One is the use of anonymous wheels for venue selection. Customers are particularly keen to show that they are monitoring real time execution quality, venue selection etc. We’re also seeing the concentration of flow with fewer providers. ZebrA-X is creating a hub for trading globally for the bank. We’ll be able to concentrate venue choice, algo choice and a high level of customer service in one location. We’re working with a number of brand new venues and innovators in the market to keep this current. The key for us is to differentiate ourselves from bulge.

When you put technology in the middle of a brokerage offering it tends to accelerate successes and therefore you’d expect the big to get bigger. The more a brokerage business looks like an exchange, the better it does. Much like you’ve seen with internet businesses from 20 years ago, you tend to get the weak ones withering away quite quickly. Due to commission wallets and equity issuance, the market’s extremely competitive so you’re seeing some fallout across different business silos, including electronic and low touch trading.

How are market conditions driving these low touch developments?

A couple of years ago, the goal was to capture retail and reinvent RSP mechanisms. Several banks and brokerages tried to do that. Clients we speak to – in particular wealth managers – are trying to cut costs. They’re doing that by electronifying the smallest 10% of trades. Big clients want to be able to interact or harvest that flow. If on a company’s results day there’s lots of retail sellers, some clients love to build a position by trading against retail because they have better information.

ZebrA-X has one OMS provider called Infront where orders go for three seconds all or nothing. If they don’t execute, those clients’ tickets then go to the RSP of the whole street. In that respect, we’ve disintermediated part of the RSP mechanism. The first bite of ZebrA-X algo goes exclusively to Aquis for 12 microseconds on an all nothing basis so if there’s an institutional order resting there, the retail order can cross at mid or better against that ticket before it goes off and checks all the other venues. Clients can do these kind of trades on a match basis in Aquis Auction on Demand (AOD) and then further down the life cycle of the ticket, a piece will rest firm in Aquis for the life of the ticket which enables us to hand on heart say you cross institutional to retail, retail to retail etc.

The more you electronify the business the more business you do. TCA – traditionally on which execution wheels are built – looks at three things: one is average fill size, two is pre-trade signalling and three is post-trade reversion. Typically, five seconds pre-trade and five seconds post-trade.

How are clients leveraging low touch offerings differently today?

Overarchingly customers want to do block business. They want to finish their tickets by the close of business. There will be some clients who’ll flash our dark aggregator with their tickets for a couple of minutes and then change the order into a benchmark algo. They’ll be some clients who’ll rest the block with us all day long and there will be some clients who rest fractions of tickets and work out where the liquidity is on a particular day, using it as a radar.

One of the key things we’ve done is to connect to systematic internaliser’s (SI) directly. If you can rest benign blocks of stock in certain SIs and get good fill rates you will get extended better liquidity down the road much like reputational scoring seen on Cboe or Turquoise Block Discovery does reputation scoring. There’s a move amongst us and our peers to connect directly to these bilateral SIs because customers want it. Customers’ overarching need is to do the block. They don’t want to miss the print on an exchange where they’re not represented.

We’re building proprietary tools with big xyt. Traditional TCA is T+1 so heads of trading look at execution quality from the day, week, month before. What we are building are live tools that we can drop and drag into the Bloomberg chat and say to the customer look have you thought about doing this with this ticket in order to get this outcome? For us, over the years we’ve seen lots of client chats become quite dormant. On the buy-side, some customers we speak to have hundreds of chats. For us to be relevant in an electronic space we have to have interesting content. If we can drag and drop a picture with what they should do for that particular order based on 20 days of geometric moving averages which big xyt have worked out for us, that’s extremely valuable.

How do you expect the low touch competitive landscape to evolve in the years to come?

Looking at the McLagan survey numbers for EMEA including UK, the low touch wallet has gone from around 30% to just under 40%. Therefore, having an electronic offering at the centre of a broader execution offering is really important. I’d say commissions have bottomed out on the low touch side and so going forward the way to win in the electronic space is really understand your customer. Customers want to see that you’ve got some academic rigour around your processes and your venue selection as well as a good commission rate even though you’re basically offering a high touch service at a low touch commission rate.

The roles of the traditional high touch sales trader and low touch electronic sales trader role are converging and people are talking about where blocks are traded and how they can optimise their outcome on a particular ticket. We’re going to be producing fortnightly research on what’s going on in the dark venue space. Separately we’ve engaged with another three innovation companies BPX Exchange which is waiting for its MTF licence, OptimX and OneChronos.

What developments are you seeing in commissions?

Large, sophisticated buy-side can build their own algo suite and they’re members all the exchanges so in order to make a new connection you have to stand out on several metrics. Two key metrics are venue reach and customer service. In flight analytics and unique wealth management and retail flow are also key. Typically, a big buy-side customer might have five bulge algo connections and then one or two spaces for companies like Investec where we’ve got an angle or differentiation along those lines. Given the high market share of the cash business here – just under 6% of the FTSE 250 – there’s decent resident flow sitting in ZebrA-X along with other wealth management flow which new customers can interact via our mechanisms.

If you rigorously control costs, you can still create profitable business on a standalone basis. Depending on how you negotiate with venues and exchanges is massively important. No one saying that margins are huge anymore but I’ve seen it done where you can run the business profitably on a standalone basis.

The post Fireside Friday with… Investec’s Dominic Lowres appeared first on The TRADE.

Dominic Lowres

Named ZebrA-X, the platform will help mid-market clients “execute at scale with limited signalling”.

“Over the past 18 months, we have observed significant changes in the medium-scale electronic agency landscape, particularly due to recent mergers and acquisitions within the industry,” Dominic Lowres, head of electronic trading and execution strategy, tells The TRADE.

“This dynamic environment has presented us with the opportunity to introduce an innovative offering that aligns with our clients’ evolving needs.”

Specifically, ZebrA-X includes a comprehensive suite of benchmark, liquidity-seeking algorithms, and is supported by a consultative Investec execution team.

“The ZebrA-X dark algorithm, along with Zebra dark lit strategies, Zebra block and the wheel solution, as well as benchmark strategies, allow them to execute trades efficiently, with a large amount of configuration choices,” adds Lowres.

“We anticipate a diverse stream of unique flows into ZebrA-X which will benefit all types of clients who will benefit from deep mid-price resident liquidity. We believe this approach delivers long-term value to clients and will help enhance overall levels of execution quality.”

The platform is designed to facilitate the efficient execution of block trades and helps in reducing both pre- and post-trade signalling through the capability to internalise institutional and retail order flow.

Speaking to The TRADE about what the offering entails more specifically, Lowres explains: “By pegging orders at mid-price for the duration of the trade, we effectively mitigate the risks associated with market signalling. Our strategic exchange memberships, along with our relationships with systematic internalisers and electronic liquidity providers, enable us to place orders directly across a diverse range of trading venues.

“[…] At the core of ZebrA-X is our commitment to bespoke execution consultancy, enhancing our relationships with clients through tailored execution analysis and insights. This integration of an expert ‘human touch’ approach with an innovative technology-led strategy allows us to deliver a high level of service to our clients.”

Investec’s market expertise spans the UK and South Africa, and trades in 64 markets from these two regions. Through ZebrA-X it is set to continue its recent expansion efforts into e-trading – which included the establishment of a dedicated electronic equity trading desk, headed up by Lowres, to meet the growing automated trading demand.

Read more: Liberum head of execution strategy and sales trader depart for Investec to set up new low touch desk  

Clive Murray, head of equities, says: “Bespoke execution consultancy is at the heart of our model, and ZebrA-X not only complements our existing high-touch trading solutions but also provides in-depth execution analysis that enhances our relationships with clients, helping to deliver an out of the ordinary level of service to them.”

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Joe Wald, BMO Capital Markets’ managing director and co-head of electronic trading left the bank, departing after four years in his most recent role, according to an update on his social media. Wald originally joined BMO in 2020 following the bank’s acquisition of Clearpool Group where he had served as chief executive for six years. Prior to founding Clearpool, Wald spent a year and a half at GAIN Capital as an executive vice president. He also previously spent almost five years as a managing director at Knight Capital Group and 13 years as chief executive of EdgeTrade.

BNP Paribas Asset Management appointed Alexandre Aubry as fixed income trader, based in Paris. Aubry previously served as a credit trader at Mizuho and MUFG Securities. Elsewhere in his career Aubry spent nearly eight years at Societe Generale Corporate and Investment Banking (SGCIB), most recently as a credit trader. Elsewhere in his tenure at SGCIB, Aubry served as a sales assistant for both rates and credit derivatives, as well as on the firms’ exotic interbank desk.

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Dom Lowres and Matt West

Dom Lowres, head of execution strategy, and Matthew West, electronic sales trader, are set to join the firm in the coming months to set up a new low touch electronic desk.

The new desk is Investec’s first low touch offering based in London and comes off the back of increased client demand, The TRADE understands.

Liberum declined to comment on the moves. Investec had not responded to a request for comment at the time of publishing.

Lowres joins Investec as head of electronic trading and execution strategy after almost 17 years with Liberum. Originally joining the firm in 2007, he also previously served as a pan-European trader and as head of trading.

Previously in his career, he spent 11 years at UBS in a pan-European equity and derivatives trading role, two and a half years at Bermuda-based investment firm Vokoban Corporation as head trader and treasurer, and a year and a half at JP Morgan Chase & Co as a graduate in exchange traded products (ETPs).

Alongside him, Matthew West joins Investec as a global electronic sales trader. He originally joined Liberum eight months ago from Numis Securities – now Deutsche Numis, following its acquisition by the bank last year.

Previously in his career, he spent four and a half years at Canaccord Genuity – Global Capital Markets as a vice president and electronic sales trader, a year and a half at broker-dealer ConvergEx Group in an equity sales and trading role and a year and a half at BNP Paribas Securities Services in a relationship management and sales role.

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Drew Vincent is set to join TD Cowen in an execution services role following almost 15 years at Credit Suisse. During his tenure, Vincent held various positions across Credit Suisse, most recently as head of AES sales trading, based in London. He also worked on the client coverage team of Credit Suisse’s agency electronic trading platform, Europe, focused on bespoke execution consulting and strategies. In his most recent position, Vincent led a team of sales traders, overseeing the restructured coverage in the aftermath of Brexit, as well as managing the review and deployment of algorithms and implementing T-1 related changes for business operations.

Aquis exchange chief operating officer Jonathan Clelland is set to depart next April, with chief revenue officer and head of Aquis Markets David Stevens appointed to replace him. Prior to joining Aquis, Clelland was chief operating officer at HSBC Investment Bank corporate finance division and of Shearman & Sterling in London. Clelland will remain as a special advisor in order to “ensure a smooth transition”. Stevens joined Aquis in 2021 and had previously held various senior roles across financial services and technology. His past positions included chief executive of foreign exchange broker Global Reach Group, as well as senior roles at Investment Technology Group, JP Morgan and Goldman Sachs.

Twelve individuals were appointed to lead UBS’ business across various areas as it restructures its operations. In the vertical global product pillars, Adrian Bracher was appointed to lead macro structured solutions (rates and FX), having joined UBS this month. Ramzi Issa was named structured credit and sustainable credit products lead, joining the business in November, as is Julien Bieren, soon to lead equity structured solutions. Also in the vertical restructure is Guilio Alfinito, appointed to lead QIS structuring, and Richard Walters, new lead of fund derivatives and structured finance solutions. Under the horizontal set-up, Romain Barba will join the business in November toco-lead APAC structuring alongside Ahmad Chaudry, while Chris Cook will head up Americas structuring. In addition, Erica Yeu will lead wealth management solutions, while Ahmad Chaudry leads wrapping solutions and Hannah Vinci oversees strategic products. Spyros Mesomeris, in addition to his global role, will head up EMEA structuring.

Investec named Paul Moss as its newest equity sales trader following three and a half years at Goldman Sachs. Moss has an established focus on global emerging markets, having worked across various jurisdictions within his roles. He has held various positions across the industry, most recently as CEEMEA (Central Europe, Middle East, and Africa) equity sales trader at Goldman Sachs. Before that we worked in a range of roles at Citi, most recently as pan Asia equity sales trader.

Instinet appointed Christopher Brown as executive director, latency sensitive electronic trading (LSET). Brown joined from JP Morgan where he spent nearly four years as executive director of quantitative investment strategies (QIS). Prior to that, Brown spent almost 3 years at Citi as director of systemic and quant trading solutions. Before joining Citi, Brown served as director, autobahn equity sales and trading, low latency DMA at Deutsche Bank. Elsewhere in his career, Brown held senior position at FIX Protocol, Chi-East and Instinet – the latter being his first tenure at the firm in 2009.

MUFG appointed Daniel Sbroocca in a credit trading position, joining from BNP Paribas where he spent almost nine years. While at BNP Paribas, Sbrocca most recently served as an emerging markets credit trader – a position he held for two years. Previously, Sbrocca held an emerging markets credit sales position at the firm. Elsewhere in his tenure at BNP Parabis, Sbrocca served in a corporate rates sales role for Northern Europe.

Wells Fargo appointed Jon Thorne as senior securities sales trading specialist, joining from Credit Suisse, where he spent 13 and a half years. Most recently, Thorne served as a listed sales trader – a position he held for almost 11 years. Elsewhere during his tenure at Credit Suisse, Thorne worked in a FX and futures execution position as well as a FX prime brokerage role. Before joining Credit Suisse, Thorne held an eFX and prime brokerage FX position at Commerzbank AG. Prior to that, he held the same role at Dresdner Kleinwort.

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Investec has named Paul Moss as its newest equity sales trader following three and a half years at Goldman Sachs.

He has held various positions across the industry, most recently as CEEMEA (Central Europe, Middle East, and Africa) equity sales trader at Goldman Sachs. Before that we worked in a range of roles at Citi, most recently as pan Asia equity sales trader. 

Read more – Trading in Asia: A future outlook

He initially announced his departure from Goldman six months ago before announcing his move to Investec on his social media. Speaking to the appointment, Moss said he was “thrilled to be joining the Investec team in London [and] working closely again with the team in South Africa.”

Earlier this year, The TRADE sat down with the Goldman Sachs equities execution services desk for EMEA to discuss the changing role of a sell-side counterparty, evolving client demands and market structure and regulatory change on the horizon.

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According to an update on social media, Hall has joined Abu Dhabi Commercial Bank as a FX options trader.

He joins the Bank after serving at Investec in the same role for five and a half years.

Previously, he served as an analyst, corporate and institutional banking at Investec for two and a half years.

Hall began his career as an intern at the Association of Chartered Certified Accountants (ACCA), where he served for four months.

“I’m happy to share that I’m starting a new position as FX Options Trader at Abu Dhabi Commercial Bank,” said Hall in his social media update.

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MillTechFX, the FinTech affiliate of Millennium Global Investments, and Investec’s new margin-free hedging solution enables transparent best execution across 10+ counterparty banks without the cash drag associated with having to fund initial and variation margin calls.  

Instead, Investec, a global bank and wealth manager will assume the credit risk, while MillTechFX’s marketplace will enable best execution, aiming to cut asset managers execution costs in half, says Eric Huttman, CEO of MillTechFX.

“We’re adding an extra flavour to the mix by solving two problems our clients have: enabling best execution whilst minimising cash-drag from margin calls,” he explains, adding that clients can benefit from MillTechFX’s execution services whilst also benefitting from Investec’s credit terms.

According to MillTechFX, average investment lifecycles for product debt funds last up to five years creating a significant long-term exposure to currency risk, which is usually hedged using FX forward contracts. However, these forwards can be a significant drain on resources with banks requesting collateral upfront – initial margin – and on an ongoing basis – variation margin -, causing a drag on the funds, with assets under management (AUM) being held back to meet a margin call instead of being invested.

Using MillTechFX and Investec’s combined solution, Huttman says asset managers can now get the best of both worlds — they can avoid cash drag on their fund performance, while still managing currency risk.

“By partnering, we believe that we can solve the constant trade off that clients face – that of obtaining the best market price or the best market credit terms – whilst also offering the best market practice post trade in Trade Cost Analysis,” said Sebastian Wright, from Investec Risk Solutions.

Max Dobson, Commercial Director at MillTechFX, said Investec’s credit appetite and balance sheet, combined with its independent multi-bank marketplace, will help managers significantly reduce their operational risk and costs while also enabling them to demonstrate best execution and best practice to their investors. “This is the first of many strategic partnerships for MillTechFX, and we look forward to announcing more partnerships with innovative firms like Investec in the coming months.”

MillTechFX is an independent, comparative multi-bank FX marketplace for fund managers, institutional investors, and corporate treasurers, focused on reducing their FX execution costs. 

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The South African bank said in a statement that a strategic review of the company found ‘limited synergies’ between the Specialist Banking and Wealth & Investment businesses and the asset management unit.

Under the restructure, the Specialist Banking and Wealth & Investment businesses will remain part of the Group’s current structure, but as an independently listed company the asset management segment would be better positioned for growth.

Henrick Du Toit, who currently leads the asset management business at Investec and is due to become co-CEO of the Group alongside Fani Titi next month, will head up the spun-off unit following its listing.

At the same time, the current Group chief executive, Stephen Koseff, and Bernard Kantor, who is a managing director at Investec, will leave the firm.

“We are confident that the proposed demerger and listing of IAM (Investec Asset Management) provides the simplicity of structure and focus to enhance the long-term prospects of IAM and the remaining Group for the benefit of our shareholders, clients and employees,” Du Toit and Titi jointly commented.

“Investec has a heritage and culture of which we are proud, shaped by the dedication and commitment of our employees and the support of our clients. We look forward to working closely as Joint Group CEOs during this phase of our evolution and to implement this transaction which we expect will create significant shareholder value over time.”

Koseff and Kantor added that the individual businesses are well-positioned strategically with strong market positions and good prospects, and the time is right to demerge the asset management unit to support the next phase of the Group’s development.

“In recent years we have also made good progress in expanding our banking and wealth management franchises in our two key markets and improving their operational and financial performance,” they concluded. “We believe the transaction will allow these businesses to fulfil their full potential and shareholders will benefit from future value creation through direct ownership of two separately listed companies.”

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Three of Investec’s founding members will step down from their roles as of October this year after almost 40 years with the South African bank and asset manager.

Chief executive officer Stephen Koseff, managing director Bernard Kantor, and risk and finance director Glynn Burger, are considered founding members of Investec having steered the group since the 1980s.

A statement from Investec explained Koseff and Kantor will serve as executive directors as of April 2019, continuing to provide support and advice to incoming executives.

Burger will retire on 31 March 2019, but will assume the role of non-executive director on certain subsidiary and associate boards.

“When we joined Investec almost 40 years ago we aspired to develop a leading financial services group focused on our clients’ needs,” Koseff said. “We have worked with most of our senior management team for over 20 years and we are very proud of what we have accomplished as a team.”

Fani Titi and Hendrick du Toit have been appointed co-CEOs and will become jointly responsible for the leadership and management of Investec from October 2018.

“The board is confident that Fani and Hendrick, together with senior management, will continue to grow and build Investec’s core businesses and deliver the right outcomes for the group’s clients and stakeholders,” Investec said in the statement.

Titi has been a non-executive director on the Investec Group board since January 2004 and chairman of the group since November 2011. Toit is the founding CEO of Investec Asset Management and will remain in this position until 30 September 2018 to oversee the transition period.

The current chief operating officer and chief financial officer of Investec Asset Management, Kim McFarland, is to take over as group finance director as part of the leadership reshuffle from April 2019.

The statement concluded with comment from the newly appointed joint CEOs, which said: “On behalf of the board, we would like to thank Stephen, Bernard and Glynn for their long standing commitment and invaluable contribution to the development of the group.

“Under their stewardship, Investec has grown from its origins as a small finance company founded in South Africa in 1974 into an international specialist bank and asset manager, entrusted with more than £150 billion of clients’ funds and more than £50 billion of on-balance sheet assets.”

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