might seem obvious , it ’ s not so much that liquidity was less important in the past , but more that it may be getting harder to access in the modern trading environment . Changes such as the pullback of the sell-side under the onslaught of global regulation have played a major part , but so too have technological changes and the fragmentation brought about by new platforms . Numerous initiatives have sprung up over the years in an attempt to aggregate the liquidity electronically ; however , the successes of these platforms have been limited , and many have fallen by the wayside . Even in equities , platforms such as Chi-East failed to achieve critical mass . Partly as a result , trading desks in Asia , like the rest of the world , are gradually becoming more multi-asset – leading to debate over the precise role of the individual trader and whether or not individual traders should be trading across multiple asset classes themselves . “ Ideally we would have enough traders to handle every niche product and asset class ,” said Rossiter . “ But in reality the liquidity is unpredictable and in certain asset types , there are periods when there is not much trading activity . We can ’ t necessarily afford to have specialized traders not doing anything for three days . You can ’ t run an efficient desk that way . We are a multi-asset operation and that includes CDS , fixed income , etc . One of the challenges is we have a lot of PMs that want us to trade different products . The bottleneck is not just trading , but legal and compliance , getting set up , making sure operationally that you can settle the trades , and of course monitoring the risk . There are many boxes that need to be checked .” Allianz Global Investors ’ trading desk in Hong Kong is mostly split by country . According to Rossiter , this is because the similarities and practices are “ probably more important ” than doing so by sectors as may be the case in the US for example . As for trading other asset classes , this is split between the traders because “ practically speaking , we may be very busy in bond trading one day , and super quiet the next . The same goes for equities , etc . We just need the bandwidth to be flexible enough to handle the uneven nature of how orders hit our desk .” While the buy-side is gradually embracing a more multi-asset mode of doing business , there are signs that this shift has not always been matched by brokers .
One of the key issues facing the trading desk in Hong Kong at the moment is the authorities ’ Hong Kong investor ID initiative . The scheme will identify who the investor is in near real time . The Hong Kong Securities and Futures Commission currently monitors live trading at the broker level , but there is a push to extend that to the individual investor . The regulator has indicated that it will consult with market participants before coming to a final decision , but is currently looking into the feasibility of identifying clients . “ Although the final details have not yet been revealed by the authorities , I suspect it will have to be done at the investor level , i . e . naming the institution , rather than naming the sub account ,” said Rossiter . “ Naming the sub account would be impractical and unworkable . Many of those accounts don ’ t even know they are trading – it ’ s the institution that often makes the decision to trade .”
June 2016 www . buysideintel . com
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