Operational risks of home trading are being addressed, but human costs might be harder to quantify.
Trading from home – in your PJs, with no commute – is some traders’ idea of heaven. But it’s not all sweetness and light for the desk heads facing the op risk curve balls pitched up by the enforced adoption of remote working by US equity traders over the past six months. Culture, compliance, communication and connectivity are among the issues tackled this year by Lynn Challenger, Global Head of Trading and Order Generation at UBS Asset Management, and his peers. In the short term, most key risks appear to be largely under control, but longer-term uncertainties remain.
Charged with overseeing a global trading operation from Zurich, Challenger had to keep pace with varying lockdown advice across different jurisdictions as the pandemic took hold. Overall, enabling home-based trading has not proved a particularly onerous technological challenge, but it did require a nod of approval from regulators before order flow could commence.
In the era of advanced trading automation, the vast majority of front-office workflow is observable electronically, from the order coming to the order management system to the post-trade analysis. But it’s less easy to track what the trader is doing beyond the firm’s framework, for example use of personal cellphones, without the physical oversight that occurs naturally in the office environment. In this context, company culture and training become more important.
Alongside the absence of physical oversight, a number of the other practical realities of working from home gave rise to increased operational risks for traders. According to Mazy Dar, CEO of OpenFin, a provider of integrated desktop solutions to financial markets clients, these included less-than-optimal connectivity and ergonomics. Assuming you can put the required hardware and bandwidth in place, what do you do about tools that are not cloud-enabled? And how do you organize your desktop when you’re used to six screens and now have to manage with two or three? In the remote working context, a long-tolerated lack of interoperability between applications can lead to a spike in rekeying and other operational risks, says Dar, adding that the inadequacies of existing remote trading infrastructures have been exposed during the lockdown.
“This environment has accelerated the migration of a number of apps to cloud-based usage,” he observes. “And compliance folks realize they can no longer just say: ‘Cloud doesn’t work for us’.”
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