By Ellie Brennan, Associate Director of Business Development 

The role of the trader has shifted dramatically. Iconic scenes that are familiar from movies – traders shouting into the phone, doing deals in pubs, paper documents flying around an office – have some resonance today, but regulation and technology has significantly transformed activity.

Whilst networking and maintaining relationships is vitally important, so is embracing the benefits technology can bring. With more data to consume, market participants are looking for deeper insights across the whole trade lifecycle to maintain a competitive edge. Real-time access to reliable data sets can help the market evaluate the right execution protocol for a given order. Technology is transforming the market and we’re only seeing the tip of the iceberg.

Volatility: the new norm

A survey by JP Morgan finds that 46% of traders said “volatile markets” is the greatest trading challenge this year. And the month of March, in particular, is no exception; representing a volatility trigger point of historical events, that significantly shook financial markets over the past few years alone. From Covid, in March 2020, to the invasion of Ukraine in March 2022, and most recently the near collapse and rescue of Silicon Valley Bank and Credit Suisse in March 2023 – market conditions are tough.

Counterparty relationships are more important than ever before, creating a higher need to further leverage data to drive efficiency and enable transparency in decision making.

Exchanges typically take data, meaning that there are no incentives or tools to unlock latent liquidity, mobility, and assets. As a result, in a market that relies on data ownership traders are increasingly finding themselves lacking the tools to be creative on the buy-side. Data isn’t just getting bigger, it’s getting smarter – which requires a cultural change to continue to drive the market forward.

To overcome this hurdle, the market is challenging the status quo and turning to more innovative models to navigate volatility and create better execution. It’s not just the buy-side enhancing their outreach with advances such as OMS blotter scraping, sell-side firms are utilising intelligent tiering and technology that has the ability to match axes to true client intent to trade. This provides the market with better control over axe distribution, maintaining reliable pricing information, whilst helping to stabilise trading and improve connectivity in a volatile environment.

Utilising technology

With volatility here to stay, it’s no wonder that electronification of fixed income is on the rise – helping the market to better weather the storm. Not only does technology help traders to find the best price, but it ticks regulation and compliance boxes in the process – such as proving best execution.

Improved pre- and post-trade analytics enhance decision-making. Integrating technology further upstream with portfolio managers allows for more aspects of trades to become automated and efficient, ultimately facilitating better collaboration between traders and portfolio managers. This results in greater efficiency on the desk, enabling traders to execute multiple trades simultaneously using smarter tools, freeing up time for managing relationships and handling larger or more complex deals.

Gen Z and beyond

It goes without saying that younger generations entering the workforce can be more dynamic with technology choices. As “digital natives” (having grown up with modern technology and the internet) younger generations can seamlessly integrate personal apps and multiple trading tools to conduct day-to-day activity. This is driving an exciting shift in the market and one that is potentially set to change the shape of trading roles forever.

Coding skills are also changing the game. With such skills typically more innate for younger professionals, it stands them in good stead for the future by effortlessly combining both non and traditional skillsets. The ability to query coding, pull back prices of bonds, and create formulas to speed up processes – for example – helps traders to understand the bigger picture and spot opportunities through engaging AI and automation.

Markets to watch

There has been a big leap forward in how markets operate, but within a regulatory, compliant, and inclusive way. Many traditional firms are in early phases of exploring adoption of the digital assets market or have started adapting existing infrastructure and investment operation processes. The UK and US have traditionally driven innovation and adoption of new technology, but there are new contenders on the horizon.

Businesses in Germany (e.g.Union Investment), Luxembourg (e.g. HQLAx), and Switzerland (e.g. Pictet Asset Management and SDX) are also leading the way. Embracing new technology and issuing digital bonds, these geographical regions have excelled with innovation. The result being: creating greater trading potential; shaping the future of regulated markets; and diversifying the role of traders.

It’s interesting to watch both the role of the trader and the markets they operate within undergo a considerable shift. From witnessing future visions of the markets become reality, to monitoring businesses that use and deploy innovative technology in meaningful ways, advancements being made in trading and execution are changing the industry forever.

Improved efficiency, enhanced liquidity, greater volumes

A more grown-up and innovative market is forming. By enabling users to control and own data and its input and distribution, together with protocol innovation, is creating greater opportunities and fundamentally more powerful executions. The evolution of digital solutions is bringing increased operational efficiency to markets, unlocking real value, and transforming the role of the trader in the process. Technology is helping traders to stand out from the rest, representing the main differentiator when it comes to navigating modern markets.