Currently, government consultations are focused on plans for the wholesale consolidation of the local government pension scheme (LGPS) and defined contribution (DC) sector, while the defined benefit (DB) arena is remaining largely untouched. 

As these changes ramp up, the buy-side is set to reap more power when it comes to managing the assets, subsequently leading to an operational shift within organisations. 

Delving into the how, Mark Austin, pension and insurance executive, EMEA, at Northern Trust, highlighted that these reforms should eventually allow pools of LGPS and DC assets to become more self-determined in terms of the oversight of their managers and the oversight of their assets against their liabilities.

The ultimate end, Austin explained, is one wherein “the buy-side is going to start to get much more power and will ultimately potentially become a price-giver not a price-taker. 

“[This is] because, when they get to 100-200 billion, they can insource some of that capability that’s currently provided to them by some of the index managers by the employee benefit consultants, and they can actually take much greater control and take a much greater part in managing their assets.

“[…] That’s not something that’s going to happen overnight – consolidation and the government consultations always take ages, but behind the scenes, that consolidation is already happening reasonably rapidly in the DC and LGPS markets.” 

Read more: A deep dive into the ongoing UK capital markets reform agenda

Discussing in more detail what this could mean for the structural make-up of the buy-side in this area, Austin confirmed that there is potential for real change.

“It really depends on how those how those big asset pools structure themselves, but we can foresee certain areas in the future where an asset manager and a very large buy-side pool will collaborate on a bespoke index.

“That will enable them to differentiate themselves, because ultimately these big pools are going to end up in competition with each other […] We don’t see the future being how it is at the moment, wherein you issue a mandate, have a beauty parade, everyone submits their RFP and their price, you choose one and you’re off to the races. There’s going to be a lot more long-term collaboration between both sides.” 

John McCareins, head of international asset management at Northern Trust, further expanded that it’s important to not have an inward-looking methodology going forward and instead seek holistic solutions to the continued consolidation of pools.

“We don’t think about ourselves, we need to move away from asset management or asset servicing and really think how we engage with large, sophisticated investors as a problem solver.

“[…] There’s enhanced collaboration amongst our different groups and we’re jointly sitting down and saying how do we co-develop an integrated solution from investment design, through implementation, oversight, monitoring, reporting and all the analytics behind it.”

Those set to suffer most from this change are, understandably, the smaller boutique asset management firms which historically have had their success defined by winning ‘beauty parades’, added McCareins. 

“Now that beauty parade becomes less and less frequent and the discussion ends up starting in C-suite, there might not even be opportunity for you to compete in the future. Of course, it plays into some of our strengths, but that will change the makeup of the industry, and namely how boutique firms think about value proposition and strategy.”

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Brian Rubin, Dwayne Middleton, Paul Cable

T. Rowe’s fixed income operations spread across three continents, with dedicated teams based in the US, the UK, and Hong Kong. Dwayne Middleton, global head of fixed income trading, is the one responsible for overseeing these teams, developing talent, defining strategic direction, building strong relationships, and integrating increasingly advanced technology.

Speaking to The TRADE about his career in asset management thus far and how his experiences shape the way he leads the team, Middleton shares that his path so far has not been conventional – and that that, of course, is a good thing.

“My journey to the trading desk has been anything but traditional, and I’m incredibly proud of that. As a person of colour coming into asset management, I didn’t take the most conventional path. Still, my parents – both educators – instilled the value of integrity, curiosity, and hard work from an early age. These lessons have shaped my career and how I approach every decision on the desk.”

“[…] Relationships have been central to my journey. Connecting with colleagues, peers, mentors, and partners across the market has taught me as much as any classroom and reinforced that success in trading isn’t just about numbers – it’s about engaging with people. Non-traditional paths often lead to the most rewarding destinations, and I appreciate the chance to contribute to an evolving and more inclusive industry.”

In terms of what his guiding principle is while performing his role, Middleton highlights integrity above all, further adding: “my approach is a willingness to listen, learn, and deliver results”.

When it comes to who heads up the various desks, Paul Cable, head of international fixed income trading is responsible for the London and Hong Kong trading teams, while Brian Rubin, VP, heads up the US fixed income trading offering.

Cable’s team trades the length and breadth of the international fixed income and FX markets, comprised of a team of nine traders (six in London and three in Hong Kong), while Rubin oversees a desk of 14 fixed income traders from the T. Rowe Price Baltimore base – set to unveil their new HQ at the location in late Q1 2025, The TRADE understands.

Sharing expertise, local success on a global scale

Speaking to The TRADE, the team emphasises that individual responsibility is the key to team success, a core perspective within the T. Rowe Price school of thought, which extends across both internal teams and regions.

“Our international reach allows us to identify opportunities, manage risk, and serve clients across time zones while maintaining deep local market expertise,” affirms Middleton, adding that the firm’s approach is as “an integrated global fixed income trading platform where market insights flow seamlessly across markets”.

“The team is our biggest strength,” agrees Cable, “It’s a strong group of exceptional traders with deep individual subject matter expertise enhanced with a breadth of knowledge across markets that provides insight to the investment process and contributes to great client outcomes.

“I’m now into my twenty-sixth year at T. Rowe Price, the last 16 of which have been as part of our global trading team, and it’s been a real privilege to watch and be part of the growth of our international presence.”

What is notable when it comes to how the team appears to operate day to day is how the role of traders is not solely limited to execution. It also extends further afield to understanding investment theses through working closely with investment team members, allowing them to provide market colour and effectively identify relative value opportunities, explains Middleton.

“Portfolio management and research partnerships drive our competitive advantage […] This integration between trading and the investment platform creates a powerful feedback loop that enhances transaction quality and client investment outcomes.

“This integrated approach proves especially valuable during market stress when our ability to source liquidity and insight across markets enhances the investment process.”

Rubin concurs, adding that the success behind T. Rowe Price can be put down to this approach, with the group of talented traders encouraged to be more than just order executers.

“Our traders effectively partner with analysts and portfolio managers to identify opportunities while analysing both upside and downside to benefit our clients. Traders are involved in every step of the decision-making process which gives them the opportunity to add value.”

Speaking to The TRADE from Baltimore about the dynamic of the fixed income desk, Michael Daley, VP, fixed income credit trader agrees that the lifeblood of T. Rowe Price truly is its collaborative culture.

“The trading desk is fully ingrained in the investment process and is expected to generate ideas and bring liquidity to our entire platform.  Traders work closely and collaborate on a daily basis with portfolio managers, fundamental analysts, and quantitative analysts.

“This collaboration is inclusive and one in which all parties in the investment process respectfully and constructively challenge one another.  This collaborative nature helps ensure best ideas from investments and trading are incorporated in our strategies. All involved parties are key contributors which helps foster continuous idea generation.”

This idea of a level playing field from all those involved is a key contributing factor to T. Rowe Price’s success, the team enthuses, wherein communication flows not just vertically, but also horizontally.

Communication isn’t just top down

When it comes to the desks’ dynamic, it is clear that openness rules, and the willingness to learn and embrace the new is encouraged and fostered.

Communication across the desk, Middleton explains, flows freely across all team levels, with this approach enabling efficient opportunity capture.

“A strong trading team thrives on diversity of thought, seamless communication, and a shared commitment to the firm’s goals. Trust and mutual respect within the team – and with external partners – are critical for success.”

He adds: “A focus on innovation and a proactive approach to embracing new tools and strategies set the best teams apart in an increasingly competitive market.”

When it comes to the most important lessons, adaptability is flagged as key when looking to drive success in trading. Given that markets are dynamic by nature, the continued increase of black swan events, and the rate of technological evolution showing no signs of slowing down, responding quickly and effectively to these changing conditions as a unit is more critical than ever, the team tells The TRADE.

“The desk is a dynamic team who is working towards the best outcome for our clients. We promote a team environment where everyone has a voice and can make an impact,” enthuses Rubin.

“Listening is key to success. Sometimes taking that step back and receiving the message helps in not making quick or wrong decisions. Listening is the key to communication and collaboration as if others feel that you are not just hearing but digesting their message it makes things go smoother.”

In an industry where work/life balance and work satisfaction are increasingly being brought to the fore, this collaborative, cross-team approach is not only effective, but also, the team notes, enjoyable.

As Cable explains: “the culture and dynamic on the team is collaborative and supportive which creates an enjoyable environment to operate in”.

Future life on the desk: Traders as architects?

This approach of well-rounded traders who thrive on co-operation across teams  is set to be increasingly important  for T. Rowe Price. As the industry continues to be shaped by ever more innovative technology, so too are the role of traders.

As Rubin points out, the most effective approach is one in which the desk is able to partner with other segments of the T. Rowe team (such as portfolio managers), but he also sees this evolving even further in the future.

“The trader’s role will look very different with fewer manual processes and balance the use of advanced technology to help make decisions. Traders will have more data at their fingertips and will collaborate with not only analysts and portfolio managers but other teams including quantitative analysts and technology to access liquidity efficiently while markets continue to get more complex.”

Middleton concurs, going on to explain that collaboration will remain key, and also that traders will become more interconnected across not just teams but also regions.

He adds: “The trader’s role will resemble that of an architect as the next gen traders design and deploy strategies that blend human insight with advanced technology. Traders will increasingly act as data, liquidity, and market intelligence integrators, leveraging technology to construct execution frameworks tailored to dynamic client needs and market conditions. 

This shift of course comes hand in hand with technology, which Middleton highlights will enable a more immersive and real-time interaction, as well as allowing traders to focus on high-impact, strategic decisions and relationship-building.

When it comes to what this could look like empirically, he explains: “The trading workspace will transform into an interoperable information centre, where advanced visualisation tools and integrated platforms provide a 360-degree view of markets, liquidity, and risk. Desktops will become interconnected workspaces that seamlessly merge data feeds, analytics, and trading protocols.

“[…] An environment where technology amplifies the trader’s expertise, enabling individuals to operate with precision, creativity, and efficiency in an increasingly complex and globalised market.”

Speaking to the future of traders’ roles, Daley also emphasises the importance of relationships, which “will continue to serve as the key driver to market liquidity”, as well as highlighting that “as market structure continues to evolve, strong partnerships and thought transparency with dealers, vendors, and third party trading platforms will be paramount”.

“Relationships are the lifeblood of our business [it’s important to] not to be scared of market evolution, rather, embrace it. Look for ways to serve as a thought leader, value the insight of peers across the industry, and collaborate with both the buy- and sell-side to help push market innovation forward.”

Pressure makes diamonds

No two trading set-ups are the same, and when it comes to what makes T. Rowe Price’s fixed income traders tick, it is clear that co-operation and collaboration built on a strong bedrock of solid relationships, alongside the freedom to speak up and be creative are the main pillars behind the desk’s success.

“The team dynamic on our desk is highly collaborative, fast-paced, and built on mutual respect and trust. Each member brings unique skills and perspectives, cultivating innovative problem-solving and knowledge-based decision-making,” asserts Middleton.

“[…] The best traders combine deep market knowledge with strong analytical and interpersonal skills. They stay calm under pressure, remain humble, think critically, and execute with precision. Curiosity and a willingness to learn are essential as the landscape constantly evolves.”

It is with this strong foundation of co-operation between the T. Rowe Price team that the desk is able to use pressure to create top grade diamonds.

As Middleton affirms: “We thrive under pressure by staying focused and supporting one another while maintaining an environment of constructive feedback. We value individual accountability and team success, creating an environment where everyone can perform at their best while contributing to a greater whole.”

The post The T. Rowe Price fixed income desk on making an impact appeared first on The TRADE.

I was at Bear Stearns through the JP Morgan integration, and I would have been a Bear Stearns lifer had it not been for the intriguing opportunity to join Credit Suisse as a multi-asset and special situations spokesperson across all products. I made the jump to Credit Suisse and we developed this product nucleus within the equities division to facilitate content distribution and market making across all asset classes, including volatility strategies tailored for hedge fund clients.

Mike Simanovsky, the founder and CIO at Conversant, served as a partner at Senator Investment Group, there for nine years before launching Conversant in early 2020. During Conversant’s formative stages, Mike and I had befriended one another while I was on the sell-side. He envisioned Conversant as a platform to capitalise on real estate opportunities across the liquidity spectrum in both public and private and up and down the capital structure including equity and credit. When Mike called me about the opportunity to join Conversant, he emphasised the firm’s long-term, buy-and-hold strategy, akin to private equity. He didn’t need a day-to-day trader, he sought someone who spoke his language, had a long-term mindset, and could be conversant across markets. Mike was building an investment team and process focused on idea generation and creative structuring. I was drawn to the flexibility of this mandate.

What does your role involve?

I oversee the capital markets function and I assist in origination. Our public positions and investments have originated through a rigorous capital markets process. We spend a lot of time thinking about capital markets activity and how that could create potential opportunities on both the public and private investment side. 

There’s been a reopening in capital markets. It seems like a lot of issuers are trying to finance or fund next year’s capital needs and are getting ahead of it opportunistically. It’s been busy. On the equity capital markets (ECM) side, volumes are up significantly, close to double from last year, and even more so since 2022. I maintain constant dialogue with ECM and leveraged finance desks to identify the next potential investment opportunities. 

Taking a step back, our investment team consists of seven professionals, including the chief investment officer, three principals, two analysts and myself. We structure the team by real estate sub-sector. We of course cover the traditional real estate sub-sectors, but also emphasise non-traditional real estate and real estate-adjacent sub-sectors, including digital infrastructure, asset managers, car washes, and student housing, as an example subset. Each investment professional is responsible for covering their respective sub-sectors across public and private markets. We have a lot of go-getters on the investment team which I love. We all sit together in our headquarters, and we emphasise collaboration. There’s a very healthy dialogue at all times at both the portfolio-level and the position-level.

Despite being a smaller organisation, we have a strong institutionalised process. My day may range from trading liquid US stocks to more illiquid European names. We do a lot of bespoke or more idiosyncratic trading when it comes to distressed bonds or structured credit. 

We take a capital structure agnostic approach to our investment mandate and spend a lot of time thinking about relative value within the capital structure. We look for the opportunity that best achieves opportunistic returns on the best risk-adjusted basis, be it in equities, corporate bonds, distressed bonds, bank debt, or convertibles. We do some listed options more on the index side as hedging instruments. We are nimble and agile. 

What is the core skillset for someone in your role?

It’s important to have awareness on cross-market currents and on what’s happening globally across every trading jurisdiction. But even more so locally, whether it is US and Europe and just having a good handle on whether it might be rates or a factor or certain style that is percolating in the market. It’s about being balanced and having a good pulse and awareness of what’s going on across markets. I’m wired to be idea-generative and an idea-oriented person. 

Why did you choose Conversant?

The beauty of what we’re doing at Conversant lies in our ability to be flexible and opportunistic. We pride ourselves on being a flexible capital provider to real estate and real estate-related companies and platforms, investing throughout the capital cycle. We’re opportunistic in nature, looking for situations that meet or exceed our return thresholds on a risk-adjusted basis. We have a synergistic approach to both public and private investments, leveraging insights from the private markets to inform our strategies in the public markets, and vice-versa.  

What are you seeing in terms of market impact following the election?

There’s a lot of copycat behaviour. People have a playbook from the 2016 election, a script for US exceptionalism, deregulation and reflation. I think we’ve come a little too far, too fast. The markets have cheered the new administration coming in and what that means for deregulation, consolidation, tax and tariff policy, but there are still several unknowns. With regards to deregulation, for us, it’s about what it might mean for further loosening in commercial real estate or real estate credit and how that might convert into further capital markets activity and lending. The setup for 2025 is harder. The S&P is at around 22 times earnings. The last election, it was 16 times earnings. The bar to beat is a lot higher. If you’re a company in the US, it’s time to grow or go home and there will be very little margin for error.

We’re not macro timers. We’re not handicapping election outcomes, but a lot of what we do is rate sensitive. We own a lot of rate proxies with duration, so one thing we think about is mitigating those sensitivities. You’re entering a fed cutting cycle, yet rates are 65bps wider since the first cut in September. What does that tell you? Growth is good and clearly there are renewed inflationary/fiscal worries given the new administration. There might be a tipping point soon in the 10-year, let’s say around 4.5%, and we are mindful how quickly sentiment could shift in real estate and more so homebuilders. If we had 5% rates again that might quickly become a market problem.

This might speak to overall more deregulation or banks willingness to lend or make markets, but it does seem like there’s more desire to take risk from the bigger banks who have the balance sheets. In terms of market making or liquidity facilitation, a lot of the bigger firms have the appetite to do it. From my vantage point, you are already seeing more risk bids at tighter discounts in block form. 

What workflows are ripe for more automation?

There’s a lot of analytics already being offered. You’re seeing it from vendors in Bloomberg around portfolio construction and analytics to augment or improve processes specifically to correlation and factor tilts. One of the things that you might see is for deals specifically in the US and Europe, you’ll ultimately see better deal indication streamlining, meaning direct order entry of orders for ECM deals. That’s one thing that I’m focused on. 

Everyone’s obsessed with AI replacing human capital. It’s certainly a unique resource, but in our view, you are always going to need someone on the other end of the phone. Our business is relationship-based and complex whether it is market making or investment banking and origination deal making. Human capital will not be replaced. Will it be improved through AI productivity and enhancement efficiency? I believe so.

What advice would you give to yourself or someone starting out in your sphere now?

Be long-term minded and patient. Markets are efficient and if you’re good at what you do and you prove it, there’s natural progression in your seat whether that’s ultimately running a desk or an entire division at a large investment bank. A lot of people look for instant gratification, but my advice is to play the long game. Act instinctively yet take calculated risks. Competency and ability always prevail. 

I was an analyst at the time of the global financial crisis. I was 28 years old and only seven years out of college. It was a frightening time given the unknowns. However, everyone at Bear Stearns went on to do bigger things. I take a lot of comfort in knowing that the best athletes ended up in great seats at some great firms.

The post Trader of the Year Hedge Fund: Conversant Capital’s David Alfred appeared first on The TRADE.

Stephen Roche

Saphyre’s automated system manages the onboarding and maintenance of custody, broker trading, and buy-side accounts, while ensuring real-time synchronisation of reference data across them.

Stephen Roche, president & co-founder of Saphyre, said: “We’re ecstatic to have Ninety One, a leading financial investment management firm, join our endeavor.”

Roche added: “By deploying our technology Ninety One will maintain data integrity through the lifecycle of a fund providing Ninety One with speed in the pre-trade thru post-trade processes not for just its firm, but also with Ninety One’s broker and custodial counterparts.”

The synchronisation creates a centralised, up-to-date data source accessible to all authorised parties on the platform. Additionally, the solution reduces issues related to failed trades and facilitates real-time, T+0 collaboration, supporting the requirements for T+1 processing.

The post Ninety One latest to join Saphyre platform appeared first on The TRADE.

Liontrust and BNY declined to comment when reached out to by The TRADE.

While it is not yet confirmed what the final agreement will be, it appears the setup will be focused on covering non-UK activity.

“As part of our ongoing commitment to enhancing operational efficiency, it is proposed to deepen our strategic relationship with BNY by using its Buyside Trading Solutions for our trading capabilities,” said Liontrust in a trading update released on Wednesday.

“This collaboration will allow us to extend our trading capabilities beyond UK trading hours and access more counterparties, with a solution that is scalable and with a partner that is investing heavily in its trading services to ensure that it remains cutting edge.”

Liontrust was awarded the Multi-Asset Trading Desk of the Year and Mid-Cap Trading Desk of the Year by The TRADE in 2022 and 2017 respectively. Liontrust’s multi-asset desk was also nominated for the Multi-Asset Trading Desk of the Year at Leaders in Trading 2024.

Read more – BNY’s Rebecca Crowe talks outsourced trading

Once finalised, the asset manager would join a growing list of firms that have turned to outsourced trading providers in the last 12 months to manage some or all of their trading activities.

Most recent was news in December that Avanza Fonder had outsourced to Northern Trust. In October, UK-based asset manager Artemis selected Northern Trust to provide outsourced trading services for its equities and derivatives activity, effective January 2025.

BNY itself won a major deal in March 2024 when it agreed to deliver Goldman Sachs Asset Management global trade execution services in EMEA, the US and APAC markets across fixed income, FX, derivatives and ETFs. 

The post Liontrust exploring outsourced trading arrangement with BNY appeared first on The TRADE.

He was most recently head of UK equity trading at UBS Asset Management, having previously served as a high touch equity sales trader at Kepler Cheuvreux.

London-based Lawrence has extensive experience working across both the sell- and buy-side, working across asset classes.

Prior to Kepler, he had worked at Principal Global Investors as a senior equities trader, Instinet as an equity sales trader, Ennismore Fund Management as head trader, and also served as a European market maker at ABN AMRO.

Read more: In conversation with… Stuart Lawrence

Lawrence announced his new role in a social media announcement. UBS Asset Management had not responded to a request for comment at the time of publishing.

The post Lawrence named head of European equities trading at UBS AM appeared first on The TRADE.

Market consolidation versus liquidity fragmentation will be a point of discussion into next year. The Swiss Exchange Group acquisition of Aquis will be an obvious one to watch, while in contrast, there are a slew of new liquidity opportunities expected to go live in 2025. However, the jury’s out on whether further fragmentation is needed given the continued squeeze in order book liquidity and/or whether the market has the capacity to connect as internalisation continues to take priority for many.   

Next year could see the re-emerging debate around shorter trading hours ratchet up, which contrasts to the 24-hour trading agenda in the US. Separately, conversations are likely to continue in support of single regulatory framework for Europe. 

The selection procedure for the European equities tape starts next June, with a decision made by the end of 2025. Hopefully the UK will also announce their views on an equities tape next year. September will see Europe ban payment for order flow and introduce a new 7% single volume cap for dark trading. Otherwise, focus must be on making equities markets more transparent and less bilateral to attract international investment and prevent further primary issuance leaving these shores.

Joe Collery, head of trading, Comgest 

I feel the biggest trend in 2025 will be redefinition of the roles of ELPs [electronic liquidity providers]. Market participants continue to lament the inadequacy of liquidity in continuous market trading which will lead to shift in how ELPs provide their liquidity to fill this perceived gap.

Jo Burnham, risk and margining SME, OpenGamma

Predictions are a tricky business. Three years ago, would many people have predicted that Donald Trump would be returning to the Presidency in early 2025, with long-term wars raging in both Europe and the Middle East? Investors have learnt that they need to expect the unexpected, which is why liquidity risk management practices are now so important.

I see this being a big theme for market participants next year – ensuring that they are operationally resilient. Being able to navigate margin requirements and optimise the ways that they are met is so important in a volatile geopolitical environment, which inevitably permeates through to financial markets.

Bjorn Sibbern, global head of exchanges, SIX Swiss Exchange 

In 2025, the challenge for European primary markets will be creating an investment environment that fosters innovation while attracting global IPOs, not just competing for regional dominance. On the secondary markets front, liquidity fragmentation remains a pressing issue. 

By the end of next year, exchanges will need to have made significant strides in venue innovation, not only to retain institutional flow but also to foster greater retail participation. Short and sharp bouts of market volatility, as we saw this year with the global equity sell-off in August, could also shape the trading landscape. This is why exchanges must evolve with smarter tools and deeper liquidity to remain the trusted platforms for price discovery. 

Matt Clarke, head of distribution and liquidity management for EMEA, XTX Markets 

In 2025, we expect five or more ELPs [electronic liquidity providers] to offer actionable liquidity directly into the major EMS platforms and the Reactive Markets network across EU and US equities. It is entirely possible we’ll see one or more banks extend similar offerings to select clients. Our preferred approach involves a broker in the middle, allowing buy-side firms to outsource ELP onboarding and benefit from aggregated prices in competition. This model enables liquidity providers to offer tailored liquidity and collaborate with end-clients. 

The exact form of this workflow is still developing with the buy-side playing a key role in shaping it. Successful solutions will have low onboarding friction, work for both automated and click trading, and aggregate all liquidity sources in one place. This aggregation of liquidity will drive fierce price competition, leading to better trading outcomes.  The potential rewards of this workflow are increased size and mid presence, resulting in measurably better execution quality. As always, results are what will drive long-term adoption.

Keep an eye out for further predictions unpacking all corners of the market published by The TRADE in the coming weeks!

The post The TRADE predictions series 2025: The liquidity landscape appeared first on The TRADE.

According BMLL Technologies data, bilateral trading accounted for 35% of overall notional traded as of November 2024, including request for quote (RFQ), off-book on-exchange, over the counter (OTC) and SI volumes both above and below the large in scale (LiS) threshold. This marks a 12% increase since January 2021.

Defining what falls into the bilateral sphere is important. Regulators in the last few months have been attempting to clean up reporting flags in a bid to offer greater transparency to participants looking to better understand the landscape.

One of the most notable bilateral growth stories, however, is that of the off-book on-exchange segment. This umbrella term again accounts for a whole host of things including retail flow and high touch agency crosses. Cboe and Aquis’ new VWAP offerings will also print their flow as off-book on-exchange for example.

Central to the growth of the off-book segment and perhaps responsible for ruffling the most feathers is a relatively new workflow whereby non-bank liquidity providers quote directly to the buy-side via their execution management systems (EMS) leveraging actionable indications of interest (IOIs). It’s this new growth among other areas that has attracted notable attention from the industry and sparked new offerings from the more traditional players looking to preserve their market share.

The benefits of streamlined buy-side workflows are clear: offering better price improvement, reduced market impact and time to market and greater flexibility around liquidity access. What’s more, with volumes on the lit market continuing to decline, one can hardly blame traders for exploring alternatives to traditional workflows.

That being said, the bilateral segment is becoming increasingly meaningful with both alternative and now traditional players exploring new workflows, and some participants are now beginning to question whether such a level of bilateral trading exists that could be detrimental to the market’s long term health. Some participants have even begun suggesting that the European equities market could find itself on track to adopting an almost completely off-exchange foreign exchange model in the next few years if it continues on its current path. However, this eventuality is highly unlikely. Said bilateral workflows rely heavily on a reference price from the lit markets. Ironically, the thing that stands to be damaged if too many volumes move off-exchange.

For buy-side traders, the appeal of executing without going out to market is – understandably – hard to resist, but the question as to whose job it is to now moderate the level of bilateral liquidity in the market is now somewhat continuously being asked.

“I can understand the appeal to a buy-side trader thinking ‘I can clear my entire blotter with one click of a button so why don’t I do that and not have to worry about direct market impact?’,” explains T. Rowe Price’s equity trader and market structure analyst, Evan Canwell.

“There’s definitely a place for bilateral liquidity, but it’s incumbent on us as the buy-side to understand what we’re interacting with and think about the balance. It’s like fast food, it might feel good in the short term but there could be unintended consequences for the longer term health of the trading ecosystem.”

Non-bank providers

One of the most spoken about names in this context is, of course, Optiver. While the firm is not solely responsible for the growth of off-book on-exchange, the market maker’s model of connecting directly to the buy-side via EMS has taken the market by a storm. The firm’s model is risk filling but without acting as a systematic internaliser (SI).

“It [bilateral trading for blocks] never really took off as a product whereas the way I look at the more recent developments in bilateral liquidity, it’s for a lower liquidity demand which does feel more sustainable,” says Legal & General Investment Management’s global head of trading, Ed Wicks.

While historical bilateral connections with other alternative providers – namely XTX Markets – have historically been more focused on smaller flow, Optiver’s model offers the opportunity to trade blocks of 5-20% of average daily volume (ADV), The TRADE understands. And it’s this element that has piqued buy-side interest. It’s easy ‘fill or kill’ model means traders don’t have to go out to market in order to execute, simplifying workflows and reducing market impact.

“The liquidity provision workflow can be a useful tool, especially given the recent record lows of lit liquidity. If you can get done and risk filled, there’s an efficiency to that,” says Hayley McDowell, EU equity electronic sales trader and EU market structure Consultant at RBC Capital Markets.

It’s this efficiency that has seen the buy-side continue to use this model of trading to execute flow. According to BMLL Technologies data, as of November 2024, off-book on-exchange constituted 58% of all bilateral trading activity – around €376bn – evidencing how attractive this model is to firms in comparison with multilateral venues and platforms in the lit markets.

“If I see a workflow solution that is potentially saving costs for funds and ultimately delivering good outcomes for clients then we have to evaluate it,” adds Wicks.

“For us, it’s [bilateral] more of an efficiency workflow tool for the lower liquidity demand orders or baskets we have. We consume the feed into our EMS so when an order hits our desk we can see straight away whether the whole order can be fulfilled by the bilateral liquidity. Not having to declare anything is an asymmetric benefit to us because we can see whether that liquidity can be fully filled on a fill or kill basis.

“If we were to go into the secondary markets utilising a liquidity seeking algorithm that would have a cost relative to trading at midpoint on the bilateral feed. For a subset of our flow from a cost perspective and an efficiency perspective it makes a lot of sense to us to utilise that bilateral liquidity.”

In light of the growing bilateral sphere, agency brokers such as BTIG and Redburn Atlantic have also been busy launching services that aggregate and streamline liquidity from alternative and electronic liquidity providers (ELPs) and connect the buy-side with them via an EMS or via a custom algorithmic strategy, all with the aim of easing the strain on the buy-side by channelling liquidity to them via one location.

“Traditional liquidity aggregation is not an option when trading bilaterally, but connecting clients to multiple competing quotes – on a fill-or-kill basis – via a single access point saves them time, limits selection bias and increases overall hit rates,” head of trading and algorithmic solutions at Redburn Atlantic, Phil Risley, tells The TRADE.

“The challenge in optimising the approach to principal liquidity, is to balance the ELP’s need to understand the profile of the flow with which they interact and the requirement to minimise information leakage.

“Ultimately, the goal is to create a virtuous cycle, with high quality flow incentivising larger and more consistent quotes – aligning interests and ensuring everyone wins.”

Redburn’s offering claims to tackle issues around market impact by operating under a fill or kill basis. Each client order is matched immediately in its entirety with a single ELP or not at all. It is directly available to the buy-side with qualifying flow via their EMS as a custom algo strategy. A spokesperson confirmed that the firm is speaking with all of the major non-bank SIs regarding onboarding. The ELP liquidity is not aggregated but available from a single point of access.

BTIG’s offering currently takes in live streams from three ELPs. Based on client preferences, it streams the best quote into the buy-side client’s EMS. A source has confirmed that the number of provider partners used by BTIG is growing.

Said quote can be anything from mid to far point liquidity in different shapes. If the client wants to interact they click to instantly execute or use OMS automation. The client then faces BTIG for settlement so there is no additional onboarding required.

The client has the choice whether to remain anonymous or allow ELP to profile them which may result in tighter pricing. This offering is also available via BTIG algos which for some buy-side clients may fit workflow better with wheels.

Traditional banks strike back

Given the growth of market share seen by these alternatives, the market has also seen a wave of new interest in this area by the traditional banks as they look to maintain their market share and retain commissions.

Major sell-side have offered systematic bilateral liquidity for years now but the practice hasn’t seen mainstream adoption for several reasons. Historically connecting bilaterally to a CRB for example has always been seen as a bit of a blind play as you don’t necessarily know what else is in there. The services for blocks have typically also only been on an ad hoc basis for banks’ larger clients.

“The evolution of IOIs being sent directly to client EMS’ is a net positive and opens up further trading opportunities and importantly enhances workflows, particularly when offered alongside a robust TCA process to help manage the challenges of longer term parent level impact,” explains Goldman Sachs’ managing director and head EMEA electronic and program trading, Alex Harman.

“This year we have been working with the major EMS’ to utilise actionables to deliver liquidity in several products; blocks, IS and close benchmarks. Expect to see a lot more from us here in the future.

“Our systematic GMOC product was the first of its kind and remains a heavily used product as part of our close benchmark offering. More recently we launched our DTC Stealth product, which is a tactic within our SOR that leverages dedicated liquidity from our systemic internaliser, plus other non-displayed liquidity with the aim to fully fill parent orders.”

With alternative players now targeting larger flow, major sell-side are looking to create their own direct connections via EMS providers in order to compete in a second wave of the bilateral evolution.

“I know several [big banks] are building aggregators and liquidity workflows that try and mimic some of the bilateral features. Whether we see a pure bilateral product from the investment bank similar to what we see from the alternatives I still don’t know if that will be the case,” adds Wicks.

“More traditional liquidity providers like the investment banks are now looking at it with some degree of urgency to try and insert themselves into that workflow. I don’t know how many more [bilateral offerings] we would need frankly but we will look at them when they come.”

Fast food?

With both electronic and alternative players cementing their workflows and major sell-side looking to follow suit, the bilateral segment is becoming extremely meaningful for both the buy-side and the wider market. And this meaningfulness is what’s raising some eyebrows. With the proposition now irresistibly attractive to the buy-side, the longer term impacts are now being assessed.

“The issue comes if too much of your flow goes that way,” says McDowell. “It can also impact on-venue liquidity. If has a trader has a large order on the pad, they might go to an ELP first, then maybe an SI, before going to the order book last.”

Given the existing decline of lit, this natural evolution – and it is a natural evolution – has the potential to become a bit of a self-fulling prophecy as spreads and toxicity increase in the lit market.

“Most buy-side firms and a lot of market participants would recognise that it’s in most people’s interests to make sure that lit markets remain a functioning viable part of the market,” concurs Wicks.

Traditional sell-side bring with them whole swathes of other auxiliary services that are bundled with their services across settlement, payments and research to name a few. Electronic and alternative liquidity providers do not provide these extensively and their services are usually limited to the execution side of things.

“Longer term, if we end up with a large part of the market trading bilaterally then we may start seeing impacts elsewhere – for example, will traditional brokers start reducing resources in other areas to focus more on liquidity provision?” Asks Canwell. “Will we see reduced price formation and greater toxicity on-exchange if smaller orders end up in bilateral mechanisms?”

The role of the regulator

The question now being asked by many is: what is the role of the regulator? Some participants are asking whether it is fair that some market makers should be able to risk fill clients without operating as an SI and the associated pre-trade transparency.

Ultimately, given this is the natural evolution of where the market is heading, it’s hard to see an eventuality where regulators would step in to prevent it. Famously, regulators tried to tackle decreasing exchange traded volumes with caps on dark trading in Europe during the Mifid II Review and the multi-year tug-of-war esque saga that achieved an arbitrary result of deleting the 4% and 8% double volume caps (DVCs) in favour of a single cap of 7% has largely been criticised as a waste of time.

“If they [regulators] think too much is being done off-exchange and there’s not enough price formation on-exchange, potentially I could see them stepping in,” says Canwell. “One area where there might be more regulatory scrutiny is around the closing auction because there’s a lot more being done off the primary closing auction in recent years.”

One area regulators should and are looking to change is around transparency. Reporting flags were one such area that was focused on by both UK and European regulators in April in order to simplify the regime and try to understand a bit better where volumes are being executed within the market. The concept of what is addressable and what is not is something now being explored by participants and regulators and could result in further probing from watchdogs.

“Reporting changes had a profound impact on the liquidity landscape. It was confusing before and a lot of the flags didn’t necessarily make sense. There was a lot of repetition and noise,” says McDowell. “Traders are looking for more transparency in the off-book space. Some participants are using “off-book” as a means of printing activity, but peers and clients are unclear about exactly what off-book on-exchange is.”

All roads lead back to the consolidated tape. And there is, of course, the likelihood that we will have a consolidated data source in the next decade (fingers crossed). This will also bring with it extensive transparency that will help both participants and regulators alike to better understand and interpret the market picture around percentages of liquidity accounted for by different segments. Given how participants and regulators alike are turning their attention to the addressability of flow, it may even be a worthwhile venture to do an independent analysis of how stable pricing is in Europe.  

“The market structure needs to respond to this change in dynamics and central to this is the delivery of a consolidated tape in both the UK and EU so all market participants can understand what liquidity is available where,” said Eleanor Beasley, EMEA equities COO and head of market structure at Goldman Sachs. “Understanding the different mechanisms leveraged to deploy bilateral liquidity is important as is understanding where this volume is printing.”

The growth of various different trading workflows that fall under the bilateral umbrella is undeniable and certainly something that participants and regulators alike should be keeping tabs on. Whether or not it’s something watchdogs should intervene with is another matter. Bilateral liquidity only works to a certain size. There will always be a portion of the market that requires public markets and going out to find the other side.

The market’s natural evolution is what it is. If these providers are offering buy-side traders an attractive service, who’s to say it is wrong or right? Perhaps as Canwell noted earlier the onus is on the buy-side to steer the market in the “right” direction.

However, when an order hits the pad, it’s rare for a trader to sit back and think about the wider long term market implications instead of whether a workflow will achieve the desired best outcome for their trades and subsequently their clients. On the current trajectory, our markets are likely set to look fairly different in the next five years. Whether that’s wrong is one for the philosophers that walk among us.

The post Liquidity, it’s a two-way street appeared first on The TRADE.

BMO will now offer a range of trading opportunities tailored to their institutional client base through OptimX.

“BMO has been at the forefront of delivering cutting-edge trading technology to its global clients,” said Peter McStay, head of OptimX EMEA.  

“We are thrilled to partner with a leading European broker and are eager to expand this collaboration across global markets in the near future.”

The two firms noted that the strategic partnership meets increasing demand from institutional traders for a centralised technology that provides improved access to significant liquidity.

Watch now: BMO Capital Markets on the success of their collaborative approach

“We welcome the opportunity to expand our partnership with OptimX and deliver an opportunity to help facilitate blocks for our institutional clients,” said Mike Green, managing director, chief operating officer, EMEA electronic trading at BMO Capital.

The post BMO Capital and OptimX Markets partner to deliver flow in European markets appeared first on The TRADE.

We need to take a step back and look at today’s trading desk. By dissecting a trading desk into its functions, processes, and tasks, it becomes clear that 80% or more can be successfully automated with today’s technology – and that figure is just for the front-office, potentially even higher in the middle- and back-office. We first need to envision how the job will evolve in the coming years. I envision the trader’s role converging into a multifaceted position where responsibilities traditionally spanning from the front- to the back-office will be seamlessly integrated and executed with the aid of technology.

These technological advancements will profoundly impact our industry and give rise to a new kind of role: the “domain jack of all trades.” In other words, traders will likely become more akin to product owners. Being a market expert and knowing all the ins and outs of trading will no longer be sufficient. Instead, we will need to be familiar with all aspects of the business, from legal and settlement processes to transaction cost analysis and trading. This implies that fewer people will be needed to run a trading desk end-to-end, with more operations running as a one-man show, relying on the interaction of a human and a multitude of specialist systems or AIs. 

So, what are the skills of a domain jack of all trades? 

By definition, many, but the key ones I believe will be relevant are: 

Project Management Skills: The ability to manage multiple tasks, prioritise efficiently, and oversee the implementation and maintenance of automated trading workflows.

Adaptability and Curiosity: Flexibility to adapt to new market and regulatory conditions. A continuous drive to learn about every single corner of the business and market. This adaptability will be essential in an environment where change is constant and rapid.

Technical Skills: While traders may not need to program large-scale applications, the ability to retrieve and analyse data will remain vital. Skills in basic programming or systems knowledge will be necessary for tasks such as manual overrides, improvements, and customisations. Understanding technology will be crucial for validating automated workflows.

Soft Skills: Strong communication skills to convey complex information to diverse stakeholders. Problem-solving and creativity to navigate and innovate within complex systems. A holistic business understanding to see the broader picture and integrate various aspects of the business effectively. This is, and will likely continue to be, a people business, requiring strong interpersonal skills to manage relationships and collaborate effectively.

The interesting aspect of this vision is that no single degree can prepare you for this. It is unrealistic to expect a trader to be formally trained in finance, software engineering, and law to do the job. Therefore, either education will need to become significantly more industry-focused, or firms will have to identify and develop new talents to become the domain jack of all trades.

The trader of the future will be a multifaceted professional, adept at integrating technology, traditional market expertise, and a broad understanding of the operational aspects of the business. This evolution will streamline trading operations, creating more efficient and dynamic trading desks powered by human-AI collaboration.

How can firms ensure that their traders receive the necessary support to do so?

We have two aspects to consider, how our firms will develop domain jack of all trades within the existing workforce and how will we recruit them. In terms of development, I work for an organisation that has successfully cultivated domain jack of all trades for years. What I have seen is that ownership is what transforms a great employee or trader into a do-it-all, all-terrain expert; giving more responsibility and freedom only brings the very best of people as far as the firm’s mission is clear to everyone in the organisation, which is the case of NBIM – with the added advantage of having a common goal.

As a trader, this ownership can mean taking full responsibility for an asset class and/or a region. This includes managing counterparty relationships, overseeing internal processes, making key decisions, and communicating across various stakeholders. Effectively, you own a start-up within a larger organisation. This setup naturally drives innovation, improves how things are run, and maximises returns. Because of this, I believe that firms with a flatter structure are better positioned to foster ownership and hence develop successful domain jack of all trades.

Additionally, rotations or secondments across all seniority levels have been widely popular and highly effective tools. They not only support the development and future-proof our workforce but also cross-pollinate best practices. This exposure to different parts of the business helps traders develop a broad skill set and a deep understanding of the entire trading operation.

The other aspect is how do we recruit domain jack of all trades. It is obvious that the old-school interview rounds, and brain teasers and esoteric questions are no longer relevant. Hiring will likely become a lot more expensive. New grads will probably be hired from summer internships or similar programs where we can evaluate individuals over a longer time horizon. Finding well-rounded candidates for trading roles will be very difficult with short hiring processes.

How do you expect traders to adapt to software engineering requirements in the future?

The claim that traders will speak the language of software engineering is becoming increasingly true. However, it’s essential to understand that software engineering encompasses much more than just programming. While AI might handle the bulk of coding tasks, there will always be a need for scripting and integration. If we consider the trader as the conductor of an orchestra of AIs, the need for software engineering becomes much more apparent. The trader, as the domain expert, will need to resort to engineering principles to design and aid in the development of trading workflows and systems.

Traders of the future will need to develop a robust understanding of engineering principles to collaborate effectively with technical teams and machines. This shift will enable them to design, develop, and manage complex trading workflows, leveraging the full potential of AI and automation. As the conductor of an orchestra of AIs, the trader’s role will evolve to integrate technical expertise with market knowledge, driving innovation and efficiency in trading operations.

In your Oxford style debate, your opponent is arguing AI will fill the role of coding and traders will go back to the phones – what do you think will happen?

I think Armon-Jones uses the phone as an analogy for the business getting even more relationship based. With increasing process and decision-making automation in trading, I cannot see this evolving in that direction – unless the trader makes a script to instruct the systems to route volume based on what broker took him/her out for lunch that week, in which case the trader would need to know how to program!

If voice trading is supposed to save the role of the traditional trader, we should see this role growing significantly over the next couple of years. Unfortunately, the opposite is true. Looking at current trends and how the future is shaping up, there will be a reduction of workforce at the trading desks. When that reduction of personnel required to run a trading desk becomes its minimum, it will converge to the trader as the conductor of an orchestra of AIs or the “domain jack of all trades”. It sounds scary, but also it opens lots of exciting possibilities and new roles in the industry.

The post The future role of the trader as product owner appeared first on The TRADE.