HSBC Global Asset Management has named Aaron Waters head of European equity trading, following three and a half years as head of equity trading at the bank, The TRADE can reveal.

Prior to this promotion, he managed the London-based equity dealing desk as head of equity trading, and before that was a senior electronic trader. 

Waters has previously held senior positions at AllianceBernstein (AB), most recently as an equity trader based in Hong Kong. Before joining AB, he worked as a performance analyst at Henderson Global Investors.

Earlier this month, The TRADE revealed that HSBC’s head of artificial intelligence (AI) for markets and securities services, Ash Booth, had departed for rival bank, JP Morgan. With his departure came the appointment Edward J Achtner as lead of HSBC’s newly consolidated Office of Applied Artificial Intelligence (OAAI).

HSBC launched its digital service offering – AI Markets – in May, with the aim of enhancing the way institutional investors connect to the markets globally.

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Panellists gave insights into how disrupting technology, new regulation as well as data and analytics will help shape the changing face of the trading desk.

Speaking on things that need to be focused on to improve the trading desk in the near future, Archit Soni, portfolio manager at Dimensional Fund Advisors, highlighted the need to follow the lines that regulation provides.

“I think for us it’s actually navigating regulation because as the world is evolving very quickly, information is also passing through quickly, with people’s ability to pick up knowledge from other countries speeding up quite a bit. I think Asia’s in a really good spot because they’ve seen some regulation in fixed income markets in Europe in the last five years and they’ve seen how they navigated through Covid and market distress events,” said Soni.

“Because of that, they can actually take some of the good and bad from both Europe as well as what’s happening in the US. The regulatory framework over the next three to five years is something we’re really going to focus on. That’s going to be what really shapes the way our trading desks operate.”

Martin Viseux, head of fixed income trading Asia, HSBC Global Asset Management (Hong Kong), discussed the new focus to create tools that will enable traders to make the right decisions quickly.

“Our job has changed drastically in the last few years, as we discover new markets and new products. As a result, taking the right combination of decision becomes very hard because in the past, the traditional way of trading involved sending requests for quotes electronically or voice trades. Today we have so many different decision options and the pre-trade is somewhere where we invest a lot. Dynamic real data is important to obtain in an organised manner to allow us to make the right decision quickly. In addition, we follow our internal best execution policy, making sure that the combination is justified and at the right price point,” said Viseux.

Speaking on the role data will have in transforming the trading desk, Laurent Ischi, director, AiEX and workflow solutions (APAC) at Tradeweb, noted that “In the past we saw a lot of people always talking about gathering the data. But what I think is very interesting here is, there’s actual use cases that are being applied and being shared, and I think that makes it more interesting at the end of the day.”

“Getting the data is one thing, but then actually doing something with it is a complex step and I think people are definitely making that step now and then applying it. Finding the right protocol, whether to trade on the list, whether to automate or to trade manually – that’s all the stuff that now is being fed by the data that has been gathered and actually can be used and recycled for these purposes,” added Ischi.

Moderator of the panel, Brett Elvish, director at Financial Viewpoint, shifted the focus to where panellists expect to see trading desk evolve by 2030. Archit Soni, portfolio manager at Dimensional Fund Advisors, noted that post-2008, the role market makers play has changed fundamentally.

“Because of that we’ve seen alternative market makers or liquidity providers come in. The actual progression from that was, well at the end of the day, where do the bonds end up going? They end up going and sitting with the buy-side. If you think about it, naturally the buy-side are the real risk takers. I think, a world where you’ve got buy-side to buy-side, buy-side to sell-side, essentially all markets that’s trading in a range of different protocols, we understand that the bond market isn’t exactly like some of the other asset classes, so we can’t expect to have just an RFQ or a dark pool or an auction system, but multitude of different protocols,” said Soni.

“Instead, a place where using global connectivity will allow us to have a much more rich market in the sense that we can actually trade with different market participants. In the bond market, I think going forward, the more transparency that we can get and the more electronification we can get, on average, will lead to lower transaction costs.”

Tradeweb’s Laurent Ischi, director, AiEX and workflow solutions APAC,  highlighted two things that he expects to see changing in the coming years. “Firstly, we’re going to see a continued increase of electronic training protocols tailored to trade particular markets. If we’re looking at the automation in particular as well, what we’re going to see is a lot more change of how trading desks operate a lot more towards exception handling – very much what we’ve seen on equity trading desks over the last 20 years, essentially,” said Ischi.

“I also expect trading desks and trading styles across multiple asset classes to converge, and people are going to have the ability to actually benefit from different ideas that are present in different asset classes.”

HSBC Global Asset Management’s Viseux, highlighted that with new market participants in the market and new capabilities and products that they are using, transaction costs are likely to decrease.

“I definitely think transaction costs will go down and the way we trade as well. We’ve seen a big change in market structure with high volatility where the traditional banks have backed off and do not provide liquidity as intended. Fortunately, I think that growing the number of market participants will help us find greater liquidity. We are doing a lot of work to connect new market participants into our trading platform so that we can access liquidity at a cheaper price overall,” said Viseux.

Elsewhere, Ravi Sawhney, head of trading automation and analytics at Bloomberg, said he believes “an environment where things like automation, data science and AI are sort of like woven into the fabric of the trading desk. I also think you’ll see things that we might not expect as well, such as virtual reality as a different way for traders to analyse their trading data. We’re not really sure where it’s going to go, but it has definitely open up a lot of minds and planted seeds in people’s heads.”

Concluding the panel, as well as predictions on how the trading space is likely to evolve by 2030, Martin David, head of trading APAC at UBS Asset Management, noted: “I think eventually it’s very possible that the whole trading procedure will be a bit more like a kind of big black box on both sides and for all counterparties and then the job of the trader is to oversee the entire framework. Instead of analysing trade by trade, it will likely be more about analysing the flow and the result and seeing the relationships they have.”

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Panellists gave insights into how trading desks can leverage innovations in electronic trading and big data as key differentiators to drive growth and achieve agility.

Kem Husain, managing director APAC at AxeTrading, broke down future proofing a trading desk into three key areas. “Number one is really investing in your trading technology – that’s of utmost importance to keep up to date,” he said. “When you’re looking for efficiencies, whether that’s data, workflow, automation or execution – it’s all about efficiency and helping to drive that.”

“The second main point is really around skills. Fixed income traders are unique, highly skilled individuals. They need to be able to have that type of skill set to know which tool to use in the appropriate manner on a particular channel. It’s really about utilising that tool at the right time – that’s really key. The last point is around having an interoperable execution system that is easily accessible to traders,” concluded Husain.

 Meanwhile, Martin Viseux, head of fixed income trading Asia, HSBC Global Asset Management (Hong Kong), noted that electronification is an initiative that the asset manager takes seriously. “I think electronification is a word that we hear a lot in fixed income trading, where we need to signal workflows and we need to increase electronic trading. This is something that we’re trying to achieve by using the best trading platforms available for every asset classes. Automation is also a big topic for us because as we said, with low liquidity and lack of market transparency, we need to gain time as a trading desk and automation is the key,” said Visuex.

Automation has been a key topic over the last several years, with many acknowledging the benefits it can present. “Automation is a way to execute faster, but I’m not saying that we will give up quality for quantity. I think that there are few asset classes where we will be able to have time as the biggest component of quality and for such liquid asset classes,” added Visuex.

“When you’re looking at future proofing of the trading desk, workflow is a key conversation we have with sell- and buy-side,” said Larry Rorrison, head of fixed income APAC at ICE.

“Automation is key, these workflows are continuously evolving. Efficiency is extremely important. The immediacy of information continues to shorten, as well as information that is actionable and how that can be used. The two key areas that we focus on with clients at the moment is around workflow efficiencies as well as understanding the information that they’re consuming and how they can make use that of information in different market conditions to make better decisions,” added Rorrison.

 Another major talking point during the panel was the importance of the people who work on the actual trading desk. “When we talk about future proofing the sell-side trading desk, the first thing that comes to mind is our people,” said Alexandre Manakyan, co-head international eMacro trading at Credit Suisse.

“If you’ve been around a trading desk for a while, you will have noticed that what traders do today is a little different than what they used to do in the past. I think the thing that stands out is that traders are asked to do more. They have to do more business and more products, and so the idea here is that we’re breaking down silos of specialisation in trading,” said Manakyan.

 “Today we’re seeing desks merge and we’re seeing traders become capable across multiple seats. The next generation that’s going to replace us won’t only be capable, but they’ll be proficient at everything. That new generation of traders that is growing up in that environment of a merged desk, multi product and multi asset coverage, will be much more versatile than we are today,” added Manakyan.

 Other areas noted as being beneficial for the future proofing of trading desks included the investments in new technologies and in particular, artificial intelligence. One panelist stated that the democratisation of deep learning techniques and how the sell-side uses that, will be essential in creating differentiated offerings as well as adding value to customers.

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Daniel Leon joins HSBC as global head of trading, treasury management, and global solutions. He has more than 25 years’ industry experience most recently as head of global trading, security financing, and derivatives at AXA IM.

Prior to this role, Leon held other various roles at AXA including head of client solutions development and CIO for investment solutions.

In his new role, Leon will be responsible for strategic direction and oversight of HSBC Global Asset Management’s trading and treasury management activities, as well as global investment solutions.

Leon’s trading-focused responsibilities include managing global counterparty relationships and improving investment performance and trading platforms. He will also be responsible for establishing a dedicated treasury management function to support client portfolios.

“We have a global platform for Investments and Daniel’s appointment will allow us to manage our trading and treasury management activities globally, ensuring clients everywhere get the benefits of best practice and efficiencies. Coupled with that, Daniel’s skills and experience in investment solutions will allow us to solve a wide range of problems for our clients,” said the global chief investment officer Joanna Munro.

Leon, who left AXA IM last month, will be based in London and report to Joanna Munro, global chief investment officer at HSBC Global Asset Management.

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Adam Ottewill, equities & derivatives trader, HSBC Asset Management

Adam joined HSBC Asset Management in late 2015 as an equities and derivatives trader, also covering global developed and emerging markets, executing program and single stock trades via both low and high touch methods. Prior to this, he spent six years with Coutts, starting out as a funds dealer before taking on a role as an ISA equity dealer, and then as a dealer on the Coutts securities dealing desk, responsible for trade execution for multiple asset types across global markets. Adam holds certification for derivatives, securities and investment management from the Chartered Institute of Securities & Investment. His peers praised Adam’s knowledge of the EMEA market structure post-MiFID II, teamwork and “excellent talent for innovation”.

Colleen Sweeney, equity trader, FMR Investment Management

Colleen has been with FMR Investment Management, part of Fidelity Investments, since joining the firm in August 2011 as a business associate, before moving to an equity trading role in March 2013. She holds a BA in Government & Legal Studies, Environment Studies from Bowdoin College in Brunswick, Maine. Colleen has been praised by her industry peers as “a great ambassador for Fidelity” and for consistently looking for “ways to add value to the investment process and the most cost-efficient trading solutions”.

Markus Bauer, former equity trader, Lazard Asset Management

Markus graduated with a Business & Finance degree from Cass Business School in 2013, securing an internship with Goldman Sachs which subsequently led to a full-time employment offer as an analyst. Markus then joined the buy-side with Janus Henderson, also in an analyst role, across the firm’s EMEA and APAC operations, before taking on a role as an equity trader with Lazard Asset Management in September 2016, staying with the firm for three years. is currently a CFA Charterholder and is described by his peers as “diligent, humble and possesses an excellent understanding of the ever-changing equity market” and “one of the most talented buy-side traders”.

Alex Jenkins, former head of European equity trading, Highbridge Capital Management

Alex graduated from King’s College London with a BSc in Business Management before joining Knight Capital in 2007 as a European sales trader, covering institutions and hedge funds in both the UK and US markets. She then moved to Cantor Fitzgerald in a similar role before joining Highbridge Capital Management as its head of European equity trading, responsible for implementing investment decisions across public markets primarily in Europe, building out the firm’s desk, providing specialty trading services, carrying out periodic broker reviews and managing relationships with portfolio managers. Alex has been commended as “bright star” for the industry who “will go far in the future”.

Sam Barclay, macro execution trader, Moore Capital Management

Sam started his career in finance with BlackRock in mid-2008 as a portfolio analyst, overseeing the analytical coverage for the firm’s European hedge funds, European specialist and Global equity portfolios. After obtaining a 1st class BSc from The London School of Economics and Politic Science in Economics, Sam joined Credit Suisse as an electronic sales trader in London, before moving to Hong Kong with the bank in late 2015. He then moved back to the buy-side with Nezu Capital Management in mid-2017, executing equities, swaps, options and convertible bond trades across APAC markets. Sam joined Moore Capital Management in March this year as a macro execution trader across the fixed income, equities, foreign exchange and commodities markets, and has been praised by his peers for his quality of execution.

This year’s Rising Stars of Trading and Execution will be awarded during the cocktail reception at this year’s Leaders in Trading awards ceremony.

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Moreau will join HSBC GAM from Deutsche Bank’s asset management business, DWS Group, where he has held the role of chief executive since mid-2016. Prior to that, Moreau held a number of senior positions with AXA, including chairman and chief executive of AXA France, and Group chief executive of AXA UK and Ireland.

Based in London, Moreau will take on the role in September, replacing the current CEO, Sri Chandrasekharan, who is to move into a separate senior role at HSBC GAM, to be confirmed at a later date.

“We’re delighted to welcome Nicolas to HSBC. Asset management is a key area of focus for us and one we are committed to growing in line with increased client demand for products and solutions that help meet their long-term financial ambitions,” said Charlie Nunn, CEO of Retail Banking and Wealth Management at HSBC.

“HSBC Global Asset Management passed the $500 billion threshold for its assets under management this year, and Nicolas is the ideal candidate to lead the business going forward.”

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Jean-Charles Bertrand and Joe Little will share responsibilities to develop the asset manager’s multi-asset investment capabilities and tailoring strategies to support its global client base in a consistent approach.

As co-chief investment officers, Little will focus mainly on the investment process, including economic and asset allocation research and investment strategy, while Bertrand will focus mainly on risk budgeting, portfolio construction and fulfilment.

 “We have built a strong multi-asset platform with close to 60 investment professionals in 13 countries, supported by strong research and a range of proprietary decision support tools”, commented Chris Cheetham, global CIO of HSBC GAM. “The appointment of Joe and Jean-Charles will help us further enhance our offering and ensure that we remain at the forefront of this important area.”

Both Bertrand and Little will also retain their current roles with HSBC GAM, head of multi-asset France, and head of investment strategy, respectively.

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The implementation of the new regulatory regime on 3 January was not expected to cause any immediate tidal waves, particularly as the introduction of some aspects has been staggered to allow participants to fully adjust to the new trading environment, but it cannot be said that the industry has not responded to the task over the last six months.

Indeed, a variety of new terms have entered the trading lexicon and look set to stick around for some time to come as a direct result of MiFID II, meaning firms on all sides of the market spectrum deal with what has become the ‘new normal’ for trading.

“We are beginning to get to a point where market participants are looking at new innovations and ways of trading,” says Brian Schwieger, global head of equities at London Stock Exchange. “In some ways, the fun is coming back into the business because up until now, resources across the board have been so focused on preparing for MiFID II.”

While volumes have so far largely favoured periodic auctions and systematic internalisers, in place of the lit exchanges favoured by the European Securities Market Authority (ESMA), equities market participants are now adjusting to the new environment and there has yet to be a significant dearth in liquidity.

However, despite a relatively successful implementation of the new regulations in January – albeit with that one-year postponement required by the industry to fully prepare – and the necessary adjustment by trading behaviours to the new framework, it cannot be said that the regulation has been a complete success so far considering it has only been in force for six months.

“If a key objective was to move liquidity back into lit exchanges, at this early stage, it is questionable that that this goal has been achieved with much trading simply shifting to systematic internalisers  and periodic auctions,” says Charlotte Decuyper, European market structure analyst at Liquidnet.

Big changes

The introduction of SIs in place of broker-crossing networks (BCNs) was one of the most significant points of contention within the regime, particularly around how these trades are being reported and ensuring that SIs fall under the tick size regime.

“With the bulk of SI trading going through SIs at banks and brokers, there has been some differing views about how transactions should be reported,” says Mark Hemsley, president of Cboe Europe. “Some are reporting their operational trades, and the question is, are they flagging them as SI or over the counter (OTC) transactions?”

“The key point is understanding how much volume is price forming as I believe the numbers reported on SI trading have in fact been vastly exaggerated in terms of what is truly addressable liquidity. The SIs and regulators are working out between them how to address those nuances and resolve some of those reporting issues, which I think will happen pretty soon.”

The issue of enforcing the tick size regime on SIs was one of the major early controversies facing ESMA following the implementation of MiFID II, and after an industry consultation in February that drew conflicting opinions from participants, the regulator announced it would go ahead with its plan, stating in late March: “ESMA also does not fully subscribe to the arguments brought forward by some stakeholders that, in consequence of the proposed amendment of RTS 1, trading venues would be subject to a lighter regime than SIs.”

Cboe’s Hemsley says that it is likely that there will an update on sub tick pricing that SIs can use. “SIs will likely have to follow the same tick size as exchanges which is good for the market and levels the playing field. However, it is important that half ticks are allows, especially for mid-point pair transactions where there are an odd number of ticks in the spread,” he adds.

While there were changes made around best execution and trade reporting, both elements that continue to throw curveballs at compliance teams across the industry, the unbundling of research payments and execution fees has the been the biggest shift to deal with, according to HSBC Global Asset Management (HSBC GAM) managing director, global head market structure & execution strategy, Ian Cohen.

“HSBC Global Asset Management has operated itemised research budgets for many years, and thus the process and mechanics for operating detailed budgets was not new to us. However, the changers to how research is provided, consumed and paid for were and continue to be significant,” he says.

“Possibly second to this in terms of significant change has been the industrialisation of post trade monitoring of best execution, which in the case of HSBC Global Asset Management means daily monitoring of every single trade.”

Blinkers off

While so much of the industry’s attention has been fixated on MiFID II for the last few years there has clearly been a tremendous amount of effort put into preparations and ongoing compliance, but market participants must be wary not to put all of their regulatory eggs into the MiFID II basket.

“MiFID II did not exist in isolation, and required any changes be made in parallel with changes for other regulatory and commercial needs,” says HSBC GAM’s Cohen. “The fact that the industry as a whole was able to introduce MiFID II without any major issues is to be commended.”

As such, it’s worth taking a step back to take a wider view of the numerous forces at work in the markets according to LSE’s Schwieger: “I would encourage the market, being six months into the new regulatory regime, to start taking off their ‘MiFID II blinkers’,” he says.

“It will of course continue to have a significant impact, but MiFID II is not the only influence on the market at the moment; there is the Capital Requirements Regulation (CRR), Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR) and the relaxing of the Volker rules to also consider.”

But taking that wider view doesn’t just mean focusing on Europe or Euro-centric regulation, particularly as the effects of MiFID II become felt across the wide markets.

“One surprising outcome following the introduction of MiFID II is the speed at which key parts of the reform are going global. Already in areas such as research unbundling and best execution, the requirements of the regulation are becoming global best practice,” says Liquidnet’s Decuyper.

“With more and more firms doing business in multiple jurisdictions, this globalisation effect is likely to gather pace, as enhanced transparency becomes a competitive advantage for asset managers to offer to all clients, irrespective of their location.”

Looking forward

While there has been plenty of introspection as to how the new regime has bedded in so far, it would be unwise not to consider how the regulation will evolve going forward. There are already signs from ESMA that alterations may be made in the near future, with chair Steven Maijoor recently highlighting that SIs and periodic auctions will be given a close inspection.

As Cohen puts it, “MiFID II did not end on 3 January 2018”, and there is still work ahead, even for those firms that believed themselves ready for the implementation date at the start of the year.

“Market infrastructure models have evolved and will continue to evolve and recalibrate as further changes are introduced,” he says. “Market regulators will also quite correctly refine and improve the regulatory framework.”

However, not everyone is expecting significant changes just yet. Aite Group buy-side analyst, Paul Sinthunont, says that ESMA and local national competent authorities (NCAs) are still in the midst of investigating MiFID II compliance and the regulation’s impact on the market.

“It will take quite some time to gather the necessary data, analyse it, and go through the process to suggest changes to the directive. For example, the FCA has suggested its focus is on increased monitoring and assessment of compliance for the next two years.”

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HSBC Global Asset Management has appointed a head of passive fixed income within its investment team, as the bank’s investment arm seeks to strengthen its passive investments business.

Sebastien Faucher was formerly the head of index fixed income responsible for ongoing fund management activities across all index fund strategies, including implementation and client onboarding, at Legal & General Investment Management.

Prior to his time at Legal & General, Faucher was an investment manager for the global fixed income business of State Street Global Advisors.

HSBC said Faucher has taken up  the newly-created role as part of its strategy to provide clients with the most relevant range of products.

Based in London, Faucher will report to global chief investment officer, Xavier Baraton who said the new hire forms part of HSBC’s plans to strengthen its passive investments business.

“The initiative, in which Sebastien will play a key role, is in response to identified client demand. It reflects our commitment to satisfy it with the most relevant and effective range of products and solutions,” Baraton said.

HSBC added it will unveil a number of passive fixed income products as part of its new Undertakings for the Collective Investment of Transferable Securities (UCITS) product range later this year. 

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Legal & General Investment Management (LGIM) has poached a senior trader from HSBC Global Asset Management to join its expanding team in Asia.

Danny Kwok has been appointed head of APAC equity trading, reporting to Ed Wicks who is the global head of equity trading.

He departed HSBC earlier this year after six years with the asset manager and was previously an equity derivatives trader at Macquarie group.

LGIM is currently expanding its business in Asia-Pacific in a bid to facilitate local market coverage for the region’s trading and index fund management.

The move will see responsibility for the firm’s equity trading and index fund management transferred to its Hong Kong based team.

LGIM said its presence in Asian markets has grown in recent years, as it looks to become a more global provider of investment services.

“We have developed our trading and fund management capability in Hong Kong, as well as the supporting infrastructure, in order to provide the best solutions for our clients over the long-term,” said Alan Flynn, head of LGIM Asia.

The transfer of trading of Asian equity orders to LGIM Asia was completed in July, with plans to transfer multiple equity index funds to Hong Kong in the fourth quarter this year.

Chad Rakvin, head of global index funds, explained LGIM has won various clients with index, fixed income and multi-asset mandates in Asia since the business established in 2012.

“We believe this change in fund management arrangements is the best solution for the continued, long-term management of the funds in question and will meet the needs of the Asian client segments we have attracted so far,” he added.

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