Best Execution

Cathy Gibson, global head of trading at Ninety One explains the changing dynamics of a global trading desk.

How have current events impacted the market and skillset needed to trade?

First and foremost, this is a humanitarian crisis. However, the important thing, like any crisis, is not to panic. You need to be considered in how to react because this is an evolving situation and there are multiple factors playing into the trading environment. In this case, we must make sure that we are acting appropriately and in accordance with government sanctions from an operational and investment point of view.

One of the results of the current environment from a trading perspective is that it impacts our ability to access liquidity because there is a reduced number of counterparties to select from, where we can transact and how we settle. What is key in these types of markets is relationships and deep partnerships with liquidity providers.

Inflation and interest rates were already rising – how have trading strategies changed to reflect this?

Inflation started to rise last year so the writing was on the wall that it would continue to increase this year. However, it has increased more than anticipated and it along with geopolitical risks are now much more areas of focus than they were two years ago. It is the portfolio managers though more than the traders who decide how to change their investment strategies to reflect market conditions.

Covid was also a game changer – what lessons have been learned over the past two years?

I started my job in January 2020 but then Covid hit so it was not an ideal way to start a global role. However, I give great credit to my colleagues who were very supportive and accommodating. The industry and Ninety One in particular showed amazing resilience in the way it seamlessly set up home offices for people. It became BAU (business as usual), and we found different ways to work together. However, although I do value the flexibility, for me it is very important for me to be back in an office environment. This is because you learn from osmosis, and it creates a much more collegial atmosphere. I also find the problem solving is more efficient when you are meeting in person.

I think the other impact of Covid and working from home is that it has made people think twice about whether they need to get on a plane. The industry as well as Ninety One are very conscious about reducing our carbon footprint and I do not think that business travel in general will return to the way it was.

However, there is always value in going to conferences and having a cup of coffee with another head of trading to share thoughts. People may prefer though to go to Amsterdam or Paris where they do not have to fly and can take the Eurostar instead.

Overall, how does sustainability fit into trading?

We have joined the Sustainability Trading platform which is an industry led initiative that looks at the environmental impact of building, operating and maintaining financial trading infrastructures as well as the diversity and inclusion policies that they have. It is about accountability and implementing a best of code of practice. As we have seen since the financial crisis, industry led initiatives with market participants coming together can be effective in developing solutions as an alternative to needing regulation.

I am a board member of the initiative and I think it is very important to bring counterparties along with us on the sustainability journey. Just like our investors have done with our funds, the initiative enables us to open a conversation with our counterparties about sustainability and the impact they are having. For example, we have a choice of different trading venues and exchanges, and we will factor in their sustainability practices before deciding as to who to trade with. We would look at their diversity and inclusion policies as well as, for exchanges for example, where their servers are located and how they are being run in terms of energy efficiency. Do they operate on a 24/7 basis when they are only open for seven hours?

Has Brexit had any impact on trading?

It has in the sense that there is more complexity because now we have two sets of regulations to navigate – one from the UK and the other from the EU. The FCA (Financial Conduct Authority) is developing their own regime while in the EU, there is the ongoing MiFIR review as well as other regulations such as the CSDR being rolled out. There are many different trade groups and industry organisations that are wanting to make sure that their voice is being heard on the different issues and we at Ninety One are definitely one of those voices to ensure that the results will lead to good client outcomes.

What are the most important tools you use and what technology would you or do you see playing an important role going forward?

The biggest and most important piece of technology for us is the order management and execution management systems. These are key, and we are in the process of changing to the Charles River Platform as part of our ability to grow the business. In terms of what we would like to see is greater efficiency in the new issuance space. There doesn’t seem to have been much change in 20 years.

Distributed ledger technology is also a hot topic and at the moment ESMA (European Securities and Markets Authority) launched a consultation on its DLT Pilot Regime looking at how MiFIR reporting requirements might need to be updated in order to handle tokenised securities on blockchain platforms. They are new in inception, and we will be keeping an eye on how that plays out and how they could add value.

What changes have you made since you joined and how do you plan to future proof the trading desk?

The trading desk operates across London, New York, Hong Kong and Cape Town which focuses on Africa and frontier markets but forms part of the global coverage. My mandate is to future proof the global trading function which not only means having the right technology and technologists but also the right people. We have 16 traders across our different desks, and I am currently hiring a new person to make it 17.

As emerging markets are a main focus for Ninety One, this requires more expertise from a trader than for example, more liquid investment grade. In terms of what skillsets are required, it has changed over the past ten years. Previously, there might have been someone calculating the FX movements, but today traders will do it themselves. They also need to understand the impact of regulation, know Python, be able to master Excel sheets and overall have good quantitative skills. These are all side tools to make the job better but one of the most important things is to develop and maintain relationships and ensure that they are adding value over the short and long term.

Cathy Gibson is global head of trading at investment managers, Ninety One, responsible for the trading function that supports their global investment teams. Gibson has a wealth of investment experience, most recently heading up dealing at Royal London Asset Management. Prior to this she was head of fixed income trading, UK at DWS Asset Management. She obtained a BA in Pure Economics and a Master’s in Economic Science from the University College Dublin.

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