Buy-side Perspectives Issue 15 - Page 26

How do you see the centralised dealing desk delivering cutting-edge value to the buy side? Is there an industry wide increased justification for centralised dealing across your asset class responsibilities? Each house is different. Where you have a small shop with niche product suites, centralised may not be a viable option. The buy side is extremely competitive, we are challenged at many levels and having an efficient value- added trading function is just a part of Traders are also the eyes and ears of the market for the fund and given the number of data points hitting them today, it’s essential that we have the tools to manage this flow to benefit our funds. the competitiveness of the industry. Fortunately, we have (the scale) that enables us to centralise and bring those benefits to the forefront of asset management. What are the key deliverables of the fixed income trading desk in the investment process? We have seen fixed income traders becoming much more involved in the investment process, particularly when it comes to liquidity assessment. Our traders are involved at the portfolio construction stage to help portfolio managers assess what the liquidity conditions are likely to be on the way in, and potentially the way out of the investment. This is all done prior to the pre-trade analysis at time of execution, where we have proprietary and third party tools at our disposal to help make the best informed decision and record it every time. Traders are also the eyes and ears of the market for the fund and given the number of data points hitting them today, it’s essential that we have the tools to manage this flow to benefit our funds. What are your key messages to the buy- side firms who still solely rely on their custodian relationships for FX trading? technology that was well-established in the equity markets now becoming business-as-usual in FX and some fixed income trading. Technology adds real scale to the business in a risk managed fashion. It allows us to optimise staffing, and to draw upon the value of experienced traders on the desk. Which hurdles are the buy-side trading desks facing to adapt new technologies and make choices between best-of-breed and multi- asset solutions? “New Platform Fatigue”. Any buy-side head of trading will tell you that over the last few years they have been inundated with pitches to the next trading platform across multiple products. With now over 100 bond trading platforms alone, we have to clearly assess which platforms are likely to add real marginal benefit to our business. Couple this with the process of on-boarding a platform through legal, risk, compliance and operational due diligence before a go live, then writing Technology adds real scale to the up as part of procedures is business in a risk managed fashion. quite a lot of heavy lifting on It allows us to optimise staffing, our side. We have partnered with our preferred platforms and to draw upon the value of across each asset class and experienced traders on the desk. had an influential voice in their development. We are unlikely to be asking for development Clearly this is not the only consideration that can’t be used at the next buy-side when making this decision as a client, client so it’s usually to the platforms’ as prime brokerage relationships benefit. Additionally, we also have to come at a cost, and reporting is also a pick partners we know will still be in the consideration. However, we owe it to business in five to ten years’ time. our clients to provide them with the information that will help them make What are the characteristics of the the right decision for their brokers who come out on top in the needs. changing capital markets? How do you see trading We constantly evaluate how we access technology increasingly our markets. Brokers that provide adding value to the scalable technological solutions trading desk and how do (automated market making, pre/ you expect this to evolve post trade TCA capabilities, dynamic over the next few years? algorithmic suites) with balance sheet capabilities have been shown to win a Technological competency greater proportion of our business. is at the centre of any agile We have seen the traditional business trading desk. We have seen “Caveat Emptor!” This is still clearly a very profitable business for the clearing banks, especially in anything even remotely exotic (outside G10) or long dated. I think the case is quite easy to make to clients. We can run the stats on a particular account against benchmarks where we think we could have executed and present the P&L differences to clients to make an informed decision. Adrian at the 7 th annual ATF Global Summit 2019 26 www.buysideintel.com Spring 2019