Technology and the Transformative Role of the Trader

As I speak to traders around the world one thing is clear: their role and the role of technology are not as interchangeable as some may believe. Erik Brynjolfsson, Director of the MIT Initiative on the Digital Economy, recently wrote in Harvard Business Review “AI won’t replace managers, but managers who use AI will replace those who don’t.” It’s fair to extend this notion to the buy-side trading desk: Technology won’t replace buy-side traders; but buy-side traders who use technology will replace those who don’t.

What does this mean, then, for the buy-side trading desk? How will these new technologies help to expand a trader’s role, influence, and overall value to the firm? What areas of their job should be automated, and what areas should be further developed?

For more than a decade, we’ve been working with traders to help them better equip themselves to be better managers, leaders, collaborators, communicators, and strategic planners through our Liquidnet Member Academy. Every workshop starts with the same call to action: “Don’t be a cost center; be a strategic partner.” The technologies available to the buy-side trader today allow this to happen more effectively than ever before.

Machines are most efficient at processing data and managing structured tasks, but they are not yet able to explore the unknown and challenge the status quo to help move institutions forward. Judgment, communication, human connection, and decision making are, and always will be, critical for success. Can a computer alone persuade a portfolio manager to adjust her investment thesis? Not likely, but a trader who is armed with the data the computer spits out, and who also understands how to explain that data in a way that’s meaningful to the PM, certainly will. With AI and machine learning gaining prominence in all areas of financial services, traders need to focus on honing the enduring skills that differentiate humans from machines and develop these to their advantage.

Identifying ways to harness the power of AI will be the key to longevity. At Liquidnet, we call this “IA,” or Intelligence Augmentation. Computers are ideal to specialize in a particular task, to process massive amounts of data quickly, and to make predictions based on that data. For a trader, that might mean using this technology to automate many of the more “routine” aspects of the job, freeing up time to address more strategic, performance-producing initiatives. Communicate, evaluate, assess and implement the right tools for clear, actionable results. Leveraging advanced technology in this way is what will lead to buy-side desks not only being more productive, but also to buy-side institutions being more competitive.

Jeff Schwartzman, Head of Learning and Development

Ellen Gordon