Participants in the 2020 Financial Times’ Commodities Global Summit noted that commodity trading houses are increasingly juggling new technologies and large amounts of data — which has itself become a commodity — but ultimately it is still the trading desk personnel’s responsibility to check final documents such as bills of lading to ensure security and eliminate fraud.
“These days, we’re swamped with data and the name of the game is how do you turn this massive amount of data into information? … Some people say data is the oil or the energy of the future,” Vitol Chief Information Officer Gerard Delsad said during a panel titled Commodity Trading in the Digital Era.
To deal with the onslaught of data, trading houses are now employing ever-more data scientists in assisting the trading desks with tools. Data involves “a trade-off between quality and quantity,” said Cyril Reol, Chief Information Officer at trader Mercuria. To mitigate this, we are seeing prop trading funds combine fundamental trading capabilities with hires from a sciences background including computer science, physics and engineering supporting risk taking as can be seen at the likes of Jane Street, Citadel and Balyasny.
There is a crucial need for trading houses to have top people in their data processing functions, from the front line to the executive level. Those handling data must understand the intricacies of a wide range of software and particularly block chain. Trading relies heavily on physical documents, and even blockchain does not give complete security, mistrust has led some to move away from algorithmic trading and some banks have preferred to pull out of commodity financing rather than push for technology adoption. Withdrawal, however, is unlikely to be a viable long-term solutions, and for those companies which, unlike banks, do only or mainly ETRM and CTRM, it is not an option.
The dilemma that trading companies face at the executive level is that, while it is hard to find a trader who will make a great leader, it is almost impossible to be an effective leader of a commodities trading operation without trading experience. Professional credibility derives from the trading record, the trader’s attitude to risk and the ability to think tactically about it. Carrying that credibility forward into a management role is essential. In Pareto terms, leaders need to deeply understand the subject matter (20%) and they need to be visionary and inspiring (80%).” Leaders need to be able to build confidence, to exercise moral courage and to influence others throughout the trading house.
Identifying the caliber of executives that is needed is made far easier by structured, rigorous assessment. Leaders need not only to exhibit a range of cognitive abilities, including intelligence, but also have the capacity to develop the soft skills and EQ to equip them to manage relationships effectively and cope with the many nuances inherent in a management role.
Whatever the route, the transition from trader to executive is tough. Respect is earned by trading and easily lost by managing poorly or by failing to understand the trading scene.
Many of the traits that are needed for excellent commodities trading technology leaders are traits that characterize the best leaders regardless of sector or type of business. Many traders have a number of these traits, but to be an outstanding executive they will need to possess all of them.
Credibility. Respected for intellect and trading experience.
Depth of understanding. Knowing the subject matter from a technical and physical perspective.
Strategic and tactical thinking.
Deep understanding of risk. Balancing the ability to exploit opportunity and control risk.
Entrepreneurial mindset. Identifying gaps and responding rapidly to market opportunities.
Conviction, strong nerves, and resilience.
People skills. The ability to inspire and motivate and to shift easily between collegiality and authority.
The ability to recruit, train and retain talent..
A capacity for bridge building. Communicating effectively with management and the wider business; speaking both languages.
Executive presence. A combination of qualities including poise, communication skills and the confidence born of humility.
A strong recruiting partner will provide candidates who possess who possess a winning combination of analytics and decision-making skills ideal for success in the front office trading industry.
BrainWorks is a prominent boutique executive search firm offering a 29-year track record of successfully sourcing and placing top talent. By harnessing proven strategies, collaborating with stakeholders, and leveraging a diverse and talented candidate network, BrainWorks helps businesses find, attract, and ultimately hire talented professionals that create differentiated results. To learn more about how Brainworks can help you, contact us.