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Trading technology in 2020 and beyond

Michael Chin
Michael Chin
Managing Director and Global Head of Trading Proposition at Refinitiv

In this third blog in the Views on 2020 series from #Refinitiv, we look at how advances in trading technology made financial markets more efficient in 2019, such as through rules-based automation or greater use of artificial intelligence. What are the #SmarterTrading trends set to enhance workflows in 2020 and beyond?

  1. Advances in trading technology in 2019 delivered new solutions for streamlining processes, reducing costs and improving the customer experience.
  2. A 2019 survey by Greenwich Associates found that 61 percent of respondents are either using artificial intelligence now or expect to be within 12-24 months.
  3. Refinitiv trading workflow solutions include pre-trade research in Eikon, and at-trade and post-trade capabilities in Refinitiv REDI EMS, and our order management system, AlphaDesk.

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Tighter regulation, compounded by thinner liquidity pools and changing market structures, has created a complex backdrop against which the trading community must maneuver.

Market participants consequently face a host of on-the-ground challenges, but technology is stepping up to the plate, delivering new solutions to streamline processes, reduce costs and improve the customer experience.

A 2019 survey, conducted by Greenwich Associates and made possible by Refinitiv, highlights several key trends that we will explore below.

In one key finding, 78 percent of market professionals surveyed said that technology has made financial markets better and more efficient.

The caveat, of course, is that despite advances in trading technology, the adoption of new solutions is rarely straightforward.

The survey further concluded that institutions are at vastly varying stages of readiness and adoption, with data availability cited as a significant challenge. Our second report, due out in January, will cover this in greater detail.

Trading technology trends in 2019

Against this backdrop of technological innovation, some of the key trends of 2019 included:

Buy-side consolidation

The ongoing migration of assets from actively to passively managed investments has led to shifting roles on the buy-side. This has impacted the job of the trader, with trading desks consolidating across both geographies and asset classes.

We have witnessed portfolio managers assuming trading responsibilities, the outsourcing of trading desks, and the automation of trading changing daily workflows, with more changes expected.

Advances in automation

Rules-based automated trading is increasingly enabling greater productivity. The use of rules-based order routing determines whether trades are executed automatically or reserved for manual intervention. When the former route is taken, it frees professionals to focus on the critical areas of alpha generation and risk mitigation.

Regulations impacting costs

Regulation continues to be an important driver of trade cost analysis. Institutions increasingly have regulatory and fiduciary obligations to maintain best execution policies and must be able to demonstrate adherence to those policies — all of which can add up to spiraling costs.

Many firms have responded by evaluating and reducing their spending, including curtailing their technology overheads by turning to third parties to satisfy their solution requirements.

Evolving workflows

Leading-edge trading technologies are steadfastly reducing the burden of lower value-add activities such as data retrieval.

The increased use of artificial intelligence (AI), machine learning (M/L) and natural language processing (NLP) is simplifying workflows and enabling quicker, better and more accurate decision-making by delivering alpha-generating ideas to end users in an actionable format.

Data and analytics platforms

We believe that the solutions that will enable the trading community to streamline, optimize and future-proof their operations are those that combine flexibility, innovative technological capabilities, trusted data and invaluable human expertise.

Our financial data and analytics platforms such as Eikon and the Refinitiv Data Platform have been designed to help traders get the most out of their data and are supported by a growing developer community.

Moreover, our suite of Eikon, FX, and Refinitiv REDI EMS APIs can be combined, customized and integrated with others to create a bespoke solution.

These solutions are designed to offer unparalleled flexibility and customization options, allowing users to pull data into their existing systems with ease.

Importantly, traders can choose the services they want without being obliged to pay for those they don’t — an important consideration in a cost-conscious environment.

Trading technology in 2020 and beyond

Our research further points to some of the important trends we expect to see developing into 2020 and beyond:

  • We expect artificial intelligence, including machine learning, to continue to impact global capital markets, a view that is strongly supported by our survey respondents — 61 percent of whom are either using AI now or expect to be within 12-24 months. Moreover, a significant 80 percent expect AI and machine learning to be fully integrated into the trading space within three-to-five years.
  • Cyber security, trade performance analytics and real-time risk management will remain top of the list of longer term defensive solutions important to financial markets overall.
  • Shorter term, traders are focused on strategies to create opportunities, particularly execution management systems (EMS) and performance analytics. Nearly three-quarters (73 percent) of traders expect EMS to be ‘impactful’ or ‘very impactful’ in financial markets over the next three-to-five years, while even more (83 percent) have the same opinion of trade performance analytics.
  • There will be a continued and growing need for end-to-end trading solutions to help streamline the trade workflow. With pre-trade research accessible in Eikon and at-trade and post-trade capabilities available within our award-winning execution management system, Refinitiv REDI EMS, and our order management system, AlphaDesk, Refinitiv provides an open, end-to-end solution to meet traders’ needs.
  • Additionally, we expect to see continued cloud adoption by the buy-side as cloud-delivered solutions generally lower the total cost of ownership and promote agile development methodologies that increase the pace of innovation.

As these expected trends and ongoing developments unfold into 2020 and beyond, we will continue to support our customers by delivering technological innovation and trusted, holistic data to address the on-the-ground challenges faced by the trading community.

Refinitiv provides the data and trading solutions necessary to support all market participants as they strive to meet customer expectations and ongoing regulatory demands in an evolving and dynamic market.

Read our full report: ‘The Future of Trading: Technology in 2024’

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