SEIZE THE
OPPORTUNITY,
THE BUY-SIDE
TRADING DESK
IN FOCUS
Eric Heleine, Deputy head of trading desk, Groupama Asset Management
O
ur priority for the year 2017 naturally revolves around
the implementation of MiFID II. The regulation is
driving profound operational changes. It is obvious
to me that the trading desk is at the heart of this
transformation process which will have major impacts on the
structure of the markets for equity and fixed income instruments,
currencies, and commodities (“FICC”). The requirement to take
“all sufficient steps” to obtain the best execution imposes us to
review our trading practice.
Clients are already including questions about the firm’s execution
capabilities in their Request For Proposals (“RFPs”) which clearly
indicate the client’s interest in the firm’s best execution efforts.
MiFID II will transform the market and the trading desk will be
instrumental in delivering the intelligence on how to capture
short term alpha opportunities in the new environment.
The subjects unbundling of research, selecting the tools for
the tracking of research consumption (face-to-face and written
research), setting up the research payment accounts (“RPA”) and
regulatory reporting (RTS27 and 28) reduces the time given to
the recurrent activities of the trading desk. But this profound
transformation of our industry represents an opportunity to
evolve and improve the trading capabilities of the buy side. More
granularity in the data and an improvement of our TCA are assets
to give to traders more responsibility and better tools.
10
A major share of my time as a deputy head of trading is currently
prioritised around adapting to the upcoming regulatory
changes; coordinating with people, reviewing processes,
researching and implementing new technologies and trying to
establish how we will interact with counterparties and venues.
This means that a major part of the day to day trading activities
need to be delegated to the trading staff.
The trading desk and processes
The obligation of best execution requires us to review our
trading process. For example, on equities we are working
on a better segmentation of our flows by flagging low and
high touch. The objective is to group together flow that is
similar in characteristics. The process of grouping is based on
different characteristics like liquidity, spread and volatility.
The fragmentation post MiFID I has added complexity for the
trader to understand the behaviour of brokers’ Smart Order
Router (“SOR”), the nuances between various strategies but
also the implementation differences across brokers. One simple
and effective solution for the low touch flow is to create an
automated execution wheel to randomize the flow between
different brokers after that trader has defined the executions
objectives.
www.buysideintel.com
Summer 2017