What are some of the less automatable equity desks?
I know that cash equities is heavily automated, what about stuff like equity index derivatives trading, etc? Or dispersion / volatility trading?
I have a STEM background but do want to be a trader, if I do end up on a big equities desk just wondering what I can do as a trader (don’t want to sit there automating trading)
Thank you!
Based on the most helpful WSO content, it seems that while many trading desks are moving towards automation, there are still some areas that require a human touch.
1) Exotic products: These are less automatable due to their complexity and the wider spread charge. Even though many complex products like options and barrier options are now dealable on electronic platforms, there's still a need for human involvement.
2) Equity derivatives: While some banks focus on flow with strict risk management and deem traders as "human quoting robots", there are places where traders can trade with less restriction. This suggests that there's still a role for human traders in these areas.
3) Volatility trading desks: These desks seem to require a higher level of complexity and may not be as susceptible to automation. There are also e-trading, quant strats, XVA, and lots of quant research teams that might be of interest to you.
Remember, while automation is a trend, there's still a need for humans, especially those who can bring a unique perspective or skill set to the table. As a STEM graduate, you might find that your skills are particularly valuable in these less automatable areas.
Sources: Is S&T dying? COVID-19 impacts, 2021 S&T Bonus, HF PM Q&A, https://www.wallstreetoasis.com/forum/trading/what-are-the-top-volatility-trading-desks-at-jpm-gs-and-what-differentiates-them?customgpt=1, PE Investment Activity Amidst Spiraling Markets
Fixed income/Commodities OTC stuff is still far away from being automated and probably the most interesting, a lot of equities stuff at banks is very boring.
For equities the most interesting stuff that is not fully automated is probably market making, a lot of it is on systematic models but a lot of banks has sizeable old-fashioned market making desks. I think Morgan Stanley has a pretty big MM division.
The divisions you mentioned, especially equity index derivs are actually some of the most automated processes nowadays.
what do you mean by automated? afaik, apart from qis-esque groups, no index/ss vol desks have completely automated hedging and strategic trading strategies.
you could also take a look at structured products / exotic equity derivs trading.
If you're interested in trading quantitatively and not being on a heavily automated desk, try out the rates swaptions desk. Plenty of scope to use quantitative methods without being automated away there. Can also be an interesting desk if you like thinking about monetary policy and macro
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