“Between asset classes some of the
senior managers at the brokers know
our firm holistically, but down on
the desk the equity trader and fixed
income trader at one of the banks
may not even know each other and
they really are more focused on
their own asset classes, and not how
Allianz Global Investors may use their
firm’s offerings in other areas,” said
Rossiter.
When it comes to selecting the trading
venue for equities, there are rarely
multiple venues to choose from in
Asia, since most countries in the Asia
Pacific region are still primarily focused
around the national exchange. However,
some markets such as Japan do feature
multiple venues, and in such cases,
Rossiter’s trading desk has to pay
attention to which venue it is working
orders on. To complicate matters, the
presence or otherwise of high-frequency
traders can be a significant factor in the
decision of where and how to trade. One
method to mitigate the risk of being
picked off is to use minimum fill sizes
10
for dark fills or some of the PTS. But in
reality, Rossiter warns that the trader
could be interacting with HFT all day
long even on the primary exchange.
Under the right conditions, in limited
circumstances, then there can be an
opportunity to trade without too much
risk.
“There’s a mentality in Asia to trade
at one-third volume by default,” he
said. “Trouble is, there are many savvy
HFT programs out there that can
take advantage of our signals and
disadvantage us. It’s hard to pick a
standard volume. The fact that HFTs
are not present when I’m matching
blocks is a great reason to do that,
but realistically a lot of the order
sizes are smaller. If I have to work
in the market, I’d rather be slow. If
you’re running at 30% volume you
will have market impact but if you’re
at 5% at least you won’t make that
impact. Slow down where you can. In
those cases where I must be trading
in the market I try to at least be less
predictable, taking breaks here and
there, and bold moves between.”
“With a smaller sized order where you
really don’t have impact then there’s
little chance an HFT client could game
you, and in that case if a PTS has a
better price then why not take it?
We’re not against dark pool trading
with our brokers but do have some
settings in place which we hope help
us avoid interacting with some of the
more toxic flow found in such pools,”
That’s not to say there is no place
whatsoever for alternative trading
methods in the market, however.
www.buysideintel.com
Rossiter added.
Broker lists are another factor that has
experienced pressure in recent times
in some parts of the world. At present,
Rossiter estimates that nearly 70% of
Allianz Global Investors’ trades in Asia
can be executed with the firm’s top
10 brokers; however, while there is
significant concentration of flows, the
tail of the broker list is much longer. It
includes brokers that do not have the
scale of the bulge-bracket firms, as well
as niche brokers that may only have
June 2016