[ F I X E D
I N C O M E
L E A D E R S
S U M M I T
2 0 1 8 ]
BUY-SIDE MUST ADAPT TO RISE OF
FIXED INCOME AUTOMATION TO
FLOURISH, SAYS PANEL
HEADS OF TRADING FROM PICTET ASSET MANAGEMENT AND BLUEBAY ASSET
MANAGEMENT UNDERLINE THE IMPORTANCE OF ADAPTABILITY AS TRADING
TECHNOLOGIES BECOME MORE AUTOMATED.
T
he increasing emergence of au-
tomated processes within fixed
income trading means buy-side
desks must adapt to evolve along-
side these developments, according
to buy-side heads of trading.
“We’re at an interesting point in
time, a point of transition, where
buy-side dealers are having to
adapt to the role, to new services
and ways of finding liquidity, and
they need to either embrace those
changes or go find themselves an-
other job,” said Carl James, global
head of fixed income trading at
Pictet Asset Management.
Discussing what impact the
growth of machine learning and
artificial intelligence (AI)-based
systems in fixed income means for
the role of the human trader going
forward, James and other speakers
agreed that while human traders
will see their workflows change,
this doesn’t necessarily mean they
will be replaced.
“This trajectory is set, this path
of taking on machine learning and
AI-driven investment is happen-
ing,” James commented. “Currently
at Pictet we do systematic trading
which the dealers have embraced
and are evolving, which I am de-
lighted by.”
Stuart Campbell, head of trading
at BlueBay Asset Management,
highlighted how increased use of
automated systems allows buy-side
38 // TheTrade // Winter 2018
desks to fully utilise segregated
trader skillsets, although he also
underlined that many examples of
automation are not anywhere near
the finished product yet.
“It’s important not to confuse
rules-based trading with AI; I
don’t think we can look at them as
one and the same,” said Campbell.
“What we are talking about right
now is the infancy of AI for fixed
income, but it won’t be too long be-
fore the robot, or whatever you call
it, is suggesting to me to ask three
brokers, not five, and ask these
three specifically. So, we will get
that where it can predict the best
possible outcome; whether they
can achieve it or not is different.”
Speaking to the benefits of adapt-
ing to new systems, James said that
while not all buy-side firms will
see the same level of applicabil-
ity, there are distinct advantages
to using machine learning or AI
systems in the pre-trade space
“It’s important not to
confuse rules-based
trading with AI; I don’t
think we can look at
them as one and the
same.”
STUART CAMPBELL, BLUEBAY
ASSET MANAGEMENT
to better inform traders and add
greater value.
“As a buy-side dealer you can be
passive, waiting for something to
happen, so when the order comes
in you can start to action it. Howev-
er, if you are proactive and actually
offer up where liquidity is, you
understand what they are looking
for and what their strategy is,” he
commented.
Much of the discussions around
the use of machine learning or AI-
based systems in trading focus on
how it will impact the role of the
human trader.
James detailed that since Pictet
implemented its systematic trading
system it has not experienced any
reduction in headcount across
its four trading desks, although
this was not the same outcome as
seen at BlueBay, which Campbell
described as a “real-life example of
high-touch/low-touch cycles”.
“We created a desk, just over
three years ago, for high-touch/
low-touch and then at the begin-
ning of this year we collapsed that
desk and moved away from that
model, which was an interesting
break from us,” he explained. “The
reason being that over time there
is going to be far more automated
fixed income execution and we felt
that the low-touch wasn’t actually
adding much value, that there’s
wasn’t a real need for that desk.”