[ C O V E R
we do have very good tools and
processes around that requirement,
ranging from comprehensive TCA
to best execution committees in
each region, but that’s no guar-
antee regulators consider that
sufficient too.”
It is a serious concern even for
a shop as big and well-resourced
as AGI. The asset manager has
S T O R Y
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E R I C
B O E S S ,
discovery process because there is
a buyer in the market which has a
very different price sensitivity than
regular investors who seek optimal
risk adjusted returns. Central
banks are now contemplating a
way out of these extraordinary
measures, which will not be easy
considering the volume of their
balance sheets.”
“We have a lot of experienced traders so we are
trying to balance it out by strengthening the
technology skillset.”
already devoted considerable
resources to the challenge—there
are over a hundred people working
on it in the business as a whole.
And things will probably be even
tougher for smaller shops with
less resources, admits Boess. He
says that he does not know what
the first couple of weeks of trading
post-rules will look like.
“The whole marketplace is
uncomfortable with the situation.
There are too many uncertain
scenarios. There are real risks that
you will see illiquidity and volatile
trading because of technical
glitches. Or people are not trading
because they don’t know how to
interpret certain rules.”
Regulatory complexity aside,
Boess also has his mind on other
technical challenges in the market.
One of these is the liquidity issue.
European fixed income liquidity
has been distorted by central bank
purchases in recent years which,
Boess says, has led to the price
discovery process of fixed income
markets currently “being put on
hold.”
“The ECBs purchases are obvi-
ously impacting prices,” says Boess.
“There is currently no classic price
Technology skillsets
It will be a challenge for central
banks to move the market back to
pre-2008 conditions and Boess says
this will undoubtedly raise volatil-
ity when it occurs. To prepare for
this the asset manager constant-
ly monitors its investments in
easy-to-liquidate assets in case of
redemptions or volatility events in
markets and has also established
access to additional pockets of
A L L I A N Z
G I ]
to go with the experience already
on desk.
“Most recently I hired a guy in
his 20s with a technology back-
ground,” says Boess. “We have a lot
of experienced traders so we are
trying to balance it out by strength-
ening the technology skillset.”
Technology is important to know
what is possible from a best price
or best execution perspective.
Boess says the company has teams
looking at new technologies like
blockchain, big data and artificial
intelligence (AI). However he is
not fixed to the idea that technol-
ogy will solve the market’s future
problems.
“AI is a big term,” he says. “It is
different in portfolio management
where new AI techniques are help-
ing with investment decisions, po-
tentially opening up new, untapped
ways of making sense of data and
information. But this is less so
in trading. We are not in nuclear
physics and markets are ultimately
driven by humans.”
He is adamant that asset man-
agers will never replace traders
“There are real risks that you will see illiquidity
and volatile trading because of technical
glitches.”
liquidity.
“For traders the day-to-day
business is to make sure you know
where liquidity can be found,” says
Boess.
Getting a handle on liquidity in
different markets requires a global
approach. The business runs on
one global trading platform—
Bloomberg—which is vital to
enable orders to move from one
desk to another. AGI has also been
hiring more technology specialists
with machines—though traders
will increasingly have to work with
machines. It is the strong experi-
ence of the relationship of different
assets and markets he learnt in his
job as derivatives head—“deriv-
atives people have no home,” he
says—which is helping him in the
current role. While the demands
of regulation remain high, Boess
seems in a good position to guide
AGI through the choppy waters
ahead.
Issue 53
TheTradeNews.com
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