There is a broad spectrum of automatability across asset classes -- the most liquid, standardized securities (for example, AAPL, the stock of Apple Inc.) are well-suited to automation, while high yield bonds of a small corporate issuer are not. So a sell-side desk that specializes by asset class is better positioned to win buy-side business than a competitor that offers low touch across the board.
Just the sprawling bond market itself illustrates the complexity of automation, as there are huge protocol and workflow differences in the trading of on-the-run U.S. Treasuries, compared with mortgage bonds. The bond market is moving toward more automation overall, but without a ‘game changer’, its unique structure precludes ever reaching near 100% electronification as in equities. As such, savvy sell-side institutions will recognize where to deploy automation resources and where not to.
In some historically less liquid asset classes such as credit and derivatives, the evolution of trading from an OTC, voice-brokered market to electronic trading with more transparency has made process automation a necessity rather than a luxury.
As of March 2020, 44% of investment managers had increased or significantly increased their use of rules-based, fully automated electronic execution in investment grade corporate bonds compared with three years prior, according to the International Capital Market Association.