Last November, I spoke on an “all-star” panel at TradeTech Asia, on “Determining the future of the multi-asset class trading desk – What does the buy-side want.” What was our conclusion? The multi-asset story is still finding its footing in Asia.
Certainly each panelist had a slightly different take on what being cross-asset meant for them.The old school definition of multi-asset originally included equities, futures and options. Today you can add two new asset classes: forex and fixed Income or OTC. Three have become five.
With desks being continuously streamlined and headcounts kept to a minimum, being multi-asset plays a key role for institutions that want to bring efficiency to their desks as well as lower their total cost of ownership (TCO) and total operating cost (TOC) across different businesses.
The buy side will continue to shape how the sell side addresses the multi-asset trend. Both buy and sell sides have a need to streamline their platforms in such a way that it complements the different asset classes and supports the specificities of each asset class.
Market players on the sell side in particular have a strong desire to rationalize their technology stack, which today is a complex hybrid of different vendors’ solutions glued together with a layer of integration. This hinders efforts to be agile in an ever changing landscape.
This complexity is also costly to maintain. In Asia’s multiple markets, costs are two to three times greater than in Europe and the Americas, and regulations are about five years behind the rest of the world, so firms are under a lot of pressure. Meanwhile, it’s difficult to introduce more automation into trade and workflows.
Vendors need to step in. They must design their technologies with their customers’ multi-asset needs in mind. They need to do more to build their own solutions to be cross-asset-centric from the ground up. This, together with providing a front-to-back solution, will allow their customers to rationalize their technology ecosystems, reduce costs and be more adaptable to changes in the market.
So while the term multi-asset means different things to the same peer groups, everyone agrees that technology providers need to do more. Yes, you’ll always have niche asset class players – and vendors that sell niche solutions. But being niche will remain just that.
Regulation will continue to play an important role. The ever-growing need for transparency and accountability is driving the industry to be ever more cost conscious. Having a truly multi-asset ecosystem allows you to better standardize the way to adapt to new rules and makes reporting a by-product of your business process frame work. This is a lot harder and costlier to accomplish when your technologies are in silo.
And even if your firm does not trade multi-asset, you must be aware of what is happening. Companies that want to grow in this fast changing and demanding market need to address the multi-asset trend and capitalize on it by partnering with a vendor that truly understands their cross-asset needs – however that’s defined.
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