Voice trading after MiFID and COVID: It’s time to stop worrying and embrace digital transformation

Voice trading has undergone major changes as a result of regulatory reforms. MiFID II has had the biggest impact. To comply with the transparency, best execution, and reporting mandates of MiFID II, banks in Europe have been forced to digitise part of their voice workflows. Banks in other regions have pushed for similar digitization to standardise their processes and ensure they don’t fall behind the automation curve.

With the sales desks being the face of the banks in the voice business, they’re the most impacted by this change. Has this automation increased their efficiency and simplified their work? Or has it just kickstarted a long-awaited and lengthy digital transformation of voice trading?

In reality, the forced automation of conventional processes and operating models has left sales desks facing bigger challenges than they were before MiFID II. Sales teams now find themselves in the middle of a semi-automated end-to-end workflow where they have to use multiple systems when negotiating voice deals on behalf of their clients.

Interaction with clients is still manual and involves a mixture of communication channels such as chat, phone, and emails to provide the fast execution that clients expect. By contrast, compliance checks, price discovery and negotiation, as well as deal bookings within the bank are done electronically using internal or third-party applications. Often, different systems are used depending on the product traded and whether it’s covered by MiFID II or not.

The complexity of the workflow increases with the complexity of the product traded. For example, bond deals are less convoluted than Interest Rate Swaps. This has a direct effect on the speed of execution and the efficiency of sales teams.

These challenges have been exacerbated during the Coronavirus pandemic. With remote working, screen real estate has become an issue, as salespeople don’t have the luxury of 4-6 screens to use multiple applications simultaneously. Remote working also means that shouting across the desk for quick price discovery is no longer an option.

The challenges stemming from the pandemic are not temporary. With remote working here to stay at least until the emergency ends and possibly into the future, sales desks need new working practices involving less verbal communication and fewer screens.

The impact of regulations and the pandemic on voice trading is two-edged. On one hand, banks have faced several challenges that are slowing down their trading. But on the other hand, it has shown up inefficiencies in processes and systems that are making sales desks, and voice trading in general, appear antiquated in the light of today’s technology. For example, a lot of data and intelligence can be captured from voice dealings. To draw useful insights from this data, you need automation.

That said, the future may be brighter than it looks. If MiFID II kickstarted the automation process and the Coronavirus pandemic has stress tested it, the trends of machine learning, robotics, and NLP engines are driving organisations to continue with the automation journey.

It’s now clear that a full digital transformation of the voice business is becoming a necessity. It’s the only way to cope with increasing client demands for personalised services and market trends that are disrupting the status quo. It’s no longer about banks needing to automate their voice workflows to comply with regulations. It’s now about replacing manual workflows with new technologies to stay competitive.

At ION, we’ve been working with our clients to embark on this digital transformation of the voice business. We’re focusing not only on automating workflows and consolidating different functions into one screen, but also on empowering sales teams with client and trading intelligence.

With the right level of automation, the role of the sales desks can shift away from manual processes and into value-added activities that can’t be fulfilled with technology. For example, building new client relationships and using targeted research to understand market trends and find new business opportunities for customers. After all, technology is here to empower people, not replace them.

However, a shift in mentality and a change from within are required to drive these changes and revolutionise voice trading in the same way electronic trading was revolutionised 20 years ago.