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Will the Virtual Trading Floor become the New Reality?

By Bob Santella, CEO, IPC.

As many countries begin to ease their Covid-19 lockdown restrictions, financial institutions, their service providers and regulators are starting to look ahead to the future of the trading world. What awaits us in this uncertain new world? How has the market landscape changed as a result of Covid-19? Will our new working practices become a permanent fixture, and if so, how will technology and regulation adapt to better support them? How are decisions makers planning their “back to work” and future IT trading investment strategy: virtual, hybrid, on premises?

Turning constraints into strengths

Unlike many other industries, financial services has been a latecomer to the paradigm shift towards flexible working structures and working from home. This has been driven by two constraints: technological limitations – the resources required to support turrets, trading systems and multiple screens, and the regulatory compliance requirements in terms of control, oversight and data capture (including voice communications capture). The global pandemic has shown that, with IPC as a reliable partner, these constraints are not insurmountable, when sufficient will and flexibility is dedicated to solving them. Reports suggest that for some dealers, up to 95% of their workforce are now working remotely, and by all accounts, markets are functioning as effectively as can be expected under the circumstances.

To a large extent, this is a testament to the regulatory changes implemented following the global financial crisis aimed at ensuring that financial institutions are able to continue operating with resilience in stressed market conditions, without falling prey to systemic and liquidity risks. Stable and functioning markets have also been enabled by the enormous strides made in technology during the past decade. One of the lessons learnt for the Covid-19 sequence is that cloud-based services now allow firms to easily and cost-effectively scale up and down as required in a timely manner. Solutions deployed in the cloud are also accessible from multiple sites, enabling a swift transition to off-site trading. The trend towards decentralization of networks has also created more resilience for participants, as well as the ability to discover new market data sources and quickly connect to them for execution.

Remote doesn’t mean electronic

Regardless of whether or not it is desirable for firms, regulators and traders themselves, the reality is that remote trading has become a fact of life for the foreseeable future. It remains to be seen how technology infrastructure will adapt to support this “new norm”. For example, will we see more investments in high-speed fiber connectivity to traders’ homes, and greater use of soft turrets and cloud delivered solutions? Alternatively, will financial institutions spread their staff and functions across multiple office premises, investing more in “Team A / Team B” models whereby staff are on-site, but physically separated?

During times of high volatility, market participants traditionally turn to voice execution with their trusted counterparties. This a pattern we have seen repeated across multiple asset classes over the past couple of months. With respect to rates and cash credit, markets witnessed a significant shift towards voice trading as risk transfer and trade sizes increased. Even FX, often the fastest-moving and highest-volume asset class, as well as a highly electronic market, experienced a slight shift towards voice for larger trade sizes as well as for the trading of exotic pairs.

Bob Santella
Bob Santella

Technology, connectivity and communities

Under these conditions, participation in a large, diverse community can give firms an opportunity to shine and to demonstrate real differentiation from competitors. A successful community network offers its participants connectivity to a readymade, diverse and global financial ecosystem – one that includes a wide variety of counterparties for price discovery, liquidity and execution, such as broker/dealers, inter-dealer brokers, exchanges, dark pools, hedge funds, asset managers, institutional investors, trade lifecycle services and market data providers. In other words, the information that firms need to find liquidity, and the ability to access it.

How IPC can power the reshaped trading world

IPC has a range of highly robust solutions that support financial services firms in their business continuity, fully empowering traders to work remotely during these challenging times. These include:

  • Disaster Recovery as a Service (DRaaS): A SaaS service recently launched with our strategic partner, Cloud9 Technologies, that allows traders to have ubiquitous access to a custom-designed virtual trading desk from any global location during an emergency.
  • IQ/MAX® Omni: A remote soft turret solution that provides access to a client’s IPC Unigy® system through an intuitive interface.
  • EVS as a Service: A SIP-based cloud service that enables firms to have multiple alternative trading locations while maintaining continuity across their private wire ecosystem.
  • Remote Devices: Enabling a firm’s traders to extend their best-of-breed IPC physical devices to any remote location via the firm’s internal VPN capabilities.

We expect that many firms will reprioritize their IT budgets, having seen the extreme conditions that are possible, as they will need to brace themselves for any eventuality. This refocus on spend will manifest itself in greater investment for cloud migrations, and in ensuring that legacy trading infrastructure is able to support the headroom required to cope with surges in volatility and volumes under exceptional market conditions. With greater emphasis on voice trading, firms will also be keen to invest in the infrastructure to support more seamless client and sales experiences across Voice and Chat channels, through the use of AI / ML-driven technologies. Given the cost constraints facing many IT departments, some projects and types of spending will need to be deprioritised in order to support this initiative.