The "easy" prediction to make about the new #1 priority in the face of economic upheaval would be that cost reduction is job one. But that's the glass half empty view - firms with an eye on both cost savings AND revenue generation have a different number one priority: automation.
Headcount, not technology, is the top IT expenditure in the banking industry - typically over 40%. Automated trading provides two big wins: reduced cost, and increased revenue. This week's announcement from PhaseCapital is a great proof point. As Dr. Geoff Goodell said this week - their automated trading system IS their trading operation - it's fully automated.
So while some firms have retrenched into a navel-gazing state of cost cutting, others have recognized the sudden rise of volatility as a big revenue opportunity. And low-latency automated trading systems are a key element in seizing that opportunity. That's why firms use technologies like complex event processing (CEP), which helps computers monitor thousands of stocks simultaneously and make trading decisions in under a millisecond (one thousandth of a second).
But more than just being fast, the key to winning the trading race is good driving. Trading expertise often resides in a small number of people: advantage can be gained by automating the best practices of the sharpest minds in a firm. This constructive debate within the harsh realities of reduced resources is motivating a new mantra: “People should be paid to think. All other business activities should be automated.”
With power comes responsibility. Some, like George F. Colony, the CEO of Forrester Research, have taken shots at automation in his article called Hal destroys Wall Street. Likening automated trading to the sentient computer Hal in 2001: A Space Odessey, George argues that computers - not humans - were behind the economic meltdown. But the computers are not in charge. In over 20 years, I've yet to see an "unmanned" trading system, or a system that "learns and decides" on its own. Traders are way too smart for that - they call all the shots. Automation simply empowers traders to monitor more data, make more decisions, more quickly, and CEP helps them express those ideas more easily. That's all. In fact, we might have been better off if Hal had been involved!
So automation is here to stay on Wall Street, and it not only helps automate trading, it also helps firms manage risk more effectively (as PhaseCapital describes), monitor for improper trading activity while it can still be stopped, and provide more transparency and fairness, not less.
So increased automation is the first of five new technology priorities in this turbulent economy.