Technology is augmenting human traders on institutional trading desks rather than replacing them, a study that charts a “modest” increase in trading-desk budgets has found.
Spending by institutional fund manager trading desks increased a “modest” 4% last year in Europe and the US, as headcounts remained steady and tech allocation increased.
According to Greenwich Associates, annual budgets average $2.8 million for fixed-income trading desks, $1.8 million for equity trading desks and $1.6 million for foreign exchange desks.
In general, desks trading less liquid asset classes allocate more to technology, with fixed-income trading desks devoting 41% of their total budget to technology, versus 36% in equity.
“This trend could indicate that when it comes to sourcing liquidity, the buy side finds that a marginal dollar spent on technology returns more than a marginal dollar spent on talent,” says Brad Tingley, market structure and technology analyst at Greenwich Associates and author of ‘Trends of buy-side trading desk spending’.
Tingley said that despite the growth of electronic trading and other technology tools, the data show that technology and automation “continue to augment human traders rather than replace them” and that with the support of improved technology, 44% of buy-side traders are now active in multiple asset classes, and more than two-thirds trade multiple instrument types.
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