The rise of electronic trading over the past decade has had a profound effect on the structure of equity markets. Automation transformed the market from one where a great deal of human intermediation was required into one where computers largely do the work in executing and processing trades. There are many benefits to this. First, it allows greater volumes of trades, which improves market liquidity: the US average daily reported trading volume increased from three billion shares in 2003, to nearly 10 billion in 2009. Second, the speed of executions and cost of transactions have fallen sharply while transparency has increased. The use of algorithms – computer systems that decide on price, timing and quantity of an order – has also cut the size of the average trade. Slicing large blocks into smaller pieces reduces the market impact of trades and limits adverse costs of trading large positions.

A downside is that greater automation means less manpower. One bulge-bracket bank tells us it employs 30% fewer traders than in 2005, dealing with three times the flow. Electronic trading is well established in the high-volume foreign exchange market and increasingly important in fixed income.

Roles and career paths

Quantitative analysts

Are the maths elite key to gaining an edge in e-trading. They design, develop and implement execution algorithms using a mathematical approach to identify investment opportunities and strategies.

Consultants

Keep clients happy. They run statistical reports, including transaction cost analysis and trade reports, to ensure clients are using trading tools effectively.

Sales traders

Facilitate the execution of trades for clients, offer a menu of the bank’s e-trading products and facilitate a customer’s decision. This role combines marketing and client relationship management. Banks also hire for pure sales roles.

Market structurers

Analyse regulatory changes and macro trends and their potential effect on trading. There are also technology positions in the development of e-trading platforms (see IT in finance on page 64).

Skills sought

Most quants have PhDs in a highly mathematical subject and must also possess a good knowledge of financial instruments and technical computing software such as MATLAB. For other roles within e-trading, softer skills are valued. Good communicators and team players are essential, suggests Chris Jackson, graduate programme manager, global banking and markets at Royal Bank of Scotland. “This is important because our electronic markets business acts as a partner in driving and implementing the electronic trading and distribution strategy across designated asset classes,” he says.

The key to succeeding in electronic trading is versatility. “The skill set of today may not be the skill set of tomorrow given rapid changes in technology and in the industry landscape. You need not only to accept change – you also need to embrace, welcome, and thrive amid change,” says Andrew Silverman, managing director, Morgan Stanley Electronic Trading. “Those who succeed know how to multitask, work as part of a team, and share information with colleagues in other countries.”