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From trade execution to multi-asset: The evolving nature of trading desks
How has the role of the trading desk evolved from an execution function into a strategic driver of firm-wide value, and what does that shift demand from trading leadership today? Dramatically in all the best ways possible. By establishing and demonstrating the value that execution experts can bring to the table in either the early stages of product concept discussions, or by even being the source of product idea generation, the team has firmly entrenched itself in firm wide value creation. We truly believe that a trading desk should mirror the complexity and style of products that it is trading on behalf of, thus as our clients have demanded less linear solutions, the team has had to upskill and evolve in structure.
The pace in which these changes are occurring has never been more rapid, so leadership needs to be honest in its appraisal of talent gaps, and look to give the team the right tools and education to deliver. Moving forward desks that don’ t continue to deliver value will likely be put under cost pressures or the potential to see partial or full outsourcing.
What are the biggest practical and cultural barriers to integrating asset classes on a single trading platform, and how can firms successfully overcome them? Practically speaking, systems are often the first hurdle. Having teams in different asset classes trading on different platforms can, over time, creates challenges when it comes to bringing teams closer and offering true multilateral access to workflows. As firms evolve, thus we are in the process of bringing as many instruments as possible onto a singular EMS. This becomes an important enabler, and we are currently in the process of doing so. Alongside this, we are working closely with our EMS provider to further develop with this provider to innovate the platform to be more powerful from a multi-asset perspective.
Cultural barriers are more difficult to comment on, given that every firm will be heavily highly nuanced in the way it operates. JHI has been fortunate enough to have a strong, bought-in and respected leadership group within trading that has set the tone for the global team, and I couldn’ t be prouder of how far we have come in a short period of time. To achieve our goal we have started with the simplest things first, for example, eliminating
The TRADE catches up with Hugh Spencer, global head of trading at Janus Henderson Investors, to unpack the evolution of trading desks, from purely executing trades to strategic, multi-asset contributors for firm-wide value.
singular asset class meetings where it makes sense to involve a broader audience, creation of project streams that involve people from all trading desks and locations globally, and finally I come back to the importance of a singular EMS as being the key to continuing to unlock truly multi asset trading.
To what extent do shared systems and infrastructure act as the foundation for a truly integrated desk, and where do firms still struggle to align technology with strategy? Having covered the importance of systems previously I will focus on the technological alignment with strategy. This is not a unique issue to trading or finance as there is always a challenge to have the strategic priorities of the technology aligned with the broader business it operates within. To avoid any ideological conflict with technology we not only have members of both teams sitting side by side in the trenches on the trading floor, we take a further step to invite and encourage heavy involvement from the tech team in the creation of our trading projects and objectives.
Given the exposure that the technology team has to solutions that exist outside of the line of sight of most trading teams, to not include their perspective early and often in the formation of trading plans is doing our clients a disservice. In short, we have taken very deliberate and demonstrative steps to work hand in hand with our technologists. To take things to the next level we also recognise that the trading team needs to also evolve to have more quasi-technologists withing the group, self-solving and dare I say vibe coding before bringing solutions to the tech team for ratification.
If execution quality is no longer the sole benchmark, what metrics should firms use to assess how effectively trading contributes to client outcomes and broader business performance? Sole benchmark is the key here, as losing focus on achieving the best execution outcome for our clients is unacceptable, this point cannot get lost in the context of the broader influence that trading can play in business strategy. In terms of assessing how constructively involved the team has been in the development and bringing to market of new products or enhancements of existing products, tracking success requires constituent engagement with internal stakeholders in Investments, distribution, client solutions and senior management. Also it involves getting back to basics, get these KPIs into objectives, incentivise and ensure that you reward team members that are hitting these goals.
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