Trading Matters Guest Speaker Panel Discussion
Best Practices for Managing a Trading Desk Virtually, A European Buy-Side Perspective
On 24 June, Virtu U hosted a European buy-side panel discussion and pre-call participant survey on the implications of managing a trading desk during the COVID-19 pandemic. Learn how your peers are adapting their communication, execution and other trade-related activities in the new physically dispersed work environment.
BCP and the potential of WFH as a permanent solution
- Employees embraced WFH and now want to retain that work-life balance flexibility
- Senior management now willing to consider hybrid work dispersion model (subject to employee role).
- Portfolio Managers and Traders desks gain a lot of value from face-to-face and centralized input, panelist expect a centralized in-person model to persist.
- Firms are now looking at potential cost savings related to no longer maintaining a BCP site— WFH now viewed the new disaster recovery model— and/or pursuing a smaller office footprint model with a percentage of staff in office, and a percentage who work remotely.
WFH re-entry plan
- Geographically, countries are at a different point in the easement-of-restrictions, with one already back to in-office/full staff, while others have triaged staff into a mix WFH and in-office.
- Some firms are implementing a return to office on a voluntary basis, depending on family circumstance, mass transit, child care and other personal considerations.
- One panelist shared that they are already engaged in face-to-face meetings while another panelist commented that an in-person meeting ban was in place.
One panelist shared that early on, there was a proliferation of internal communication tools which led to crossed wires, the solution was the establishment of global communication tool protocol:
- Trading desk style of communication has proliferated throughout the organization with analysts, Portfolio Managers, implementation teams
- Daily briefings between Portfolio Manager/Trader: Increased engagement and focus on market timing/trade analytics for liquidity issues and risk management
- Market spreads prevented traders from locking prices which led to Portfolio Manager frustrations, had to manage team expectations
- High-touch interaction was reduced, panelists expressed difficulty in connecting with broker firms who were also WFH and whose capital risk was under pressure
- Reliance on electronic/low touch, portfolio trading, and algos in equities, derivatives and FX increased but in other asset classes like credit, they had to rely on voice orders, as sell-side/liquidity providers on RFQ platforms had vanished
- Trading errors relatively low, a leading indicator that execution quality was maintained throughout the stressful periods
Trading tools across multi-asset classes
- Bank/broker balance sheets made it difficult to overnight positions, so virtual trading desk is not ideal for all asset classes
with the street hard to manage, low-touch trading has become the go-to trading
channel in a WFH environment in most asset classes
- Great stability and tool performance in equities, derivatives, fixed income and FX
- MiFID II/ECB went too far in applying stricter rules. Credit market before ECB actions = no buyers, after ECB actions = no sellers
- Market making could be eased by regulator in fixed income markets to help cope with market liquidity needs
- Less need for historical data, fresh market data was/is essential
- Data-driven and real-time results were instrumental to confirm decision making versus market-feeling during periods of market stress
Automation and the continued role of the human trader
- COVID pandemic pushed adoption rates of automation, but
it was not a one-size-fits all:
- Automation rules stopped in certain asset classes (fixed income) and the rules engine was re-calibrated
- Other illiquid names were handled manually
- Overall the panel sees automation as enhancing the value of human trader, enabling them to focus on specialized alpha drivers instead of smaller trades
- Some automated tools worked very well (EOD systems for next day of trading)
Outsourced dealing desk helps release pressure valve and other benefits
- Significant shift seen in last year or so, buy-side much more open to outsourced trading services, no longer viewed as a threat but a competitive advantage
- Not a one-size-fits all but does help supplement scalability and flexibility; saves on expenses and helps improve resiliency
- Increases the value of the in-house trading team, outsourcing can share knowledge/expertise in terms of knowledge/market access gaps
- Useful in special market cycles when it is stressing–when super busy or specific times.
- Pace of increased regulation/complexity may lead to a hybrid model of in-house and outsourcing
Meet the panelists
CEO Virtu Execution Services,
EMEA Virtu Financial
Rob Boardman is the CEO of Virtu Execution Services, EMEA. Mr. Boardman’s career began in 1994 at Goldman Sachs, where he filled various roles in deploying trading technology to institutional clients before joining ITG in 2006. He was a founding member of the European FIX Protocol organization in the late 1990s, when standards for electronic trading were formed; he was global head of its marketing working group in 2001.
Mr. Boardman earned undergraduate and postgraduate degrees in particle physics at the University of Oxford, where he participated in the Sudbury Neutrino Observatory scientific collaboration.
Global Head of Trading,
FIL Investment Management
Victoria Kelly is Global Head of Trading at Fidelity International and is based in London. Victoria joined Fidelity at the start of 2013 as part of the build-out of the Americas trading team and expanded her responsibilities to EMEA in 2015. She was subsequently promoted to Head of Equity Trading in 2017 and took on the global cross asset responsibility at the end of 2018.
Prior to joining Fidelity, Victoria worked at Nomura both in London and New York as an Equity Sales Trader. She started her career at Citigroup going through the undergraduate and graduate rotational programs where she worked on the Equity Sales Trading desks (US and International) as well as the High Yield Bond Sales desk.
Head Multi Asset Trading,
Christoph Hock is Head of Multi-Asset Trading at Union Investment. He joined Union in April 2014 and, with his team, is responsible for all trading activities associated with portfolio management of cash equities, fixed income, fund and ETF business, FX, listed and OTC derivatives, and securities lending.
Christoph graduated with a Diplom-Bankbetriebswirt and has more than 20 years of international investment banking, trading and management experience, having worked for companies on the sell- and buy-side, most recently as Head of Execution Sales at Barclays Bank and at Alpha Trading. Prior to this, Christoph was founder, partner and co-CEO/Head of Portfolio Management and Trading at Tungsten Capital Management, a hedge fund company from 2005-2010. He was Head of Proprietary Equity Derivatives Desk at J.P. Morgan in London and Frankfurt from 1998-2004. Christoph began his career at Dresdner Kleinwort Benson in Cash Equity Trading.
Head of Multi-Asset Trading and Overlay Management, Groupama AM
Eric Heleine is the Head of Trading at Groupama AM in Paris, France. He joined the company in 2009 as senior equity trader.
Before joining Groupama AM, Eric was the head of trading at Etoile Gestion.
Head of Equity & Futures Trading,
Nordea Asset Management
Rolf is based in Copenhagen, Denmark and oversees the equity & futures trading from the centralized dealing desks in Stockholm and Copenhagen. Rolf joined Nordea AM in 2017 and prior to that he held similar positions at Danske Capital and Nykredit AM.