The trader is dead-long live the trader

Discussion in 'Strategy Development' started by RusselHarvey, Oct 29, 2006.

  1. There have been two notable publications over the past year or so that were really worth looking at. Both capture the essence that massive change is upon us. Both suggest we are in the early days of the Electronic Revolution, a revolution that will change the financial markets industry beyond recognition, just like the Agricultural and Industrial revolutions have changed the world before us.

    1. Yes we know that electronic trading is increasing transparency in the market and that market data is becoming more widely available. The IBM The trader is dead-long live the trader (http://www-1.ibm.com/services/us/imc/pdf/ge510-6270-trader.pdf) paper projects forward on this to conclude that once transparency is such that everybody knows everything.. instantaneously, financial markets firms that have previously benefitted from leveraging access to proprietary market information and insight will no longer have this advantage. Consequently the industry will see substantial change in the next 10 years. There will be less buyside, sellside, processor differentiation as focus has shifted from a transaction perspective to one that is truly centered and optimized on servicing demanding clients (retail / institutional). Excess agency profits have evaporated, alpha and beta seperation is completed, and so it is the creation of critical alliances with a customer focus that will drive the change and add value to the market by effectively assuming and managing risk, or by mitigating it either by taking it out of the overall system or by reducing it for their clients.

    2. AmazonBay (http://www.drkwrevolution.com/2015/). So why won’t the entities that are already processing millions of electronic transactions per day leverage their massive electronic processing ability by turning their attentions to the provision of electronic financial services? As and when they do, what happens to the current participants of the financial markets?
     
  2. ronblack

    ronblack

    But we do not know when insiders will sell, only after they do it. We do not know when and how geopolitical developments will affact the markets.

    Speaking technically, the developments may reduce assymetric information but systemic and non-systemic risk will still be there.

    The video was created by someone who does not understand the fundamentals of markets. For every transaction a buyer and a seller are required. One cannot hedge a position if another is not willing to assume the risk.

    It seems that the creator of the video worries about the future of his firm more than the future of financial markets.

    Ron