BNY Mellon has launched a new outsourced trading offering for buy-side institutions globally, including asset managers and asset owners.
The offering by BNY Mellon Capital Markets will be powered by xBK, the buy-side trading division that on average annually executes more than US$1 trillion in notional volume across assets for the company’s investment management franchise. This global multi-asset trading service is intended to give clients opportunities for operational and strategic efficiencies, savings and expansion, in line with xBK’s own, and has been on the cards since at least 2021.
Dragan Skoko, has been promoted from his role as head of trading and trade analytics, to become head of outsourced trading & xBK. His predecessor, Amy Flynn, will be leaving the organisation in Q1, according to sources.
He says, “There’s no reason why we couldn’t have the same capacity for external clients that we have for BNY Mellon Investment Management. The way that we have structured the solution is that it scales seamlessly with client demand. So we feel very confident that we can accommodate growth in client demand as it comes our way.”
The outsourced trading offering is targeting specific assistance for clients:
• Reduce spending on data, trading infrastructure, analytics and reporting, and all associated trade execution support functions;
• Efficiently expand into new asset classes and regions leveraging our economies of scale;
• Improve trading outcomes through automation, innovation, and a systematic workflow;
• Access BNY Mellon’s portfolio of services across front, middle and back-office functions;
• Refocus investments toward core competencies and alpha generating activities.
The trading team will provide liquidity colour back to the portfolio manager, Skoko notes, in order to help support their choice of how to trade, while also ensuring that a portfolio manager is making the selection of which security and how much of that security to trade.
“We can take care of everything else, based on their objectives,” he says. “We want to be very mindful in terms of what we can and cannot do, but we continue to we arm our traders with data and quant tools that allow them to be very efficient in that engagement in their communication.”
The desk will support crossing of trades, subject to client objectives, as well as the regulatory constraints in each country and asset class.
“For example, if client funds had the Dept of Labor exemption to cross internally, we could support that activity, if they are eligible for 17a-7crosses, we could accommodate them as well,” he says. “In short, for us to consider crosses, we have to make sure that we are compliant with all the rules and that the cross makes sense for both sides of the transaction. As such, we’ll be very careful when exploring crossing capabilities across the different markets and geographies.”
Ultimately, he says, each client should see best execution according to their own criteria and terms.
“The key here, on the front end of the process, is for us to understand the client’s objectives with that investment decision when we take the order,” he says. “Through that agree on the most relevant benchmarks, capture that electronically, then over time as we’re executing for the client, we track performance versus those metrics versus those targets. They are able to see performance across a range of decisions that we made. We think of best execution as a process that keeps evolving. We need to provide full transparency around the quality of execution, and any data or metrics that they need to assess the quality of our work. Lastly, we’re also happy to provide back rich analytics to inform the dialogue, as we explore the path to best trading outcomes in partnership with the clients.”
Backed by its investments across technology, data science and quantitative modelling, the company plans to offer external clients a range of services, including:
• Coverage of all major asset classes, with the ability to transact across most global markets;
• Expertise in supporting complex workflows of more than 150 investment products across equity, fixed income, and global asset allocation strategies;
• Data science capabilities which use quantitative insights to fine-tune execution strategies, reduce transaction costs and execute trades within a risk-controlled framework.
Adam Vos, CEO of BNY Mellon Markets & Execution Services, said, “We are committed to supporting the buy-side as they position themselves for long-term growth and competitiveness. By leveraging the full scale of the BNY Mellon enterprise, combined with our expertise in trading, we are uniquely positioned to provide a high-quality outsourced trading offering to our clients worldwide.”
This exclusive first appeared on The DESK, January 25th, 2023.
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