A glimpse into the future of trading desks in 2024 emerges as a result of a collaborative effort between Refinitiv and Greenwich Associates. In their technology survey, industry participants from the buy-side and capital markets contemplate the prospective role of artificial intelligence, big data, and analytics in shaping their field by 2024.
In partnership with Greenwich Associates, this three-part report series delves into the transformative technology poised to revolutionize capital markets.
The survey of capital markets stakeholders reveals that protective technology solutions, particularly in the realm of cybersecurity, are expected to exert the most significant influence over the next half-decade. Notably, 44 percent of market participants are already integrating AI and machine learning into their trading processes, with an additional 17 percent planning to adopt these technologies in the next 12 to 24 months.
Greenwich Associates, in conjunction with Refinitiv, conducted a survey, focusing on technological trends, data proliferation, and the essential competencies for future success within capital markets. The first of the three reports scrutinizes the influence of technology on the trading desks of tomorrow.
A notable 78 percent of respondents assert that technology has already made financial markets more efficient and improved their functioning. This consensus further underscores the continuing fintech revolution and its consequential impact on financial markets in the forthcoming years.
Nevertheless, the nuanced responses expose differing viewpoints and intriguing insights into the specific domains where market participants anticipate technology’s greatest impact over a three-to-five-year horizon.
The Anticipated Impact of Technology on Institutional Financial Markets
Market Perspective on the Trading Desk of the Future:
According to capital markets respondents, long-term defensive solutions are predicted to have the most significant impact during this period. An overwhelming 49 percent consider cybersecurity as “very impactful,” closely trailed by 43 percent who select real-time risk management and trade performance analytics. Remarkably, trade performance analytics takes precedence when combining scores for “impactful” and “most impactful.”
Evidently, solutions directed at cybersecurity, real-time risk management, and trade performance analytics will play pivotal roles in the success of trading desks in the forthcoming years.
Traders’ Perspective on the Trading Desk of the Future:
However, traders express distinct expectations regarding the technologies that will reshape markets over the same time frame. Execution management systems (EMS) take the lead with 41 percent, followed closely by trade performance analytics at 40 percent, and cybersecurity at 35 percent. The EMS serves as a trader’s gateway to the world, being the quintessential tool for success, even if the underlying technologies such as AI, data mining, or cloud computing enable their proficiency.
The Potential Disruption of Artificial Intelligence:
A significant 56 percent of respondents predict that artificial intelligence (AI) will be the most disruptive technology over the next three to five years. Moreover, a staggering 80 percent expect AI and machine learning to be fully integrated into trading processes within this time frame, despite only 44 percent currently employing these solutions. Challenges persist, chiefly regarding data availability in the AI realm, as many financial services firms grapple with limited datasets and stringent privacy regulations governing customer data usage.
Advances in Trading Technology:
Innovation in technology has contributed to heightened efficiency and an improved customer experience. The availability of extensive data and intricate analytics has facilitated greater transparency and enhanced decision-making regarding pricing. Consequently, firms proficient in aggregating and normalizing substantial data volumes hold a distinct advantage.
The future of trading is intrinsically tied to technological innovation, with the competitive edge hinging on the adept deployment of technology.
The Survey on the Future of Trading:
Over 100 capital markets professionals from various sectors participated in this online study. Respondents spanned across different generations and firm types, encompassing buy-side, technology vendors, broker-dealers, consultants, industry groups, exchanges, and more.
Looking forward, this series will further explore the data explosion and its implications for future workflows, as well as the evolving dynamics between trading professionals.