Structured vs Flow trading
What Does The Future of Trading Hold?
While there have been many headlines about the impact of automation on trading, it’s still early days. Retired Certified Private Equity Professional @derivstrading" provides his insight on a few WSO questions.
Impact of Automation
Who thinks the roles of flow traders are slowly being automated?
- For something like cash equities flow trading is def becoming more automated.
- However, any other products, even if they move to exchanges are not likely to be automated just because of liquidity issues as there are fungibility issues.
- I just don't see products like options being so automated because there are so many different risks to take care of whereas in equities you simply lose money by price going up or down.
Future of Flow vs Structured
Will flow dry up? Is structure going to stay put?
- During the financial crisis people fell out of structured stuff and into more liquid securities, as liquidity was important.
On the Job: Structured vs. Flow
On a day to day basis what’s so different about structured vs flow?
- Flow desk is a bit more fast paced, smaller spreads, higher liquidity.
- On a structured credit trading desk the feel is more of a regular 'office' just because most people are working on structuring and then there are two or three traders handling the FX and correlation risks of the desks positions.
- On flow equity derivs its a bit more real time.
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For something like cash equities flow trading is def becoming more automated. However, any other products, even if they move to exchanges are not likely to be automated just because of liquidity issues as there are fungibility issues. I just don't see products like options being so automated because there are so many different risks to take care of whereas in equities you simply lose money by price going up or down.
In terms of drying up, during the financial crisis people feld out of structured stuff and into more liquid securities, as liquidity was important.
On a day to day, the differences are fairly intuitive. Flow desk is a bit more fast paced, smaller spreads, higher liquidity.On a structured credit trading desk the feel is more of a regular 'office' just because most people are working on structuring and then there are two or three traders handling the FX and correlation risks of the desks positions. On flow equity derivs its a bit more real time.
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