The Future of Trading
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2015: The Always On Desk
November 4, 2010
It’s happening faster than you think.
The day when trading occurs 24 hours a day, at least six days a week, may in fact already be here, according to trading firms interviewed by Securities Technology Monitor, as well as hardware, software and network experts.
But it may be at least five years before a trader anywhere in the world can trade, around the clock, in any financial instrument in any market anywhere else in the world.
The obstacles are technical, regulatory and human. But, if the technology permits it, trading firms will find ways to man their desks at all times. Because competition will demand it.
FOLLOWING THE SUN
ING Investment Management on Park Avenue in New York is already operating 24 hours a day, six days a week, according to its head of U.S. equity trading, Nanette Buziak.
The New York-based trading team handles U.S. and International trading. While ING is globally coordinated, they are not globally integrated as yet.
As a result, the firm currently uses Instinet for overnight trading in Asia-Pacific and early European trading. The electronic, agency-only broker handles orders on their behalf from 5:30 p.m. to 7 a.m. Eastern time each night as well as on US holidays that are not global market holidays.
That may well change, as ING pursues its effort to be a “global boutique,’’ a specialized investment firm that provides personalized service and deals effectively with regional differences. A worldwide project, under way for a year, will create, for instance, a single common order management system that will be used in all time zones. As its business grows, replacing Instinet with its own team in Asia is a logical next step.
ING’s “follow the sun” model is not the only approach in wide use. Decentralized approaches constantly compete with centralized approaches, according to Dave Csiki, managing director of Indata. The “centralized” approach translates to working around the clock in one locale. Three shifts, like a manufacturing plant. Including one graveyard shift.
That does not sound like the relatively family-oriented work hours of the Wall Street tradition. There’s a reason that its trading begins at 9:30 a.m. and ends at 4 p.m., every weekday.
“Humans go home and have dinner with their family and they watch their kids play baseball and they need to close, they need to shut things off, they need to go home,’’ said Joe Ratterman, the chief executive officer of BATS Global Markets, which now operates two equities and one options exchange in the United States and one equities exchange in Europe. “The close is an incredibly invaluable part of the price formation process.”
But there are signs that this is changing. “Finding talent to work overnight shifts is increasingly not difficult,’’ said Scott DePetris, chief operating officer of Portware, which developed an algorithmically based system for basket, index and automated trading around the world of stocks, futures contracts, options and currencies.
And there are already precedents. Cotton, cocoa and coffee futures trade from 5 p.m. each Sunday to 4:15 p.m. each Friday, Chicago time, with only a 45-minute break before trading resumes at 5 p.m. each day. Similarly, currencies are traded 24 hours a day, from Sunday afternoon to Friday afternoon, thanks to sequential activity on markets in London and Frankfurt, for instance; followed by activity in New York; followed by activity in Sydney, Tokyo and Singapore.