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managers has to be extremely smooth because we have to make these decisions quickly . It is so important to communicate efficiently – not sitting next to each other was very difficult .”
When it came to single stock orders however , the traders shifted towards more aggressive DMA and liquidity seeking strategies , a trend which they agree other market participants had also adopted to ensure the trade was done in a quicker time frame . Interaction with periodic auctions and dark liquidity seeking strategies were also more widely used .
“ Looking at the volume curve , we noticed the way liquidity was forming during the day had shifted compared to other market events ,” Marie-Françoise explains . “ Although the close was still a huge part of the day , we noticed it was slightly lower than it used to be . Traders were avoiding the open too , and executing in a more closely fitted time frame through venues like periodic auctions more than usual .
“ Liquidity on-screen was also larger than usual , in some cases two or three times larger – but with a trade-off . Do you want to sacrifice however many basis points to get the trade done , or do you want to try your chance somewhere else ? I ’ d say the fragmentation we had before has tilted towards dark and auction venues . We certainly used those venues more . When analysing the TCA regarding our algo strategies , it showed we were very much involved in the periodic auction more so than usual . It was very efficient to be fair .”
Evolving partnerships Champenois and Marie-Françoise place extreme value on their partnerships with vendors and system providers , similar to the value they place on their relationships with brokers . They are in constant communication with their EMS providers , seeking custom development and training to get the very best out of the platforms the trading desk is using . In return , the trading desk plays a role in testing new systems or upgraded versions for their vendors , and providing valuable knowledge of trading that the firms may not have .
Relationships , whether that be with vendors or brokers , have evolved in recent years for the trading desk at Unigestion . Upon becoming MiFID II compliant , and as the fallout from the separation of payments for research and trading under unbundling played out , Champenois and Marie-Françoise noted a shift in some of the broker partners .
“ When MiFID II introduced unbundling , we saw the level of service with some of our brokers decrease quite significantly ,” Marie-Françoise explains . “ We didn ’ t want that and opened up discussions with some of these brokers . We reached a point where our broker list was reduced , but I would say our relationships with our brokers now are stronger than ever . Several years ago , we were just a number to some of our brokers , but that has shifted and we have become solid partners . We offer them good commitment because we give them a good amount of business , and in return we expect a good level of service .”
Like asset managers in Europe , Champenois and Marie-Françoise are keeping a close eye on the ongoing review of MiFID II . They agree , as many other market participants would , that a consolidated tape for trades and quotes should be prioritised to improve transparency , strengthen best execution , and boost competitiveness .
Both note the regulator ’ s lack of commitment in laying out plans for the tape , and point to the recent consultation on the MiFID II review which also seemingly lacked commitment in terms of which direction the regime will be heading in the future .
“ We would have liked to see things move faster ,” Champenois says . “ These topics around the consolidated tape and MiFID II have been circulating since MiFID was introduced and they have still not been applied . We may see a new version of MiFID II soon , but as of today , it is unfortunate that it has taken so much time to have something concrete in place .”
On the potential changes to dark trading and the double volume caps ( DVCs ), Champenois adds the adjustments put forward by the European Securities and Markets Authority recently could be problematic from a technological point of view . Brokers and the buy-side have developed tools to monitor and take into consideration the data to trade .
Imposing changes to systems to accommodate adaptations to the DVCs after three years would prove burdensome for many market participants , he says . Dark venues would also likely see an uptick in market share , at the expense of lit markets . For Marie-Françoise , the increased fragmentation and complexity born out of the MiFID II regime is further highlighted by the simplicity of trading Swiss markets nowadays .
“ In terms of MiFID II , the addressable liquidity is very difficult to evaluate and the more venues you have the more difficult it becomes . If you don ’ t know the right venue to go to then you simply don ’ t have the liquidity ,” Marie-Françoise says . “ Even for the brokers , constantly having to adjust their algorithms and strategies , it ’ s very complicated . Systematic
30 // TheTRADE // Fall 2020