Jefferies went home with the best electronic fixed income trading award at this year’s European Markets Choice Awards (EMCAs), held in July. Melvyn Merran, EMEA head of ETF, credit algo and portfolio trading, talks to Global Trading about what has driven the company’s success this year, how the fixed income landscape is evolving, and what to expect over the next 12 months.
What has driven your success this year?
A combination of internal and external factors. To mention a few:
Internal factors:
- The way we are organised. The eFixed-Income tech, quant and sales and trading divisions have a shared reporting line that delivers high frequency feedback loops, upgrades and releases.
- Integrating fixed income ETFs into our fixed income infrastructure as the backbone of Jefferies’s eTrading offering. In practice, it means leveraging ETF flow and price discovery to guide our low-touch bond trading offering. That helps facilitate high balance sheet turn-over by harvesting multiple layers of liquidity across bonds and ETFs. It also means managing risk and PnL in a centralised fashion, with ETFs, lists of bonds and single bonds all feeding into the same books by subset of risk.
- Proprietary analytics computed across a jumbo-large dataset are absolutely critical to our success, assessing relative liquidity and performance of every single pocket of the credit market and delivering a systematic trading offering across more than 5,000 securities. That includes things like live ETFs iNAV, target create-redeem ETFs bond baskets, and risk-factor management.
External factors:
- The growing client adoption of Credit eTrading (more tickets, more clients, more passive list-investing, wider universe of bonds) and the rise of fixed income ETFs (more clients, more innovation — passive ETFs, active ETFs, fixed maturity ETFs — more AUM).
- The current competitive landscape, which is wide-open for new entrants. While ultra-competitive, market-share is still heavily concentrated across a few specialised market makers. Jefferies is now ranking well within the top five, and regularly within the top three. We have been able to deliver consistency in pricing, hit-rate and producing content.
- The marketplace continues to evolve. Recent changes include the aggregated tape, bringing more transparency to automated trading engines, and the growth of auto-ex protocol to select dealers on RFQ platforms.
How have you focused investment to support this growth?
Two key layers of investment:
- Sales people to tell our story and connect the dots with platforms and clients across fixed income (bonds and ETFs) and equity (ETFs). This is true across regions, with a more pronounced push in the Middle East and Asia as of late.
- The tech and quant team continues to grow, with constant demand for more analytics and emphasis on trading user experience. We try to be very targeted in growing our service offering across pockets of the market that now qualify for eTrading and support our clients’ flow.
What has customer response been?
Overwhelmingly positive. Clients continue to look for access, liquidity and solutions to navigate the market place, and want to diversify their counterparty list with partners they trust. We aim to be that partner by continuing to put clients first.
Jefferies’s see-rate , increasing month over month, is a testament to the service we are providing and the trust we are building.
In which areas are you building the team (numbers/skills etc), and why?
In line with our current investment logic, we are investing in sales people with cross-selling knowledge of bonds and ETFs who are well plugged-in to changes in regulatory and execution protocols. Why? To keep on growing market shares, and expand Jefferies’s reach across products and regions.
We are also constantly looking for talent to support our tech and quant offering in order to assist and expand Jefferies’s systematic offering. Our assessment is that this portion of the market will keep on growing, and that delivering user-friendly tools to both clients and voice trading will be paramount to success going forward.
How will the market see your offering evolve over the next twelve months?
We will continue to grow in fixed income ETFs, with a clear focus on global IG/HY baskets and $EM. Our systematic bond offering will be more targeted, with expansion in high beta €IG and €HY. Portfolio trading will be introduced to support our client’s passive list-trading flow.
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