The role of the sell side trader has been under a lot of pressure in the last few years. A number of developments, including the financial crisis and the rapid technological progress made in the capital markets, have meant that the trader’s role has had to evolve rapidly.

In The Role of a Trader: Searching for a Raison d’Etre, Celent considers the various factors that will shape the role of a trader in the next few years. These include technology, the economic environment, the regulatory framework, the evolution of the capital market themselves and the rise of Big Data and social media. The intent on part of the employers is to hire a new breed of traders. There is a requirement for an individual who is more quantitative and technology oriented, yet is able to build client relationships that are strong enough to be able to anticipate clients’ requirements at least some of the time and address their current needs all the time.

The operating cost of a traditional sales desk can be high, and this can be an incentive to increase use of technology and reduce manpower, although the latter does not come cheap either, and there is a trade-off that has to be made. Similarly, the complexity of the product plays an important part because the likelihood of a plain vanilla product being traded using HFT is much higher.

“Due to the financial pressures, firms have to choose between traditional and automated trading,” says Dr. Anshuman Jaswal, Senior Analyst with Celent’s Institutional Securities & Investments Group and author of the report. “While some investment banks have gone for a mix of the two, it is important that all trading firms consider the issues involved and make a conscious choice, else they risk being caught out.”

This report studies the evolution of the role of the sell side trader, and also considers the changes in the role of their buy side counterpart. Rapid technological advancements are also highlighted by the role of social media in trading. Regulation and compliance are important issues that have impacted trading. This is discussed, along with a brief look at the ethics of the trading technology that is utilized in the leading global markets today.