[ I N D E P T H | B E S T I N V E R ]
“ Not all the firms were well prepared and organised at first . Once the volatility kicked in , natural blocks became much harder to find and there was a preference for counterparties to work orders rather than cross size at a price that could look bad at the end of the day .”
The strategy also changes considerably according to the market the traders are dealing with . Iglesias believes studying and adapting to ever-evolving market structure globally is one of the greatest challenges for buy-side traders sourcing liquidity today . In one example , he reveals that data following an in-depth TCA analysis in 2019 flagged high costs in US executions , which accounted to
" There is a lot of alpha in local expertise - they may find that unique liquidity that will save the day for us as traders ."
GUSTAVO IGLESIAS , EQUITY TRADER , BESTINVER
roughly one-fifth of the trading desk ’ s total volume that year .
After further investigation , analysis of trading strategy and discussions with experts , the traders adjusted their strategy based on the variations in US and European market structure . The new strategy was to seek more blocks , increase use of electronic trading and strengthen relationships with US counterparts .
“ The US market may appear liquid and quite straight-forward at first , but it ’ s a bigger challenge than one may think knowing that the market structure has little to do with European market structure ,” Iglesias says .
“ Through TCA we found that our US execution costs were above average and experienced some signalling risk due to the fragmented nature of the market . We moved to maximising block liquidity , adapted our algos to access the right set of venues and acted bold at our arrival , transforming the US into one of our top performers . Strengthening our US relationships , and opened new ones , has definitely made a difference too .
“ We constantly monitor our trades to find those patterns that steepen our learning curve . We strive to understand the reasons behind our under- or over-performance in execution . The largest challenge in analysing big data is getting meaningful insights that show a significant explanatory power -
52 // TheTRADE // Summer 2021