'Veneer of homogeneity' hides cross-asset minefield

Speaking at the FX Week Europe Congress in London last week, Smart said sell-side structures are still aligned by product silos rather than the correlation between products. He added different product areas are usually focused on different goals, with some pursuing market share growth while others target maximum of PBT strategy, or revenue maximisation.

According to Smart, product areas also remain at fundamentally different stages of development, and technology infrastructure across products has varying capabilities. "From the electronic perspective, the fixed-income side is still completely underdeveloped when compared with the FX side, which in turn is underdeveloped when compared with the equity side," he said. "This makes coming up with a coherent cross-asset strategy extremely difficult."

He noted that, although vendors might portray their platforms as cross-asset, they are usually simply linked front ends attached to differing back-end infrastructure. Application programming interfaces are still kept separate and product-based, with different pricing interfaces, methods of ordering and execution.

"All too often the system hailed as cross-asset class merely delivers a veneer of execution capabilities which belies a minefield of different trading protocols, non-homogenous products and different confirms, credit and operational procedures," said Smart. "Even with a slick front end, the reality is a veneer of homogeneity over a complex interwoven series of pipes."

He concluded that, although there is demand for the systems from the buy side, it is unclear whether the development of cross-asset class systems will progress as rapidly as previously thought.

"Incentives are often not strong enough for technology firms to invest in developing world-class cross-asset class trading platforms," said Smart. "The demand from the buy side is often not strong enough to drive the necessary change."