THETRADETECH DA I LY
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THE OFFICIAL NEWSPAPER OF TRADETECH 2019
Transforming TCA with Data Science
Invesco’s head of trading rules out outsourcing equities
trading, saying ‘nobody can do it better than us’
ASSET MANAGER SAYS ITS EXPERIENCE, TECHNOLOGY AND SIZE MEAN THAT OUTSOURCING THE EQUITIES TRADING DESK IS
NOT ON ITS RADAR.
TCA is evolving – Towards Comprehensive Attribution
Diverse trading skill sets essential for the buy-
side desk, says BlackRock’s VedBrat
BUILDING A FLEXIBLE, DIVERSE SKILL SET ON THE TRADING DESK IS ESSENTIAL TO ADAPTING TO EVOLVING MARKET CONDI-
TIONS AND GROWING AT SCALE SAYS BLACKROCK’S HEAD OF TRADING.
B
uilding a flexible and diverse skill set on
the trading desk is essential to adapting
to evolving market conditions and growing at
scale, according to Supurna VedBrat, global
head of trading at BlackRock, during a buy-side
keynote interview.
VedBrat detailed how the world’s largest
Continued from front page.
The debate was moderated by Glenn Poulter,
head of business development, global markets
at Northern Trust Capital Markets, the firm
which launched an outsourcing trading service
for asset owners and asset managers six
months ago. The move made it the first custo-
dian to take on buy-side trading functions.
Miller’s stance showed how some larger asset
managers are wedded to in-house execution,
despite the widely-touted benefits of outsourc-
ing, such as cost and risk reductions, along with
leverage of technology and platforms.
For an asset manager with the size and scale
of Invesco however, its own capabilities and sys-
tems mean it is less likely to seek out outsourc-
ing opportunities for equities execution.
Miller said it’s “possible that FX could be” out-
sourced but was firm on his stance on equities.
Speaking from the perspective of an asset
manager who has outsourced its execution,
Karen Zachary, chief operating officer at CRUX
Asset Management, described the benefits of
the decision, including the aforementioned cost
and risk reduction, access to markets and effi-
ciencies during the introduction of MiFID II.
“MiFID II impacted us pretty significantly,
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THETRADETECH DAILY
“We’ve got the experience,
the technological back-
up as well, we’ve got the
systems and the support.”
DAVID MILLER, INVESCO
having outsourced all the trade execution there
was support through all that, but the cost of
research, external reporting and everything that
needs to be controlled, cost has been pretty
substantial.
Zachary added that it did take a while to get
fund managers used to not having a trader
sitting beside them. “There is a line between
us and the external trading activity and that’s a
line that you can’t cross,” she explained.
Taking a neutral perspective on the debate,
Greg Faragher-Thomas, director at Alpha Finan-
cial Markets, believes that the new regulatory
environment will force even the largest of firms
to at least consider outsourcing.
“MiFID and regulations has forced firms to
look at what the objective is of the end client – a
passive product, an active product, multi-asset
products, solutions-based product – you really
have to hold yourself accountable to that full
lifecycle,” he explained.
“That’s where we are seeing, even the larger
firms, looking at the entire value chain from
fund manager, order generation all the way
through to settlement as to the full costs
around the process and dealing is no exception
to that.”
Faragher-Thomas described the decision to
outsource or not as an ‘emotional’ one. “If you
remove the emotion you can look at how you
can measure the value chain. People comfort-
able with outsourcing, back-, middle-office and
custody. You start to see what’s valuable.”
Research from consultancy Opimas in
February this year suggested that front-office
outsourcing is expected to surge over the next
couple of years, as asset managers struggle to
keep on top of regulatory and cost pressures.
The study predicted that by 2020, around
20% of investment managers with assets
under management greater than $50 billion will
outsource at least some portion of their trading
desks.
asset manager is staying ahead of evolving
market conditions by building a culture that
ensures trading desk staff are armed with
a manifold set of skills that can be utilised
across its execution channels and technology
resources.
“We’re not shy about picking someone with
“The trader of today and tomorrow is different from the
past, where traditionally they would have vertical, very
deep expertise.”
SUPURNA VEDBRAT, BLACKROCK
transferable skill sets and moving them into an
area where they might not be a subject matter
expert, but they do bring the very essential
‘softer’ skills that are now necessary in order
to create a collaborative environment,” said
VedBrat.
“The trader of today and tomorrow is dif-
ferent from the past, where traditionally they
would have vertical, very deep expertise. Now,
traders need to be able to understand multi
asset classes, multiple trading strategies, and
multi-regional, global influences.”
VedBrat explained that the idea of a trader as
bring siloed or purely focused on front-office is
less present at the firm now, as a wider view
of the entire investment process is required,
as well as possessing the ability to interpret
data and be fluent in their algorithm options to
adapt to different market conditions.
“Alongside their execution role, they are also
helping us figure out if we need to improve
existing trading or if there is a better way for
us to be executing,” VedBrat commented. “My
traders are looking at the entire investment
process, all the way through to settlement.”
This approach to building a flexible trading
desk means firms can approach challenges in a
more proactive way, and for a firm with global
operations to such a scale, BlackRock’s starting
point to this is through global consistency and
standardisation.
“One thing we are mindful of is that we have
a lot of regulatory change happening globally
and that is creating fragmentation,” VedBrat
commented. “Fragmentation sometimes
leads to pools of liquidity that aren’t global in
nature now becoming a little bit more regional,
and you have to keep that in mind as you are
thinking about how you are setting up trading
workflows.”
Developments in automation and data are
vital tools to address liquidity issues and
BlackRock’s proactive approach to these
technologies has allowed the firm to engage in
consistent dialogue with its market counterpar-
ties. VedBrat said that while gaps in liquidity
present issues for all market participants,
artificial intelligence and data science are key
tools for BlackRock in going forward with these
trading challenges.
Issue 2
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