Given the current market volatility, adds ING's Buziak, buy-side traders must know how to react to quickly developing events. "In higher-volatility periods there is a move to high-touch rather than letting orders sit in algorithms, which don't know how to react to changes in volatility because they are based more off of historical data," she says. "Traders need to know how to reach into their tool kit and what to use in various situations."
One technology area in particular that can help traders improve their trading is the use of TCA, according to TABB's Berke. "There's now a feedback loop, and over time a trader can look at the transaction cost results of a trading decision ... and determine, 'Could I have done better?' " she says. "Because of the algorithms and real-time analytics on a trader's desktop, being quantitative can be helpful, and they can measure adding alpha using TCA both pre- and post-trade to improve their trading."
Berke adds, "In general we have a younger group of people on the buy side who are more comfortable with the technology and have grown up with technology at their fingertips."
But while technology has given buy-side traders more control, they are not immune to the market implosion and the changes that turmoil is creating. ING's Buziak points out that in today's financial market, with firms reducing head count at a historic pace, the ideal buy-side trader must have diverse skill sets. "To be successful, someone has to be a team player with a lot of self-initiative who is not afraid to roll up their sleeves and take on new responsibilities," she says, adding that this often means learning to trade new instruments and/or asset classes.
"In the past the buy side may have been able to afford to have different traders trade different instruments, but that's not the case anymore," TABB's Berke concurs. "Going forward, as there are fewer traders on the desk, they're going to have to take on a larger role, which may include trading in listed derivatives, OTC derivatives, international equities and foreign exchange, for example."
OPERS' Stack adds that the era of "superspecialization" is over and trading responsibilities are only widening. "The lines between asset classes are starting to blur, and you don't just trade equities anymore but equities and equity derivatives, for example," she states.
This broadening of traders' responsibilities also extends beyond actual trades. ING's Buziak notes that the role of the head trader has changed significantly in the past year and a half, focusing on managing counterparty risk more than ever. This includes "being smart about a day that's very volatile to make sure everyone is taking time to confirm orders and make sure the IT department knows ... that they have to be on their game," she says. "If FIX connections go down, they need to be all over it."
In addition, Buziak says, buy-side trading desks are increasingly relying on their sell-side counterparties. "As the buy side goes down in head count, on busier days we need to use the agency-only broker as somewhat of an extension of our desk," she comments. "If we're busy we're more likely to be giving orders to more capable hands -- and making sure we don't have to handhold those orders," Buziak adds, suggesting that a good buy-side trader must know when and what to hand off, and to which agency broker.
And the buy-side trader is likely to get even busier as the markets continue to evolve. Clearly the old days, when the only trading tool, was a phone are gone forever. Today's buy-side traders have to have a better grasp of a broader range of skills and tools than ever before. And in order to meet the next challenges that the markets present, they surely will have to continue to evolve as well.