Jupiter Asset Management, the London-based, LSE-listed investment manager with assets under management of around £47.4 billion, recently promoted former head of fixed income Mike Poole to run its trading desk. He sits down with The TRADE to discuss his career to date, his strong feelings about the future of trading – and the direction in which he’d like to steer the firm he has called home for the past 17.5 years.  

Learning the ropes 

Poole joined Jupiter back in March 2005 as a lowly dealing desk assistant. “We’d just taken on our OMS for the first time, so it wasn’t quite paper tickets, but we weren’t far off.”  

His job was to help the equity traders sort out queries, listen in on phone calls, and assist them with the organisation of elements such as IPOs and secondary offerings. “We used to have a big white board in the office, and I would put up all the information to make sure the fund managers could see. A collaborative effort has always been a big part of the trading floor here, and my job was to grease those wheels.” 

“When it comes to trading, you listen in, you learn how it goes, and you learn the etiquette. That’s the key thing about a place like Jupiter – it’s all about the etiquette.”

He saw quickly that the two-way communication between traders and fund managers was vital, and as a desk junior without any real execution experience, just wanted to take it all in. “It was information by osmosis. When it comes to trading, you listen in, you learn how it goes, and you learn the etiquette. That’s the key thing about a place like Jupiter – it’s all about the etiquette. How you’re seen, not just by internal stakeholders like fund managers, risk, compliance, but by external parties:  sell-side, brokers, ultimately clients. For example, speaking to a counterparty and taking them short $5 million-worth of risk, and then calling another counterparty because you know they’ll short you the same security, and then doing that again and again, and everyone is trying to cover the same stock – you’ll get a pretty bad reputation quite quickly in terms of how you engage with risk provision and balance sheet. It goes back to partnerships. If someone has shown you something, or you’ve sold them some risk, allow them to get out of that. Understand the market. I learned very quickly how to get a good feel for how our traders did good business, and that is something that has continued throughout my career.”  

Poole started off by helping his fund managers set up program trades and found those discussions with the PMs notably helpful in terms of understanding portfolio construction: “What it is fund managers look at, why they look at it, what they expect from us, and how we can deliver it in terms of value.” 

Jupiter also used to have quite a significant private client business, and Poole did much of the trading for that, ranging from very large stocks to AIM-listed micro caps, which was a good way to learn the ropes of pre-Mifid 1 market structure.  

“Liquidity was probably more abundant, but in those spaces you really had to understand who was doing what, and why they might be positioned like that. I spent a lot of time on the phone, to be honest, really getting a feel for the market, and that stood me in good stead for the next step in my career progression.” 

Credit crunch 

But then the financial crisis hit. Program trades dropped off, because people weren’t trading risk. Private clients weren’t trading as much, because there wasn’t as much to trade with, and an opportunity came up on the fixed income side, just as the firm was starting to make inroads into the credit space. 
“I thought about it for all of five seconds,” he says. “It was great to add another string to my bow – at that time Jupiter were really starting to push the fixed income product, so it was exciting to be on that journey. I was basically given a book about yields and convertible Greeks and told to go on holiday for a couple of weeks and learn it, and when I came back I was good to go. It’s a great way to learn. There’s nothing wrong with being dropped in the deep end, as long as you have the right support network.”

“There’s nothing wrong with being dropped in the deep end, as long as you have the right support network.” 

Initially there was just Poole and one other guy in the fixed income division – so the learning curve was steep. “I did take it upon myself to adopt more of a leadership role,” he admits. “Just because I could see that the industry was changing. Fixed income is always undergoing change. But at the time we were still doing things very manually, very slowly. That was fine, but we were only trading a small number of bonds.” 

Bull run 

The uptick really came with the arrival of Ariel Bezalel in 1998, who became a fixed income fund manager in 2000 and who kickstarted Jupiter’s credit success. Heading up the global flexible bond strategy, he manages the Jupiter Strategic Bond Fund – which has returned 110.67% since its launch in 2008 – alongside the Dynamic Bond Fund, with AUM totalling £10 billion. 

“The fund grew very quickly, the strategy was very successful, and before you knew it, we’d reached a few billion and we needed to onboard the likes of Tradeweb, Market Axess, Liquidnet, and look at different ways of executing, of accessing the market in a more efficient manner,” explains Poole. “This is a crucial point that I’ll come back to again and again. Giving the traders the tools to make the right decisions.” 

From 2011/12 onwards, electronification of fixed income started to become more prevalent, as did the use of data to access new parts of the market. As time went on, 2014/15 saw the advent of open trading. All-to-all became the hot topic, and Poole has always been a big advocate of accessing new counterparties. “Jupiter doesn’t really have the scope to broaden out its remit to 25 local LatAm brokers,” he admits. “So it was handy to have access to different pools of liquidity by utilising these platforms. In doing so, we then had capacity to hire additional traders.” 

Then in 2017, Poole was made manager of the fixed income team – and that’s when things started to get interesting.  

Leading by example 

“I felt empowered to bring more change in,” he explains.  

“I think I’m more of a carrot than a stick person. I want my team members to come on the journey with me. I don’t want to tell them how to do things. Buy-side traders don’t like being told what to do. They do like the idea of trying something that works, and then doing it again. My job is to encourage them to try something new. If it works, let’s go with it. If it doesn’t, let’s figure out why.” 

Poole is a fan of the film Inception, and he likes the idea of planting the seeds, the ideas, in people’s heads, and then watching them grow. “That slow dawning that perhaps technology can help you, that perhaps automation isn’t turkeys voting for Christmas,” he illustrates.  

“Buy-side traders don’t like being told what to do. They do like the idea of trying something that works, and then doing it again.”

“I believe in leadership that empowers members of staff to do new things, who are willing to learn. What happens if you make a mistake?  We have a very open and collaborative process around that. If there’s an error, or something we call a ‘near miss’, it gets logged in the system and we look at why it happened and how we can fix it. It’s very much a process, and it’s something that I very much encourage within the team. If anyone sees a gap in the process, I want to move away from the ‘oh, it’s always been done like that’ mindset towards ‘why is it done like that, and how can we do it better?’ That is what I see as my remit – to ensure that processes are as efficient and as streamlined as they can be.  

“I don’t look at things on a trade-by-trade basis, or ever want to say to a trader: you did a bad job. I want to look at trend analysis and understand why they’re making that decision over time, to trade that stock or that bond. Because if it’s sub-optimal, then we need to look at the decision-making process, and then determine whether they’ve got the right tools to access the market. Have they got the equipment to make that decision, or are they doing it just because it worked once, so they try it again.” 

Wag the tail, not the dog 

But there are shades of grey – and for Poole, automation is a monochrome rainbow.  

“Automation,” he muses. “There is undoubtedly a place for automation in fixed income. But automation is very dependent on how you execute your firm’s book of business. Jupiter is entirely active. Every fund manager lives or dies by their decisions, and by their alpha-generating capability. I see the trading desk as being part of alpha retention. If automation allows us to make our workflow more efficient, which means we can focus more on those alpha generative trades where we can actively add value, then I’m all for it.  

“What I’m not in agreement with, is using automation for the sake of it. I’m not in agreement with technology changing your process. I think you should use technology to make incremental gains and incremental improvements upon your existing process.  

“Not all trades are right for automation. I’ve never been a fan of the bifurcation of high touch and low touch. Every order should be treated on its own merits, and we don’t do any no-touch trading at all. The important factor is to have all the tools to achieve the best outcome on an individual trade basis.” 

But not all asset classes are equal, and what works for equities might not work for fixed income. “In the credit space, it’s slightly different,” explains Poole. “We don’t run any passive books, or any trackers. We don’t have a price-agnostic part of the business, and we don’t have to buy and sell things. We have no house view at Jupiter, that’s important – there’s no CIO telling the investment managers what to do. They make the decisions, and our job is to achieve their investment goal as efficiently and as cheaply as possible. If automation assists in that journey, then great. But if it doesn’t, then it shouldn’t be lauded for its own sake.”  

Climbing the Poole 

From managing the fixed income team, which is currently up to three, in November 2022 Poole was promoted to the overall head of trading for Jupiter – and for him, it’s been a natural progression.  

“I’ve always steered away from pure specialisation,” he says. “I think it’s important to have an understanding of all markets. Heading up the fixed income team was my first time as a people manager, and I think it’s important to recognise the value that each person adds. Each of my traders has an area they lean towards, but I encourage them to maintain the ability to work cross-market, and I think we’ve built up a pretty seamless desk in that regard. 

“In addition, I think that in some firms, the trading desk can be viewed as an operational cost centre. And we offer a lot more than that. We offer the ability to be part of the investment process – I’m not suggesting we’re coming up with ideas, but I want to empower my traders to be able to go to their investment managers and say – this might not be the right thing to buy right now. The liquidity profile, the positioning in the Street… We have a huge amount of information, we’re at the coalface getting our hands dirty every day. We should be able to turn round to them and say, with a high degree of confidence, that we have information that can assist their investment decisions.” 

When Poole was offered the head of trading role, however, he had to think about it rather more carefully. “It was a very exciting opportunity,” he agrees. “It was the chance to take on equity and FX as well as fixed income. It’s a shame that the opportunity came about because of headcount reduction, but I think it’s a chance for some areas of the trading desk to take a step back and reassess their use of technology and of data. 

“I’d like to get those parts of the desk to shout louder about how good they are. The average tenure of a trader at Jupiter is about 15-20 years. They are very experienced, they know the market very well. It goes back to etiquette; I think we are well-liked by the sell-side and the way we go about doing business – I hope – encourages people to want to do business with us.”  

Retaining relationships 

Coming full circle, Poole still believes – as he did at the start of his career (and the start of this article) that relationships are crucial.  

“Despite the onset of electronification, trading systems, data-driven decision-making, I’m still a firm believer that it’s a people-led business. Given the nature of our business, which can be very OTC and very esoteric in terms of what we’re looking at, you do require a degree of trust, and understanding between yourselves and your partners. They’re helping you to achieve your investment goal for your client, and that’s what we try to build upon.  

“In every engagement that we have with a sell-side partner, it’s a case of us really trying to ensure that it suits both parties. We have a number of electronic routes into the market, and yes those are important, but retaining and developing these relationships is almost more important than it was four or five years ago.  

“Despite the onset of electronification, trading systems, data-driven decision-making, I’m still a firm believer that it’s a people-led business.”

The Covid curse 

“I think Covid has led to a lot of people losing that element, and not realising quickly enough the value in facetime, the value in developing relationships and in-person. I think people got a bit lazy during Covid – be it meeting people, be it trading – I think people hid behind the electronification of fixed income. We certainly saw a spike in the volumes done electronically, and that then led to a difficulty in trading blocks. We’re now coming out of Covid, and people are starting to have those in-person conversations about how we can get balance sheet and risk provision from our Tier 1 counterparties.  

“The primary markets have really dried up this year, and a lot of people use the primary markets as a liquidity tool. So if you want to get a block done, and access some risk, then you need to have trust and you need to have that relationship. That will have been eroded over time if all you’ve been doing is putting them in competition with each other. If you’re going out every time with $2-5 million and putting everyone up against each other for every trade, there is an element of winner’s curse there. If you win, everyone else knows you’ve won.  

“They might not know who it is, but they’ll know someone has taken on $5 million-worth of risk. They can then position themselves accordingly, and you are off-side very quickly. The banks don’t like that, they would like more bilateral trading, and a lot of that comes with trust. The banks don’t have a lot of balance sheet to provide necessarily to every client, they have to pick and choose. It’s important, as a non-trillion dollar asset manager, that we seek to strengthen those relationships.” 

Ringing the bells 

So where next for Jupiter, with Poole at the helm?  

“There are some immediate changes I think can be implemented,” he reveals. “We currently have a cash management element to our trading desk – I would like that to become more dynamic, and more value-accretive: more cash trading as opposed to oversight of cash positions and collateral. 

“I’d also like to use technology more strategically. At the moment we use BlackRock Aladdin as our OMS, so we’re going to be partnering up with them a lot more to try and standardise views across the investment floor when it comes to how people look at cash positions especially. Data is only ever as good as understanding what you’re looking at – if everyone’s looking at a different view then when something goes wrong, you spend the first hour trying to work out what you’re looking at.  

“A reluctance to change can be an issue, and we on the buy-side often get tarred with the same brush. It can be difficult to move the needle.”

“A reluctance to change can be an issue, and we on the buy-side often get tarred with the same brush. It can be difficult to move the needle, although as an industry, I do think that (especially on the buy-side), we are more collaborative than ever. But within the four walls that constitute Jupiter Asset Management, my views are very clear. We should be looking at how we use data, we should be looking at how we use the platforms at our disposal, and how we can better utilise the technology that we pay for. We should be more vocal about the demands we have of that technology.  

“If we can fix the current internal fragmentation around disparate datasets and technology usage, I think we’ll be in a far stronger position to achieve the goals that I have in mind: which are to help the trading desk utilise their experience and skillset in order to add to the investment process, as opposed to feeling like they are fire-fighting. 

“By this time next year, I’d like every trader to feel comfortable using a dataset in order to tell a story about what they’ve traded and why. We’re quite a quiet trading desk, which is fine at times, but I’d like us to be more proactive. I want us to be able to tell our investment managers what we’ve done, why we’ve done it, and use the data to illustrate that. Then we’ll be able to demonstrate our value, and that’s never been more important for the buy-side. It’s on us, to show that value. 

“And that will happen, within the next year. That’s my role, and I’m looking forward to the execution.”  

The post The Big Interview: Mike Poole appeared first on The TRADE.

ION Markets has created a new fixed income execution management system (EMS) for both buy and sell-side traders, The TRADE can reveal. Designed to ease challenges around selecting counterparties and sourcing liquidity, the new platform aims to digitise the entire dealer to customer (D2C) trading process. 

“In recent years we’ve seen an increase in need of integrated automated single solution tools to facilitate market making. We were seeing a lot of fragmentation of desktop applications and a lot of inefficiencies, so we thought, let’s do something that facilitates, automates, and makes the life of traders easier,” said Tommaso Di Grazia, head of fixed income product development at ION Markets, speaking to The TRADE.  

“Aside from Covid, and the challenges of moving to a hybrid working environment, what we’ve seen recently is a lot of changes in both market structure across different asset classes, and the way people are trading within it. For example, we’re seeing a trend of reducing trade sizes and increasing frequency due to the electronification of various asset classes. 

“We’re also seeing what we might call ‘equification’ – a trend of gradual alignment of fixed income towards what’s happened in the equities market. So we wanted to plug in an EMS that allowed traders to essentially slice and dice – collect orders, execute orders, reroute, request. It’s been available for a long time in the equity space but we increasingly saw the need for this within fixed income.” 

Trading desks are under increasing pressure to deliver best execution across different bond asset classes, but data can be hard to come by and the fixed income space is very different from equities when it comes to ease of information. The new platform aims to ensure best execution for the buy-side among various D2C markets and retail venues, as well as offering buy-side capabilities to sell-side traders through direct execution as well as at-trade and post-trade hedging. It also provides a full audit trail of all steps in the execution process, with automatically generated client reports.  

“Integrated within the ION market-making solution, the platform is modular, so you can plug things into it in a quick and sleek way. We think of it like Lego, you can add all the modules together easily and we take care of the integration so that clients don’t need to worry about it,” said Di Grazia. “It’s an entirely new product and that enables intelligent auto-execution capabilities for executing brokers while extending access to liquidity for sell-side traders.” 

In 2018 ION bought software specialist Fidessa in a £1.5 billion takeover, beating out Temenos to the punch. At the time, Fidessa had an award-winning fixed income trading platform, which some market players have suggested may have been a factor behind the acquisition. Given the currently sparse marketplace for fixed income EMS and OMS, the latest offering is likely to be received with interest.  

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At TradeTech this year, you are scheduled to speak on an all-star panel about systematic trading. Why do you think automating trading workflows is such a hot topic now?

Broadly speaking, automation can be categorised as either execution or workflow automation, and both types of automation can help to drive trading cost reduction, risk reduction and minimise manual effort. Hence, it’s paramount in delivering for clients. Automation also helps to free up traders’ time so they can implement tailored trading styles in volatile market conditions, thus the heightened industry focus and conversation on automation over the past year.

What role has automated trading workflows played during the pandemic and recent market volatility?

Thanks to the automation of workflows and talented traders, we successfully navigated a material increase in last year’s volume of orders, which increased 40% compared to 2019 in EMEA. This was achieved with the same level of resourcing, whilst minimising trading costs and without any errors.

What are the inherent benefits and risks of systematic and automated trading?

Consistency of outcome, reduced trading costs, reduced manual effort, and reduced risk are all end goals when automating execution and other workflows. A consistent approach should also result in more comparable data and improved analytics. From here, quantitative and machine learning generated recommendations can be leveraged by both traders and automation systems. But it’s important to note that whilst automation is a powerful tool, it’s not an end in itself. To reduce the likelihood of any automation-related pitfalls, it’s good practice to keep your end goal(s) front of mind.

What role will automation play in the future for trading desks?

The industry is evolving as fast as ever and there will be periods of elevated volatility due to market cycles and exogenous events. Trading desks need to utilise agile methodologies and have a strong foundation of talent and platform, including automation, to be nimble and flexible enough to pivot in this environment. Automation will remain a key part of this story, offering flexibility and continuous improvement of trading performance.

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This year, you are scheduled to speak on an all-star panel about systematic trading. What are the key issues on this topic that you are hoping to address in the discussion?

Put very basically, the state-of-the-art technologies and best practices in systematic trading. It’s important we address the issues around best practices that the industry and our peers are facing and ensure we are all heading down the same path. Taking that further, what is the road map going forward and what are the next steps? Which technologies are supposed to be involved in automation?  

Automated workflows have clear benefits for participants as we have seen during the market volatility in 2020. But what risks do they hold?

The risks are held within the benefits and mirror them in many ways. As the workflow is automated, it’s on a no-touch basis and there’s no human intervention. The main element is to make sure that you have all the controls and checks in place to ensure risk doesn’t increase in more volatile periods. This includes hard and soft checks across automated workflows. For me, that’s the most important thing. 

Can automated workflows minimise trading costs and slippage?

When we implemented automation at Amundi, the main purpose was to avoid negatively impacting our execution performance before we thought about adding any value. There’s scrutiny from clients to make sure we don’t adjust execution performance to minimise trading costs and slippage. Adding value and alpha in general, however, will likely be a part of the second phase of the future of automation. We could also potentially onboard more analytics on a pre-trade basis and customise the algorithms we apply in the automation process. 

What role do you see automation playing in the future and are there areas that it could expand into?

I think that it’s going to be a big part of the whole landscape and automating more trading activity is a historical trend we are seeing. This doesn’t mean that automation will replace human beings in the process. It will become part of the must-have tools for trading desks. On the panel at TradeTech, I hope to have a further discussion about how we can demystify automation and realise that it is accessible to many asset managers. 

In the future, the main concern about automation is around the ability to bucket your order flows. Lots of order flows can be automated, but once that first level automation is done, you need more pre-trade analytics and data to design your automation process, especially if you want to make changes, switch to another bucket, or automate more difficult buckets in terms of size and liquidity. With pre-trade analytics, you open the door to more sophisticated data processes like clustering for instance, which allows us to target the right strategies for execution. It’s the huge improvements in technology that allows us to improve the automation process. 

Systematic trading and automation will likely be a hot topic at TradeTech. What other trends do you expect to hear about at the event this year?

There are many connected topics to automation, but that is going to be a central theme at TradeTech this year. The connected topics will be around all the data and the pre-trade data as I mentioned earlier that needs to be automated. 

There’s also a huge focus on transaction cost analysis (TCA) on a post-trade basis because that becomes the justification for automation. Again, it’s important to make sure that automation doesn’t impact execution performance, but ultimately that TCA is feeding the decision process in automation. 

The other topic is around regulation. To some extent regulation is pushing for a more quantitative approach in data and our processes. It’s very likely that we’ll see increasing scrutiny from the regulators about taking a more quantitative approach to these processes.

Which panels are you most looking forward to attending at TradeTech this year?

I’m most interested in best practices around automation and the use of TCA alone and for automation. It seems like regulation has been forgotten over the past few months because MiFID II is far behind us. Now though, we are starting to hear about the new versions of the regulations, like MiFID III. Any new layer of regulations will have an impact on the processes we put in place including automation, so I am keen to attend panels related to that. 

You have attended TradeTech in the past, including virtual versions of the event. Why are events like TradeTech so important for the industry? 

It’s important to raise questions with peers. I won’t pretend to have all the answers to the questions, but it’s a good occasion to make sure that we all share the same concerns and challenges.  

Hopefully, we can get some insights and inputs from the industry and gain an understanding of the state of play to make sure we are not alone in dealing with these concerns. Given the challenges we have faced and the changing market landscape, not only in market structure and regulation but also tools and technology, it’s clearly improving tremendously. Sharing experiences through conferences like TradeTech or through articles, videos or a podcast is an amazing thing. Now more than ever, we need to share our experiences. 

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Panelists at this year’s TradeTech FX Europe conference said that while automation is now widespread in the industry for the benefits of cost reduction and increased efficiency, it is also becoming a more viable tool for optimising execution.

“There are various ways that we can think about automation; there is rule-based execution or straight-through processing, building that low-touch execution desk,” said David Shack, VP, FX technology at Fidelity Investments.

“Another aspect that thinking about how we can take a more complicated approach to deciding how and when to trade, looking for better trading outcomes by being able to take a more complicated process and run that more consistently across the desk, whether it is by picking the right time to trade or the right strategy to trade.”

This sentiment was echoed by Jil Sigelbaum, head of FXall at Refinitiv, who said that while the majority of automation is focused on the pre- and post-trade side, citing workflow management and order structuring to achieve best execution, it is “at-trade that is evolving most these days.”

“That’s where the majority of validation is coming into play, because we have more real-time data to use to come up with intelligent ways to trade,” she said.

Sigelbaum also raised the issue of the role of the human on the trading desk where automation taking hold, saying that there needs to be a level of trust from traders towards the automated systems they are using, particularly for execution, and that will take time to develop.

“Over time there will be less traders and machines will take over some of those tasks, but it won’t be complete, there will always be exceptions. We see it happening at the banks first; they have already been moving a lot of their trading to machines and I think that in five or ten years from now we will see that in every aspect,” she commented.

There was a common consensus among the panel that the role of the FX trader will have to evolve in the future alongside increasing levels of automation, with Ruben Costa-Santos, head of multi-asset class analytics at Virtu Financial, saying that traders will be given opportunities to spend more time with data and analytics to optimise their trading strategies as a result, while global head of foreign exchange electronic trading at Bloomberg, said that automation presented opportunities for improving scalability and optimisation of all trading processes, including the human element.

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Amy Hong, global head of market structure, Goldman Sachs

Various sell-side institutions have highlighted automation as one of the key drivers of evolution for the fixed income markets.

Levels of automation are undoubtedly on the rise across banks, brokers and trading venues as efficiency becomes one of the key operating watchwords to deliver better services to their buy-side clients, and ultimately to the benefit of the wider markets, according to speakers at this year’s Fixed Income Leaders Summit US.

Richard Schiffman, head of OpenTrading at MarketAxess, said that the firm has experienced a sustained period of investment in automation and that the effects of this will soon be felt.

“Right now, we are running about 10% of the trades that go through our platform in an automated fashion; we believe that within four years we will see 90% of trades under five million in size happening in a fully automated way,” said Schiffman.

“It’s basically like a Tesla autopilot-type function. There is no reason to pay attention to the small, routine trades that can easily be accomplished by defining parameters of the system and letting it execute those trades according to the rules.”

Reducing manual operations for lower-value trades is one of the key, and most well-recognised, value adds that automation can provide. However, Elisabeth Kirby, managing director, US rates strategy and product management at Tradeweb, highlighted that automation on its own will only go so far and that the trading platform provider is looking at a “holistic evolution” where “optionality is the key word.”

“We don’t necessarily see a linear evolution, for example, of people who used to trade RFQ and now they want to trade in a different way; the evolution is much more additive. We have built offerings to address all of the different ways that the fixed income markets might be evolving, specifically things like anonymous central mid order books, point-to-point streaming liquidity, the automated RFQ,” Kirby explained.

“These are all things that supplement the existing RFQ, so for clients who trade RFQ and more traditional liquidity providers, that is something we want to continue to support, but there may be something of a misconception that that is all Tradeweb does or that is all that the buy-side wants to do.”

Kirby also detailed that Tradeweb’s RFQ platform has evolved into a lower-touch, or even no-touch, system whereby around one-quarter of the tickets for US Treasuries that go over the platform are now automated.

Broker-dealers are also pushing automation at the core of their offering and Amy Hong, global head of market structure at Goldman Sachs, said that the institution has focused on improving workflow efficiencies, starting with straight-through processing (STP) to reduce the amount of the time its teams and clients spent booking trades manually.

“That has evolved into really interesting things, like auto-response, systematic price formation, systematic market-making, systematic risk management. Automation is something we are seeing across the entirety of the product spectrum,” Hong said.

Hong said that Goldman Sachs has adopted a particular focus on the price formation and market-making functions and described how the firm’s systematic market-making algorithm was able to perform in ways a human could not, although she clarify that there was room for both high- and low-touch means of market-making.

“As we continue to further mature and develop our market-making model, the combination of systematically synthesising market data along with the great human trader talent that have focused on managing risk and client service, is actually going to make for a much healthier marketplace from a liquidity, as well as a user experience, standpoint.”

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For buy-side firms, the volume of data and information they received from their sell-side counterparties can be overwhelming, but Steven DiVittorio, head of public fixed income at Barings Asset Management, told delegates that talking to sell-side counterparts allowed for greater mutual understanding.

“We get so much information throughout the day; runs, electronic feeds, whatever it is we are just looking for better, more efficient ways to get information from sell-side institutions quicker, easier, so we can do our jobs a lot faster and get to more important trades rather than things that you don’t necessarily need to spend a lot of time on,” he said.

Mark Betteridge, global head of fixed income and currency analytics at data giant Bloomberg, agreed with DiVittorio’s comments and reinforced that while regulatory change was a fact of life within the financial markets, natural evolution was something firms could influence.

“It’s about the buy-side telling us what they need next,” he said. “The enhancements that we release are based on feedback, direction and guidance that we receive from the buy-side.”

Betteridge also highlighted the increasingly vital role that data standardisation is playing in the flow of information and facilitating technology innovation for the betterment of both sides, as the buy-side’s “ingestion of data is reliant on standardisation” and was driving the use of automation tools on the sell-side.

Touching on the level of automated systems that banks are now adopting, George Runsak, head of global fixed income for Wells Fargo Wealth Management, welcomed the advancements in technology but also said that the relationship is still based on communication.

“I constantly hear whether the sell-side needs to be more high-tech or high-touch; do they need to leverage technology more effectively or partner more effectively, and I honestly think they need to do both,” he said. “If you look at the clients of the future, they are demanding that. That’s how we are responding.”

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Neil Joseph, European head of equity trading, JP Morgan Asset Management

As automation continues to permeate buy-side technology and trading operations, the use of automated bots within trading technology workflows is also beginning to show signs of value for asset managers.

JP Morgan Asset Management (JPMAM) developed and rolled out its own bot, referred to internally as BETSI (Bot for Equity Trading Symphony Integration), earlier this year to automate and optimise certain trading desks workflow process, such as notifications, indications of interest for block liquidity and enhancing request for quotes (RFQ).

Speaking to The TRADE, JPMAM’s European head of equity trading, Neil Joseph, said that the launch of BETSI – believed to be the first of its kind among buy-side asset managers – is part of the firm’s rolling three-year strategic plan to accelerate its equity trading technology evolution.

The bot was built through close collaboration between JP Morgan’s EMEA equity trading desk and its technology team, “working as one team with that common goal to improve operational efficiency by automating the routine so as to enable traders just to focus on more complex order flows and continue to reduce execution costs and integrate more with the investment process,” Joseph explained.

The three key areas of operational functionality the BETSI bot offers are an intelligent notification service, block indications of interest, and RFQ enhancements, all of which align with the guiding principles for JPMAM’s equity trading desk.

The BETSI News function generates alerts for the systematic distribution of stock, market or liquidity news to portfolio managers, whereby traders instruct the bot to notify portfolio managers of relevant developments which is delivered via the Symphony messaging application to either mobile or desktop. It’s a scalable and targeted solution which initiates a two-way conversation and keep the relationship between trader and portfolio manager as close as possible, according to Joseph.

“Prior to having a bot like this, traders would generally have to manually identify relevant recipients of those indications and typically they would be manually communicating to those specific portfolio managers in a more ad-hoc basis,” he explains. “BETSI News enables a desk to send out those news and liquidity notifications in a consistent and auditable manner to that systematically determined audience.”

BETSI Indications works to identify automate and improve the communication of block liquidity signals, which enables brokers to post targeted indications that are fed directly into JPMAM’s proprietary order management system, Spectrum Trading. By optimising the identification and execution efficiency for block liquidity, traders are given an “integrated and consistent view” and can monitor liquidity opportunities in real-time, Joseph added, while also reducing impact on the market and total trading costs.

The third functional area of the bot is BETSI Bids, which Joseph describes as a “relatively simple but very important workflow”, directing the flow of communication around RFQs through the Symphony platform, with the bot monitoring, reading, recording and responding to quotes automatically.

“BETSI Bids enables brokers to register bids in response to risk price requests,” Joseph explained. “We request a risk price in a basket of stocks and BETSI will validate the bid in a broker-specific room, and they then flow directly into Spectrum Trading, responding to the broker as well. Even so far in Q1, the desk has executed over 150 trades using BETSI Bids.”

While the bot has only been live on the JPMAM equity desk since Q1 this year, Joseph said that BETSI is already showing promising results in terms of its operational efficiencies and added value to the trading workflow, whereas quantifiable metrics may be harder to come by for some of BETSI’s functionalities.

“BETSI Indications, for instance, can be measured: So far we’ve rolled this out to 13 brokers and received an excess of 15,000 different indications since go live on 29 April this year,” he said. “So, what was previously so difficult to quantify, what was previously fragmented and difficult to consume across the multiple chat windows or phone calls, is now available in the consolidated Spectrum Trading platform.”

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With the arrival of MiFID II now seeming like a distant memory (for some), the industry is looking to the future, and it was of little surprise to see that artificial intelligence and data were again some of the main talking points throughout the event. Buy-side firms have clearly jumped on this train with gusto, but are still cognisant that changing market structures and the great unknowable of Brexit mean nothing can be taken for granted.

Whether you attended and stayed until the very final session or were unable to make it Paris this year, here are some of the key talking points from this year’s TradeTech event.

• AI will transform the industry, just not yet

Artificial intelligence (AI) was once again one of the key topics of discussion throughout the conference, a continuation of last year’s trend, although now the excitement has been dampened by a sense of realism about how much work participants must put in to these technologies before seeing quantifiable results.

Automation of manual processes has been a staple of trading processes for some time now, but advances in machine learning are undoubtedly opening new possibilities for buy-side firms. Speakers across several panels and interviews on the subject outlined their own projects with these technologies, but the message that significant investments of resources and time are unavoidable and that firms must be prepared to play the long game came across loud and clear.

However, there are those on the buy-side that believe that AI will become a necessary part of trading and that underestimating this requirement will be a fundamental mistake. Clearly the industry is awoken and alert to the benefits that AI and machine learning can bring to trading beyond simple automation processes, but it will be case of good things coming to those who wait.

• Buy-side still grappling with the data

Similarly to the potential around AI, the buy-side is finally making in-roads into extracting value from the vast quantities of data that is available to them. This has been a historical issue for asset manager, at least compared to their sell-side counterparts that have larger budgets and teams to dedicate to this, but firms have been making strides to source new data sets and dig into those sets already available to them to improve trading performance or seek out new opportunities.

More asset managers are now hiring data scientists to work with their trading teams to provide greater insights to the desk for both in-trade and post-trade, while the importance of data analytics is also growing. However, the caveat to this is the struggle to not only acquire the human expertise, but to retain it – a challenge not just restricted to the buy-side.

Alternative data – such as social media feeds and blog posts – has been held up as one of the more lucrative new data sets for the buy-side to dig in to, but, much like any emerging technology, those that have been working in this area for years have had to warn asset managers that this is no silver bullet and that significant investment in this space will be necessary to derive the greatest value from it.

• MiFID II is now just another fact of life

Last year’s TradeTech conference found that the industry had, for the most part, accepted the new regulatory regime and were adapting their processes accordingly to adjust to the new trading environment. There were of course some contentious opinions thrown around, particularly concerning new trading venues such as periodic auctions and systematic internalisers.

This year, on stage at least, there was little by the way of controversy to be found at the event. For the most part, buy-side firms have acclimatised to the new regime and are now cracking on with the task at hand – optimising execution strategies, reducing cost pressures and wringing the highest possible value out of investments in technology.

It was left to the trading venue operators to continue the fight against regulator’s aims to move liquidity and trading onto lit venues, although the rise of periodic auctions and systematic internalisers so far under MiFID II has gone some way towards alleviating that ire.

How this trend will continue will be interesting to watch play out, but for now, the majority of the industry is clearly more focused on getting back to the daily tasks at hand.

• Shifting market structures mean Brexit is a big cloud on the horizon

The big cloud hanging over this year’s conference was, of course, Brexit. The question in the weeks leading up to the event was whether the UK would have fulfilled its objective of leaving the EU by the end of March (and then mid-April) and how that would be addressed by the speakers.

With Brexit’s delay, market participants still find themselves in a state of limbo, having to enact certain contingency plans early and put other strategies on ice until a sense of clarity emerges. The shifting market structures, partly resulting from the introduction of new regulatory regimes, means that many market participants are simply treading water for now, aiming to get through the headwinds as best they can while making incremental improvements to their trading processes and technology stacks.

A keynote address on the topic of Brexit by provided a number of insights into the political process and how it affects wider economic activity, but when it came to how the event of Brexit will directly impact the capital markets in the here and now, the answer could only be summed up in a baffled shrug.

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VedBrat detailed how the world’s largest asset manager is staying ahead of evolving market conditions by building a culture that ensures trading desk staff are armed with a diverse set of skills that can be utilised across its execution channels and technology resources.

“We’re not shy about picking someone with transferable skill sets and moving them into an area where they might not be a subject matter expert, but they do bring the very essential ‘softer’ skills that are now necessary in order to create a collaborative environment,” said VedBrat.

“The trader of today and tomorrow is different from the past, where traditionally they would have vertical, very deep expertise. Now, traders need to be able to understand multi asset classes, multiple trading strategies, and multi-regional, global influences.”

VedBrat explained that the idea of a trader as bring siloed in the front-, middle- or back-office is less present at the firm now, as a wider view of the entire investment process is required, as well as possessing the ability to interpret data and be fluent in their algorithm options to adapt to different market conditions.

“Alongside their execution role, they are also helping us figure out if we need to improve existing trading or if there is a better way for us to be executing,” VedBrat commented. “My traders are looking at the entire investment process, all the way through to settlement.”

This approach to building a flexible trading desk means firms can approach challenges in a more proactive way, and for a firm with global operations to such a scale, BlackRock’s starting point to this is through global consistency and standardisation.

“One thing we are mindful of is that we have a lot of regulatory change happening globally and that is creating fragmentation,” she commented. “Fragmentation sometimes leads to pools of liquidity that aren’t global in nature now becoming a little bit more regional, and you have to keep that in mind as you are thinking about how you are setting up trading workflows. 

Developments in automation and data are vital tools to address liquidity issues and BlackRock’s proactive approach to these technologies has allowed the firm to engage in consistent dialogue with its market counterparties. VedBrat said that while gaps in liquidity present issues for all market participants, artificial intelligence and data science are key tools for BlackRock in going forward with these trading challenges.

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