Trading technologies is vital in today’s century. If you are applying for a technology work in an investment firm, it means that you have probably thought of working with the systems that support banks sales and trading activities.
Meanwhile, this is the spot the highest paid jobs with the greatest exposure to the front office are even thought some technologists say they are best avoided.
Since you want to apply for the trading technologies, and before stepping into an interview for a front office tech job, is necessary that you know what trading systems do.
We will examine some point in trading technologies before you apply for any job in the industry. These are the key points:
- As machines overtakes trading floors, human traders are supplemented.
Many think that human being is supplemented, but they are not disappearing from trading floors, in another way they just being jazzed up a bit.
Due to the electronification of trading technologies proceeds apace. Greenwich says three types of technology are used to help humans fixed incoming trading: auto quoting, real-time pricing systems and low touch hedging tools.
- Multiplex algorithms now provide clients with pricing information.
In this aspect, clients effectively ask dealing desks in the bank to quote prices for particular trades under the so-called request for quote trading.
And some traders used to give prices on the telephone, a large portion of RFQs are now handled by auto quoting systems.
However, these systems use mathematical algorithms to pull prices before coming up with a price in a matter of milliseconds, and the algorithms also look at public and private data about the security being traded.
At the same time, pricing algorithms also need to consider the dealer’s present exposure to the market so that the trade won’t lead to the risk of a big loss.
Meanwhile, pricing algorithms are so important and are the source of competitive advantage, and that dealers are increasingly investing in them.
If possible that it is done properly, then such algorithms connected to the right distribution trading technologies will put the bank ahead of its peers with better pricing and reduced risk.
- Internalization engines help banks hedge trades.
Previously, traders do the task of hedging mitigating the risk associated with their trading technologies activities. To perform, they have to find the customer to take the opposite side of a trade or inter-dealer broker to pass the risk onto a competitor.
But, presently hedging is now done through internalization engines, these are internal search engine which looks across a bank’s trades and tries to look for ones which will offset the risk that’s been taken on with the new transaction.
Internalization is now a big thing for big banks that have different kinds of diverse activities. But there was a suggestion that smaller banks could club together to create their own internalization pools spread across the group members, and there is the probability of risk-sharing.
- Sometimes internalization engines don’t work though
Reports say internalization engine not always enough, though they are now the go-to hedging systems for big banks. Also, if internalization engine can’t find matching trade, the trade bank still has to hedge on the broader market as this requires another kind of pricing trading technologies.
Trading technologies steam prices put the banks at the receiving end. And if eventually the bank still can’t find an appropriate hedging trade, it will surely go to anonymous market venues like NEX Group’s BrokerTec and Nasdaq’s eSpeed.
- You don’t need to work in a trading technology team to operate in trading tech.
Reports show that banks are largely buying trading technologies systems off the shelf from vendor companies. While 80% of equity investors now use an execution management system provided by a third party.