allow us to make even better execution
decisions.
Trying to develop a standard industry
process around TCA though is a very
challenging task given how different
each asset managers investment
strategies and system workflows are.
We for example have equity workflows
running through an OMS as well as an
EMS whereas others may just use one
system.
Enhanced collaboration
with the investment team
Our global equity investment teams
are long-only active investors. Once an
investment decision is made it is the
job of the trader to perform a thorough
pre-trade analysis and manage the
fund manager’s expectations over ease
of execution and keep them in touch
with trading strategies employed. Clear
communication is the key here together
with good post-trade feedback. We
are therefore also thinking about how
best to present meaningful post-trade
data in order to compliment the overall
execution process. You need to think
way beyond a simple VWAP analysis.
Spring 2018
Improved buy- and sell-side
relationships
Our overall relationship with our sell-
side counterparties is today the best it
has ever been. They have developed
into trusted relationships where some
of the old market opaqueness has now
become much more transparent and
old barriers broken down. Sell-side
execution services have moved on
with the times and many offer first-
class products and services that really
do help the buy-side trader achieve
their best execution role. Execution
venue data is also now much more
easily accessible with clear information
provided within the FIX tags. Sales
traders do still provide a very important
role too particularly in accessing block
liquidity and also providing a very
good all-round trade–related service.
The onset of electronic trading has a
long way to go before we completely
eliminate the human touch!
We run a very large small-cap fund
with liquidity access clearly different
to that of large-caps. One of the key
liquidity sources is often small-cap
specialist brokers. With the onset of
the new MiFID II rules around different
liquidity venues or changes that have
been made, there were potentially
concerns that some of the small cap
relationships would suffer, but we have
not seen this. We still maintain very
strong relationships with our small cap
specialists and accessing liquidity this
way still remains invaluable.
www.buysideintel.com
Unbundling of research
MiFID II brought the unbundling of
research from commission to a head
and we, just like the majority of our
peers, are paying for research ourselves.
The bundling of the two had been a
legacy market practice that had to
come to an end in the overall best
interests of the end investor. This has
also brought some challenges to both
the buy and the sell-side but will no
doubt produce a healthier and more
competitive result for all involved as it
continues to settle down.
From our trading desk perspective
though, the new rules around
unbundling has had no effect on
our best execution process. From an
operational perspective we have now
removed the research element of our
commission rate structure from our
CSA brokers leaving us with a pure
execution-only structure. The removal
of the administration burden around
CSAs was welcomed.
Commission rates
Commissions rates have always
been an important focus and are an
explicit cost for our clients. Managing
commission rates and making
sure we get the best deal without
compromising any execution quality
or liquidity access has always been an
important part of our trading role.
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