FIXED INCOME
Buy-side profile
THE MULTIFACETED
CONSIDERATIONS
FOR BUY-SIDE
PRICE MAKING
Cyril Batkin
Senior trader, Candriam Investors Group
Please describe your role and
responsibilities within Candriam
today.
I have two responsibility areas within
my trading role at Candriam. I am both
a generalist on global FICC & Equity
derivatives as well as a specialist
trading Emerging Markets Fixed
Income (Credit, Rate, FX, derivatives).
While it would appear impossible for
a human trader to cover such a wide
spectrum, technology improvements
have allowed our desk to automate
trading of liquid instruments in small
sizes efficiently so we as traders can
maintain a strong focus on our areas of
expertise.
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Firstly, it’s important to note that (1) we
are not only price takers and (2) price
discovery is more complex in fixed-
income than in equities. Price making
in fixed-income is more about how you
approach your flow (pre-trade checks)
than a process in itself. Our challenge is
to have the best possible idea of where
a block can be executed before even
asking the street. For example, asking
for an offer in €10 million on an illiquid
bond will shift the bid-offer away from
you. Therefore, you need to find ways
to reduce information leakage and
market noise to the strict minimum.
This in-depth understanding and
approach to address market impact
also helps your desk automation, as
www.buysideintel.com
high touch processes end up feeding
low touch processes but that’s another
story.
Once you have an idea of the feasibility
of an order, then you can build a
negotiation strategy with all available
tools to get the best outcome. A
simplistic approach to RFQ only is
not always sufficient to achieve best
execution. RFQ (electronic or voice),
buy-side to buy-side tools, use of an
agency broker are just various options
for you to achieve your objectives,
depending on the type of instrument,
the order size and market conditions.
There is no clear one size fits all
process as markets are in constant
evolution.
Summer 2019