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The modernisation of the trading desk
How are you redefining the head trader role to balance diverse client needs with execution performance? What clients expect in terms of execution performance can vary substantially and over a wide spectrum of possibilities. The expected result can range from implementation shortfall, to minimising market impact or to avoiding market signalling. In addition to that, it can differ depending on products, for example, whether the order in question concerns single stocks or ETFs.
For a head trader it is therefore crucial to understand these different clients’ needs, while in-depth knowledge of the various execution strategies available remains a key requirement. Being able to explain the reasons for choosing a proposed execution strategy is an important part of this.
Considering this,“ soft skills” are important for a head trader for several reasons. Managing clients’ needs and expectations is one, while managing the other traders on a desk requires a high degree of people management skills. One of the most important aspects of this is the ability to lead by example, especially under stress, ensuring that pressure does not affect execution quality. In short, the head trader is no longer only a top executor, but a technical leader, client translator, and people manager. Shortcomings in any of these skills would ultimately affect execution performance.
Where is the right balance between hightouch trading and automation for a desk today? Expanding possibilities have considerably increased the importance of automation on desks and through different products. Automation has delivered the scalability required to face the increase of volumes across the board. Having said that, 100 % automation would not be beneficial to the service delivered over-all, even though it may already have become a reality for a certain type of orders and assets. But high touch has its merits, not least that clients appreciate this approach. Additionally, the day-to-day use of high touch allows desks to maintain the skills that enable traders to parametrise, monitor and maintain the automation that manages the majority of flows.
The TRADE sits down with Paolo Angioletti, global head of securities execution at EFG Bank to explore the role of the modern head trader, from balancing automation with human judgment, leveraging local expertise, and maintaining flexibility to meet diverse client needs and rapidly evolving market conditions while preserving execution quality.
Therefore, automation should handle the bulk of standardisable flow efficiently without jeopardising traders’ opportunity to interact with orders or their ability to keep and sharpen the specific skills needed to ensure they can challenge, tune, and improve the automation.
The goal is to reach a level of automation that maximises efficiency without losing the human expertise that underpins both client trust and the quality of the automated setup itself.
How should firms best structure desks to manage cross-regional flows efficiently? There is no“ one size” that fits all, considering the many factors that influence this. The concept of cross regional can be applied both to client location as well to investment target. When considering a client’ s point of view, we need to be aware that markets which might be far removed from the desk’ s day to day experience may well be a client’ s home market. The specialisation required to meet clients’ standards in each of these different markets would require more resources than desks can muster.
What I consider a good solution is to have enough local brokers( or agents) that can provide the local expertise to the desk so to be able to deliver the“ specific market” touch to clients.
What differentiates a high-performing trading desk currently? If I had to choose one word to define a high-performing trading desk today, it would be“ flexibility”. Flexibility is needed to embrace changes that allow a desk to stay up to date with clients’ expectations. Flexibility allows desks to adapt to the evolving market structure and to adopt new execution styles and tools. Flexibility enables desks to follow the evolving market regulation and quickly integrate these changes into processes and systems.
The key recent development is the increased speed of change. We are facing constant changes at higher speed, and handling this requires a high level of flexibility. A successful desk needs systems that can evolve quickly and people with a positive mindset towards change, not just the ability to cope with it. A high-performing desk is therefore one that combines robust infrastructure with high flexibility, both at the system level and at the human level.
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