like TradeTech is an amazing thing . Now more than ever , we need to share our experiences .” the whole landscape and automating more trading activity is a historical trend we are seeing . This doesn ’ t mean that automation will replace human beings in the process . It will become part of the must-have tools for trading desks . On the panel at TradeTech , I hope to have a further discussion about how we can demystify automation and realise that it is accessible to many asset managers .
In the future , the main concern about automation is around the ability to bucket your order flows . Lots of order flows can be automated , but once that first level automation is done , you need more pretrade analytics and data to design your automation process , especially if you want to make changes , switch to another bucket , or automate more difficult buckets in terms of size and liquidity . With pre-trade analytics , you open the door to more sophisticated data processes like clustering for instance , which allows us to target the right strategies for execution . It ’ s the huge improvements in
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