Nov 7, 2016

NEXT 2016 | The Future of Trading with Greenwich Associates

At the 2nd Annual Numerix Global User Conference CMO, Jim Jockle speaks with Head of Market Structure Research, Kevin McPartland of Greenwich Associates about his latest research examining the transformation of the trading business. Jim and Kevin analyze ten key steps for keeping sell side trading desks relevant in today's capital market ecosystem and into the future.

James Jockle (Host): Hi welcome to Numerix Video Blog, I’m your host Jim Jockle. Joining me today is Kevin McPartland, of Greenwich Associates, Head of Market Structure Research. Kevin how are you doing?

Kevin McPartland (Guest): Good, how are you thanks for having me.

Jockle: And thank you for joining us at our NEXT Global User Conference. Today you presented on your vision based on your latest research in terms of the transformation of the trading business where you kind of walked our users through the vision of ten key priorities ranging from changes of business model through some technology considerations to think about. What are some of your highlights of this latest research?

McPartland: Sure, so you said it well. It’s a good number of things that are about the business model, the business model to fit the current environment and then also a number of Technology focused points that banks should think about. So from a business process side I think one of the key things thinking about the profitability of clients as opposed to simply clients that generate a lot of revenue. Big clients are good and you need those on your roster but increasingly as banks are again less focused on that, just looking at their share of the wallet, their investors and the board members especially at the banks are looking now at how profitable are these businesses for the banks to want to stay in those businesses. So that’s a big focus on something that’s sort of a mind shift I think for a lot of trading desks, not just going for big profitable, clients.

Jockle: So, but on the other side of the coin, you also said, you know, don’t be afraid of the cloud. Where do you see the cloud now? We are moving beyond the hype cycle and we’re looking at practical implementation.

McPartland: Yeah, I think we are finally past not only the hype cycle, we’re past the period of unnecessary worry about will it be compliant? Will it be safe? Will the security be up to par? I think, especially what we’ve seen on US regulators look to the cloud in several circumstances that banks are starting to feel more comfortable, not just the banks are starting to feel more comfortable, in general with the market.

Jockle: And regulators started to use the cloud themselves?

McPartland: 100% yes. FINRA in the US is a big user of the cloud for sure. So the banks are trying to wrap their heads around that and realize that hey, actually if I look to an Amazon, Google, or Microsoft that’s all they do for a living, they’re good at it and the security of that information in those cloud environments are what keep those businesses afloat when trying to withstand that information.

Jockle: So, you know, in terms of recent news on trading platforms and things of that nature, what is the competitive differentiator for an institution looking ahead to 2020?

McPartland: So it’s an interesting point we talk a lot about in the research that institutions should look to outsource where they can. Using third-party services to become more efficient might lead you to believe that technology is not a differentiator but of course it will be on the institutional side, talks about electronic trading, data analysis and intelligence, all the way down to the retail side. We’re talking more about Robo-advisors, and payment services and such but again all of that I think there’s a relationship component, a human element, that will never change regardless of how electronic or automated. Some people want to talk to somebody, they want to make sure they trust who they are doing business with. So merging that with the technology will be key.

Jockle: And so, one of the questions, it’s come up a couple times in this conference, is the concepts of AI and other new leaves of technology and arguably in terms of trading routine AI kind of kicked around or maybe in its early stages but there’s also some arguments that AI can have a profound impact on elements of risk and risk management platforms. Where do you see AI as we move beyond cloud hyper cycle? Where’s the AI adoption?

McPartland: When people think of Artificial Intelligence they think of a robot sitting in a chair with robot fingers touching a keyboard, that’s not what we’re talking about. It’s software that can learn from what was done in the past, so different risk models have seen something happened, not just big macro events like the credit crisis but small blips of changes that maybe it wasn’t expecting and then rework that into what it will do into the future to adjust the model itself without much human intervention. I think that’s where we’re going to start machine learning really starting to make its way into financial services.

Jockle: Well, Kevin I encourage everybody to read the report, you can get it at numerix.com, more on Greenwich Associates website as well, which is…

McPartland: Greenwich.com

Jockle: And if I want to follow you and your latest research, tell me where you’re blogging, what’s your Twitter, where can I find you.

McPartland: Yeah, on Twitter its @kmcpartland and then you go to blog.greenwich.com. We’re always posting there as well.

Jockle: Well Kevin, thanks so much for joining us and of course we want to talk about all the topics you want to talk about, please follow us on Twitter @nxanalytics or on numerix.com. Thank you so much.

 

Download a complimentary copy of "Transformation of the Trading Business"

 

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