FIS Blog

The Multi-Asset Trading (R)evolution


Vincent Burzynski | Tuesday, November 3, 2015

Are we in the midst of a multi-asset trading evolution – or perhaps a revolution?

Today, different U.S. trading desk heads mean different things by the term multi-asset trading – some refer to the old dual-asset trading style while others are thinking of the modern one (which includes fixed income (FI) and/or FX). Likewise, when asking their counterparts on trading desks in the EU what kind of trading they do, if they respond multi-asset, they most always will mean the old style. When it comes to Asia-Pacific countries, desk heads may say they do multi-asset trading, but when asked to describe it, they often mean that they have a cash equities desk and an options or futures desk sitting right next to each other and working together – dual-asset trading at best.

Although the generic term “multi-asset trading” means different things to different brokers, sales traders or traders around the globe, there’s far more agreement on where trading methods and trends are going in their firms and markets.

That’s one of the findings of new research from Aite Group, The shifting sands of global trading, part 1.

Sell-side firms were asked about the preferred asset classes and products traded as well as where they were headed. As expected, listed cash equities and FX remain the most highly traded products, followed by trading in fixed income. At first glance, this mix is not so multi-asset.

However, when taking into account the current and planned listed equity derivatives trading as well as the planned expansions into listed and OTC derivatives in other asset classes, the trend toward a more multi-asset trading mix is clear. In particular, the planned trading for FX derivatives stands out, which is reflective of expected global currency volatility and the need for FX hedging.

The addition of FI and OTC derivatives products in lower proportion shows that the move from old-style to modern multi-asset trading is well underway on the sell side. The interviews and additional conversations with trading desk heads also make clear that this move is being spearheaded in U.S. markets. EU and Asia-Pacific adoption of multi-asset trading is strongly indicated, and within an accelerated time frame from past trading-method and trend migrations.

Moreover, 62 percent of sell-side desks indicate that they have already organized some trading desks on a multi-asset basis – that is, with multiple asset classes traded either on a single desk or multiple but aligned trading desks.

So perhaps the only real question is when multi-asset trading will catch on.

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