[ I N T E R V I E W
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J A M E S
B A U G H ]
receive, you have to look at a quant
fund very differently versus an
institutional client, in terms of the
types of liquidity they want to in-
teract with and how we make sure
that we are providing access to that
type of liquidity. This will season
and develop over time, and that's
where coming together with your
underlying clients and understand-
ing their needs is very important.
This isn't a one-size-fits-all oppor-
tunity and will be a slower burn,
in terms of how banks and SIs, like
Citi, will look to differentiate over
time.
How will the role of the broker
develop in future as the market
structure continues to evolve?
JB: Given the increasing complex-
ity, the role of the broker will be-
come more relevant and important
in helping the buyside to source
liquidity. We are very proactive
in terms of how we are looking to
develop our business and allo-
cate resources to take advantage
of structural changes as a way to
differentiate ourselves in a market
that has become fairly commodi-
tised.
What needs to play out is that
consolidation of liquidity; it is
something that is well-discussed,
but actually we haven't neces-
sarily seen some of those brokers
as negatively impacted as some
might have you believe. But we are
definitely seeing a consolidation
of flow driven by the underlying
client being able to declutter and
manage what is a very different set
of regulatory obligations.
What have been the positive chang-
es brought about by regulatory
change?
JB: One of the key objectives of reg-
ulatory change was to encourage
greater transparency and there has
been a benefit from the new re-
60 // TheTrade // Summer 2019
porting regime and that has been
useful in driving some conver-
sations in other products, like
exchange traded funds (ETFs).
The other key positive develop-
ment here is the buy-side and sell-
side coming together, the buy-side
becoming much more focused on
broker performance and meeting
their best execution obligations.
That is encouraging the sell-side to
sharpen their focus and make sure
they are providing best outcomes,
access to unique liquidity and that
they are able to work together on
optimising trading performance.
That can only be to the benefit of
the end investor.
On the buy-side the unbundling
of research and execution pay-
ments has been positive in terms
of allowing the heads of dealing on
the buy-side desk to concentrate
more on best execution, rather
than having to cut cheques.
There are, however, still many
challenges left. The concern is
that the market has become more
fragmented and complex, and
invariably, with that costs increase,
which is always going to be an
issue when trying to provide an
efficient service to the end investor.
I sometimes think that gets over-
looked by the regulator.
How do you view any further reg-
ulatory change or amendments to
MiFID II playing out?
JB: We don’t anticipate a massive