![Risk.net](https://www.risk.net/sites/default/files/styles/print_logo/public/2018-09/print-logo.png?itok=1TpHrpuP)
‘People who bought this swap also bought Apple’
Dealers hope personalisation algos will help them cut sales costs, but data gaps could be a problem
This opinion piece accompanies our series of four feature-length articles on front-office digital change. The first two features are available here and here. The third will be published on July 12.
There’s a video on YouTube introducing a new, Natixis-built bot. Designed as an add-in for bank-owned messaging platform Symphony, it illustrates how the industry plans to turn chat into an all-singing, all-dancing workflow tool.
Equally interesting – though for different reasons – is the queue of autoplay videos YouTube stacks up on the right-hand side of the screen to keep me watching.
I probably shouldn’t tell you this, because the videos have been selected on the basis of my personal viewing habits but, after the Natixis presentation, we leap quite quickly to cognitive biases, the “10 worst British military aircraft” and a short film in which a small girl gives money to a street performer and “gets the best surprise in return”.
You’ll have to take my word for it when I say I’m not particularly interested in any of that. At least, not right now.
I bring it up, because personalisation is another part of the industry’s plans for a tech-led revolution in its approach to sales. The idea is that self-educating algorithms will listen in to phone calls and chats between banks and their clients, pick out and understand the clients’ needs, and then run off to fetch something useful – market data, say, or relevant research, a trade idea, or a product the client might want to buy.
The call might even be happening because, based on recent market moves – and the bank’s knowledge of the client’s positions – the algorithm suspects now is the moment to pitch the client a particular trade and prods the salesperson to pick up the phone.
Banks believe they can make this work. But that may be because they need to make it work.
With large swaths of the buy side facing cost pressures of their own, and more business being done electronically, dealers anticipate a shrinking wallet and tighter margins. If they want to keep these customers, automation is the way to do it – and a computerised assistant that can perfectly anticipate client needs would solve everything.
If a bank keeps calling you about a product you don’t want, then you stop taking their calls
Electronic trading head
But the problems that lead YouTube to think I care about cognitive biases and military aircraft also afflict dealers: they don’t have complete information about what their clients want. They only see the trades and enquiries that come to them; they don’t know anything about the trades that go elsewhere. And they don’t always have the context: is that swap a hedge of an existing position or an investment view? Is the client free to take profit or not?
Amid all the excitement about this idea, one electronic trading head sounds a note of caution: “When you’re on Netflix or Amazon, and they recommend something you think is completely useless, it doesn’t matter – you’re still going back. But if a bank keeps calling you about a product you don’t want, then you stop taking their calls. So although these techniques have been around for a while, they’ve never been required to generate the level of precision we would need in order to feel comfortable using them,” he says.
He’s not writing the idea off, but he envisages “multiple years of testing and refinement” before the tools are in widespread use.
That sounds realistic. Although maybe I’m a victim of confirmation bias. I’ll just look it up on YouTube.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Markets
Vanguard stages swaptions comeback
Counterparty Radar: Deutsche grew book to $11 billion in Q1 to become largest non-US swaptions dealer to mutual funds
Data reveals hidden clockwork of FX forwards market
More than 70% of Vanguard’s volumes and nearly half of Pimco’s regularly occur on just four calendar days
RJ O’Brien plots expansion into US Treasury clearing
Chairman and CEO says futures house plans to capitalise on SEC’s new mandate for interdealer trades
Premialab adopts CDM for QIS swap booking
Vendor selects open source data model to power expansion in growing systematic index market
Is JSCC-CFTC stalemate about to be broken?
Japan CCP gains allies in battle to clear yen swaps for US clients, but CFTC shakeup could dash hopes
What T+1 risk? Dealers shake off FX concerns
Predictions of increased settlement risk and later-in-the-day trading have yet to materialise
How steepener trades burned hedge funds, and what happened next
Delays to central bank rate cuts torpedo popular trade, causing funds to pull capital – to the chagrin of sell-side desks
Covid-induced Eurobonds mark step towards EU financial cohesion
Successful issuance points to greater pan-European sharing of risk
Most read
- Harvesting the FX skew premium
- How steepener trades burned hedge funds, and what happened next
- What T+1 risk? Dealers shake off FX concerns