Radical automation
and buy-side empowerment
Mike Bellaro, global head of equities and listed derivatives,
Deutsche Asset Management
MiFID II and unbundling represent
a fundamental re-alignment of the
European investment market that
will force the buy-side to redefine the
way it does business, according to
Mike Bellaro, head of equity trading at
Deutsche Asset Management.
“This [MiFID II] combined
with unbundling could be
the most significant amount
of change we have ever
seen. It’s equivalent to the
Big Bang.” “Most have
been focused on how to
value research but profound
change should be expected
on the execution front”
Where once the buy-side could rely
on help from the sell-side, this is less
the case today as increased regulatory
pressures and capital constraints
limit the ability of banks to intervene
and provide services to the buy-side
trading desk. At the same time, the
buy-side is itself being directly affected
by a combination of sophisticated
technological advancements and cost
pressures.
“My goal is to create a
scalable platform. If I triple my
firm’s AUM, I should be able
to do it without increasing the
headcount. Automation is
the key.” We are in our next
evolution which will allow us to
automate more smarter”
“We are one of the most
aggressive users of algo trading
in Europe.” At the same time we
are one of the most aggressive
leaders on block trading. We
have had record volumes with
record post trade performance
driven by alpha from using
strategic liquidity.”
Part of the ethos behind this push
towards automation is the conviction
that human traders should be
reserved for the kind of trades where
they can really make a difference.
Bellaro is leading an ambitious drive
to automate the trading desk as far as
possible. Last year, 85% of Deutsche
Asset Management’s flow was
executed electronically – much of
it through customised broker
algorithms with no human
intervention.
These changes can be seen as a
disadvantage for the buy-side –
but they can also be viewed as an
opportunity. For Bellaro, the shifting
situation means above all the
empowerment of the buy-side, as
asset managers take control over their
own tools of execution. The challenge,
however, is to take advantage of
the opportunities on offer without
dramatically increasing the buy-side’s
fixed costs.
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