With Joe Rodela, Head of US Head of US Trading Trading, Allianz Global Investors
US Trading at Allianz Global Investors operates within a global trading platform – but with a regional approach. We now work out of three locations in the US. Our trading used to be solely San Francisco based but when we merged a number of boutique firms owned by Allianz, we integrated them into our global trading platform. It is still one US trading platform but it now operates out of San Diego, San Francisco and New York City.
Most equity-related trading takes place on the San Diego and San Francisco desks. Most derivatives, futures and some emerging market debt trading takes place out of New York, where we have two very highly experienced options/derivatives traders. We used to trade some derivatives out of San Francisco but two years ago transitioned that flow to New York.
The reason for having trading activities in the different locations is because we have portfolio management activities there and our experience is that there is added value in having traders operate in the same location as portfolio managers.
But I must emphasise that even though we are located in three different places, we really do function as one desk. We all use the same trade blotter so whenever a portfolio manager enters a trade, we can all see it. Similarly, we use the same turret system to our brokers, so if a broker calls the desk, the call comes into the three different locations simultaneously; any one of us can pick it up and service that call for any other trader.
We follow all the same policies and procedures and our commission management and broker voting systems are identical. Our view is that we are ‘one desk, one team’. It just happens that we are sitting in three different locations.
In order for it to work, I rotate through our San Diego office once a month, and I go to the New York office every quarter. At least once a quarter our other traders will play musical chairs as well and work from the other locations. In that way we enhance the ‘one desk, one team’ culture.
There are often times when I will be sitting on the New York desk but I’ll still be trading for the portfolio management teams in San Francisco, or I could be in San Diego doing the same thing. The way our telephone systems and trade blotters are set up means that it is unlikely that the portfolio manager will actually know which office I’m in. They can reach me just as they would any other time, – regardless of where I am sitting, they will know how to contact me. They will only know where I actually am if they physically try to come and find me. Technology has helped make this transition relatively seamless. In addition, there is an intercom system set up between the desks. We just have to hit a button and we connect between the traders in San Diego or New York instantly, and they can do the same thing back to us.
We have carefully examined the risks and rewards of this type of set up. We need to keep united as one team given that we are physically in different locations. The technology available to us and the fact that the traders are willing to rotate around the offices means it works well. Another advantage of having three desks is for business continuity and disaster recovery purposes. For example, there could be an emergency in San Francisco which might prevent us from getting into our offices. All we would need to do is put a call through to San Diego or New York in order to have them pick up trading activities for the day.
Global positioning
The way our global trading platform is set up gives us centres of expertise. It works in a similar way for the portfolio manager team regardless from where they operate. If a US-based portfolio manager wants to enter a trade in Taiwan, they put the order in the system as normal. The only thing that is different is the desk to which they route the order. For example, for Taiwan they would just highlight our Hong Kong desk which takes care of pan-Asian trading. They hit the enter button and the order will appear on our Hong Kong desk; so when the Hong Kong traders come in the next morning, they will see the order on their blotter just as we would see it here and they work it just as they do for the local Asian-based portfolio management teams in Asia.
For portfolio managers, analysts, and traders, the process is pretty seamless regardless of where they are sitting.
Strategy
If a firm is to set up a global trading platform to trade anywhere in the world there are three ways of approaching it:
- The firm could operate out of one location which would mean the desk would require 24-hour cover, so there would be shifts of traders coming in around the clock.
- A firm could have one location but base the hours on whichever region the desk is in. So in the US, they would have US hours and when the traders go home, they would simply hand off orders to the brokers who would hand them off to the regions. The traders would need to be on call 24 hours a day in case anything happened with the order that needed attention, regardless of the time of day or night.
- The third option is the way we operate: having specialised trading desks in the regions so as to have experts in each market. It allows for the promotion of best practice within each specific region. We adopt the same policies and procedures on a global level, but there are also regional sub-sets of policy for each specific region.
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