Two contrasting approaches to building a multi-asset trading capability were showcased at TradeTech FX in Paris, from Manulife Investment Management and APG Asset Management.
Manulife has hubs across Singapore, Boston and London with a multi-asset team in the London office covering equities and credit.
“We have multiple execution management systems (EMSs) for each asset class,” said James Barnett, multi-asset trader at Manulife Investment Management. “We have two primary systems that we mostly use, and it would be a pain logging into five execution platforms every morning. We’re all striving for greater efficiency and more scale, and having multiple EMSs does have its challenges.”
However, there are trade-offs, he observed, and a head of desk needs to carefully consider the pros and cons of their set-up relative to the impact of change.
“Some execution platforms offer genuinely differentiated points of liquidity,” he said. “If you strip that away, go into a single EMS platform, you lose. So then it’s a question of defining where the inflection point of your traders time and operational efficiency offsets that liquidity gap. If it became a case that I had to use all five every day and I needed five screens for that we would have reached critical mass and need open the conversation [about change].”
That conversation has already happened at APG Asset Management, which has trading desks in Amsterdam, Asia and New York as senior trader, Sunil Patil, explained.
“We have multiple EMSs at the same time for now, but we are in transition to single EMS,” he said. “We started migrating one asset after another. Right now, we have futures moving into the single new EMS. We are planning to have equities in the next year.”
The drive for change was the need to overcome the operational complexity that multiple systems can create.
“If you have multiple systems, there are several complications, starting with data,” he said. “As we move towards more data analysis and data use to enhance trading, if you have multiple EMSs, then you have multiple data structures, multiple ways to analyse data. It’s very complex to simulate that data. If you have a multi asset trading desk, and you have to trade multiple assets on a single day, then you have three screens needed just to run three EMSs. It’s just too complex.”
In addition, he noted that evolving technology is increasingly able to provide support across assets.
“It’s very easy to trade two asset classes in parallel,” he explained. “If you have to handle an equity order and the FX associated with it, it’s very easy to trade that in single EMS. It makes sense when it comes to multi-asset trading.”
Andy Mahoney, managing director for EMEA at EMS provider Flextrade, noted that interface level integration could be achieved without having a single EMS, but tackling the integration of underlying data was a game changer.
“The single pane of glass argument for consolidating EMSs is purely for desktop real estate,” he said. “There are other ways to solve that using the FDC3 standards, you can make applications talk to each other and present a consistent workspace. Sunil’s point about data is the key driver for all of our clients looking at multi-asset systems. If you can get one consistent dataset that’s cleaned in one way in one database, normalised and abstracted, you save a lot of time and reduce issues with data ownership as well.”
Patil confirmed, “It was one of the main decision-making points for us, having single points for looking at data, single view analytics and one place to do everything.”
© Markets Media Europe 2023
