Dealers face an increasingly competitive landscape. Andrea Pirino at valantic FSA, speaks to Dan Barnes ahead of the Worldwide Business Research (WBR) Fixed Income Leaders Summit in Paris to discuss potential ways that sell-side trading desks can compete more effectively through scaling and optimizing their trading technology.
“What affects their ability to compete is their lack of elasticity,” says Pirino
Andrea Pirino will speak on the Workflow Automation and Digital Transformation panel on day one at FILS in Paris on October 3.
Interview Transcript
Dan Barnes Welcome to Trader TV your Insights into institutional trading, I’m Dan Barnes. Competition on the sell side is intensifying at the moment and dealers need to scale and optimize their operations. Here to discuss how I can do that is Andrea Pirino of valantic FSA? Andrea, welcome back to the show.
Andrea Pirino Thanks, Dan, It’s great to be here.
Dan Barnes Dealers are facing a highly competitive landscape at the moment but what impacts that competitiveness as a user, desk and a dealer level?
Andrea Pirino I would say that the answers are, legacy software, legacy technology and legacy relationships, specifically between a dealer and their technology vendors. If we think of users, they focus on the how of a trading application. They are concerned about the number of UIs they have and whether those UIs are connected through a unified user experience or are they living in a level of copy and paste across different applications? The perspective of the desk is different, is more about the what of a trading solution, which is basically how those workflows are implemented across different systems. For the dealer, specifically those dealers using a vendor, the keyword is probably they who their view is much more longer term, of course, and they look at the evolution of the technology and the overall ecosystem around them.
Based on our recent conversations with existing clients and prospects. What affects their ability to compete is the lack of elasticity. Business needs change and with them solutions. trading solutions need to adapt. Lack of elasticity is when those business needs are not translated into software changes or are not translated soon enough. A continued lack of elasticity is a sign of obsolescence. A legacy UI is a UI that is harder to evolve to support new requirements. Legacy technology is expensive or even impossible to evolve. A legacy relationship between a dealer and the vendor is one where they are no longer aligned on long term priorities.
Dan Barnes So how does that tie in with the client demands dealers face?
Andrea Pirino Client’s demands are a key example of business needs that may change and that pressure to dealers to do more with less, to be more efficient. Those changes that sort of provide elasticity. Clients, too, can also see their relationship with dealers through the lenses of elasticity. Is the relationship elastic enough to adjust to their needs? If not, these would add additional pressure on the dealer.
Dan Barnes How do dealers deliver the efficiency and resiliency that they need.
Andrea Pirino A fragmented system that is too hard to or expensive to evolve or that is brittle in case of issues should be considered a system that is no longer efficient or resilient. Here the key word was fragmented and while its intention would be to then go for one single solution that does it all this is typically not feasible. In reality, business needs are too complicated to be addressed by just one system, and in the case of solutions offered by vendors, obviously having just one vendor may add risks of a different nature.
So the question is how can we mitigate the risk of that fragmentation adds? The typical answer from the industry is interoperability, which is about making different systems cooperate together. Typically, we use the term connected to desktop interoperability and probably most of your audience that is familiar with the FDC3, the standard for desktop interoperability. And obviously this is a way to address part of those problems, because thanks to desktop interoperability all of a sudden multiple UIs are able to cooperate to some extent. There are also options to create interoperable systems on the backend. And while this is typically a bit more complicated, it also offers just one way to do everything. Even though behind the scenes there are multiple systems.
Dan Barnes What do dealers need to optimize and scale their operations?
Andrea Pirino Interoperability in any form relies on a model for the business workflows that they implement. There are limitations currently, even though there are plans to overcome them. FDC3 is still a bit too technical. It doesn’t cover the typical workflows of a trading desk. We see a lot of potential in modeling them. Imagine a world map where instead of continents there are trading protocols. RFQ is order management and you can basically chart your journey to go from point A, a business objective to point B. Having these more business friendly views is going to unlock a lot of potential.
The most important one, at least in our view, is the ability to measure whether an application is fit for purpose. Is it implementing what the client wants? Which features are used and which features are not used? Just like having a map of the world along with those heat maps that tell you which parts of a given world is more crowded. With that kind of information, the decision on where to invest is informed by data. So this is why we’re calling it data driven product management.
Dan Barnes I’d like to thank Andrea for his insights today and of course, you for watching. To catch up on her other shows, including Trader TV This Week at 6:45 a.m. UK time, every Monday morning go to Trader TV.net.
Catch our other shows:
To watch other Trader TV This Week shows go to – Video
Or make sure to follow us on LinkedIn – Trader TV’s LinkedIn
Available as a podcast – here
