[ B U Y - S I D E C O V E R | C H R I S T O P H H O C K ]
COVID-19 pandemic and the subsequent market volatility during the last two years has re-confirmed the essential role of the trader on the desk . This importance means that despite a large portion of his team now being dedicated to electronic trading , he always ensures that the desk has enough headcount to ensure continuity of service should automisation become redundant .
“ Intraday volatility is one key denominator for the level of automisation in the market . In volatile markets there is much more involvement from high touch traders . Take fixed income for instance , in March and April last year , we completely switched off our automisation engine because we realised we couldn ’ t get results as good as when trading these transactions in the traditional high touch and non-automised way ,” he says . “ It is not about saving head count ; it ' s about achieving best-in-class execution in the highly liquid stuff that ' s partly in an automised way . You have to ensure that you have enough resources in place to deliver your best-inclass approach in these times of volatility . Automisation is not about making less , but smart use of human traders .”
Hock firmly believes that best-in-class execution does not stop with the trader and places equal importance on efficient back-office and middle-office functions . For this reason , Union ’ s new structure includes a third non-trading front-office unit . This back-middle-front office team deals with the nitty gritty regulation , settlement and compliance cogs that keep the wheels of the machine turning . Named the trading and regulatory services team , it ’ s responsible for everything from collating and publishing data for best execution RTS 28 reporting – annual top five venue broker reporting - to escalating settlement issues . However , it ’ s unique from Union ’ s competitors as despite its non-trading function it enjoys front-office status , which Hock says is key to speedily escalating settlement queries .
“ When it comes to escalation , it makes such a difference whether a trading team escalates something with the broker or whether it ' s a backoffice team . We realise it so often that when queries come from a back-office team , quite often they are ignored . Typically , the back-office team will just
“ In March and April last year , we completely switched off our automisation engine because we realised we couldn ’ t get results as good as when trading these transactions in the traditional high touch and non-automised way .”
have contact with the broker ’ s back-office team ,” adds Hock .
“ When executing highly sensitive transactions or transactions in difficult to trade markets like Brazil or in Korea where if you don ' t settle in time , there is a punishing penalty regime in place , it ' s also important that as a last step in the waterfall a senior guy or even myself escalate these types of transactions with senior management of the broker firms . When you do not have a proper settlement and clearing team , you run the risk of burning through hundreds of thousands of dollars in a worst case scenario when you have transactions which failed to settle .”
While this team sits next to the trading teams in the front-office layer and this is useful for the weight it holds in communication , it does not trade , and this Hock says , means its priorities remain separate , which prevents conflicts of interest .
“ A trader typically is not highly motivated to sort out any settlement queries because it ' s not really part of her or his job description . That ’ s also
38 // TheTRADE // Winter 2021