Photo haFuture credit desks appeared for buy-side traders from discussions at the Bond Leader Summit last week in Washington, D.C. Transaction head, specific tool or sWorship is clearly focused and can make a significant difference to today's deal. As markets evolve, these will make a significant difference in their ability to handle certain parts of the market, such as private credit.
Embedded into all of this are intelligent applications of artificial intelligence. Three key dynamics drive change and the increasing demand for AI tools.
The first aspect is the need to empower traders through technology rather than human capital. Traders are increasingly becoming developers and users of software tools that can expand their capabilities. This is already clear in the skill set that new traders are proofing, but trading desks are not uniform. Trading heads are more likely to develop a portfolio of skills for different team members on the desk than onboard traders who can become all codes, great interpersonal communicators and experts in multiple asset classes.
As a result, they need tools to support them in a variety of ways, managing extremely time-consuming, less valuable tasks, allowing them to focus on more value-added tasks.
This leads to the second aspect, which is data aggregation and analysis. Bond traders need to draw very different data sources into understandable photographs of the market, and data cleaning and aggregation results in an incredible amount of work. Artificial intelligence tools can sort and analyze data to aid in pattern analysis and noise exclusion.
The third aspect is the development of the tool itself. AI can support coding, greatly increasing developer productivity and create more adaptive trading desks. As the level of digitalization and trading automation increases, inflexible trading desks can fall into material disadvantages.
A good example of this is the private credit market, which is rapidly growing as an investable asset class, driving change within investment managers. If secondary markets develop in this sector, they may need the ability to read between current inappropriate contracts, assess risk and value to create a more tradable view of the market.
Credit desks with the ability to scale up quickly, process data and develop new trading tools are well ahead of the curve. Other parts of the credit market witness similar needs.
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