The TRADE 58 | Page 32

[ F I X E D I N C O M E L E A D E R S S U M M I T 2 0 1 8 ] SENIOR BUY-SIDERS MAKE CASE AGAINST EMS IN FIXED INCOME CARL JAMES AND YANN COUELLAN PERSUADED SOME DELEGATES THAT THERE IS NO NEED FOR AN EMS IN FIXED INCOME TRADING. T wo heads of desks at major asset management firms have argued against the use of an exe- cution management system (EMS) in fixed income markets, claiming to have instead built similar and efficient tools internally. Carl James, global head of fixed income trading at Pictet Asset Management, and Yann Couel- lan, head of FICC trading at BNP Paribas Asset Management, made the case as part of an Oxford-style debate. Delegates were asked if the fragmented nature of fixed income, requiring continued high-touch trading, means an EMS is not a key prerequisite for the buy-side, with 42% of the audience in agreement. By the end of the debate, almost half of the audience agreed with James and Couellan. “I am against the EMS in fixed income because it adds a layer to the process which is completely unnecessary,” James said. “Within our own order management system (OMS), we have around 700 days of trading data that we can review ourselves for no cost and without the help of an EMS.” Those arguing the case for the EMS in fixed income - Joeri Wouters, senior fixed income dealer at KBC Asset Management, Ivan Mihov, head of buy-side fixed income EMS at Axe Trading, and 32 // TheTrade // Winter 2018 Andy Mahoney, head of EMEA sales at FlexTrade - instead stated the tool is imperative for evidenc- ing best execution processes, generating alpha and aggregating data, while building a similar tool in-house is a near impossible and costly task. “Alpha doesn’t just happen at the point of execution, it’s about pre-trade analysis too, and for me, the EMS is not the place you want to have that discussion,” James an- swered. “We have built a pre-trade tool which is embedded into our OMS, with our own rules that gives us our own unique data. That is different to everyone else who does use the EMS, which gives us that edge and generates alpha. EMS is old technology and the buy-side should be looking forward.” KBC Asset Management’s Wouters, countered that conversa- tions in the past have often focused on the problems around handling data and creating a comprehensive best execution process, but the EMS is, in some cases, the solution to those problems. “The development of a compre- hensive EMS in fixed income is an almost impossible task,” Wouters added. “The EMS adds value to my high-touch trading, low-touch trad- ing and at the same time, it frees up my time to focus on the data.” BNP Paribas Asset Management’s Couellan detailed that his desk has built various tools which leave him with no need to implement an EMS, while James added that the EMS is a tool for equities and not for fixed income, which need to be handled as two very different asst classes. “Today’s EMS is just adding to market impact and at some point it is affecting my quality of execu- tion,” Couellan argued. “We haven’t built an EMS ourselves, but we have built a tool to monitor market value with post-trade analytics, etc. As a buy-sider, if there is choice, I would say we need a tool that differentiates us from the compe- tition. The tool we have built was very cheap to produce and suits my trading needs which are very specific.” “Alpha doesn’t just happen at the point of execution, it’s about pre-trade analysis too, and for me, the EMS is not the place you want to have that discussion.” CARL JAMES, PICTET ASSET MANAGEMENT