Inés de Trémiolles, Global Head of Trading at BNP Paribas Asset Management, talks to Shanny Basar about automation across asset classes, hybrid working, and how the trading room is like an intensive care unit.
How is your team organised?
I have a team of about 32 traders and we trade about €800bn and 500,000 orders per year, so we have a very large volume and a very large number of orders. The largest team of 22 is based in Paris where 11 trade equities, listed derivatives, ETFs and foreign exchange and 11 trade fixed income including bonds, OTC derivatives and money markets. The smaller teams in the regions are multi-asset. We have three in Asia Pacific and five in the US.
How has trading adapted to hybrid working?
The pandemic was a very stressful time because we suddenly needed to adjust to a very different way of working. In trading you are used to being in the office with six screens but it’s not the same feeling when you are at home and you have two or three. We are now completely used to trading in a hybrid world, with most staff in the office three days and at home two days. For compliance reasons we don’t allow any conversation that is unrecorded either with portfolio managers or with the street so people at home are only allowed to communicate by chat so that we have an audit trail.
How does the team find liquidity with the increase in market volatility and geopolitical uncertainty?
The market has been tough but we have a great team of professionals with many years of experience who know how to search for liquidity. Finding liquidity is about having a closer dialogue with certain people. We saw that in foreign exchange markets related to Russia when we needed to unwind trades, a selected group of three or four counterparties really made a difference.
Having lived through the Russian crisis in 1998 you can expect this type of situation to be horrible. I’m not sure if people realise that access to the Russian market was closed to foreigners so there was nothing we could do. There hasn’t been any contagion, but the market is very much sanctions-driven and you need to adjust.
We track the percentage of orders that we send back to portfolio managers because we cannot trade within the limits that they want, and those have increased a bit. We also track the percentage of orders that we trade outside the bid-offer spread which is currently running between 15 and 20%.
How much trading is automated?
We are automating in equities, in government bonds and in foreign exchange for certain types of vanilla orders. Automation deployment differs across asset classes going from full no-touch trading to semi-automation where traders need to do some of the steps. We have an execution management system (EMS) for equities and we are now adopting that for listed derivatives, and we use another electronic trading platform for foreign exchange. We have not adopted an EMS in fixed income and personally I am not fully convinced of the value-add for the time being.
About 70% of the equity orders traded in Paris are automated, although one step at the beginning and one step at the end are manual. We are working hard to automate that step at the very beginning. In foreign exchange we started automation in June last year and accelerated that process in December. We are automating a significant percentage of spot and forwards and working hard on other orders.
We will continue to simplify the workflow and take advantage of digitisation. Automation allows the traders who are working with PMs to be liquidity experts and get more involved in the decision-making process through using data to show how we should execute a trade. Looking forward, automation is an important goal and we are hopefully going to start in the US soon.
Trading and execution is a real mix between technology and people. We can’t do any form of automation without the right people behind it, and we will never replace people. I say that the trading room is an intensive care unit that needs to be able to absorb patients and have people in the seats who can really trade.
How do you perform transaction cost analysis (TCA)?
We do TCA in-house with the help of the usual benchmark providers who give us the data, however this can be frustrating because of the quality of the data. I think we still have a way to go on TCA, both internally and across the market in looking at the detail, where you source data and what it means.
If the consolidated tape [proposed by ESMA] allows pre-trade transparency in equities that will be very beneficial. Pre-trade analysis today requires you to go and look at many different venues and that’s quite complex.
Have the skills needed by traders changed?
I came from the sellside and didn’t realise the complexity of the buyside. I always say there is never a boring day in a global trading function because you have different issues ranging from market infrastructure, automation, and RFPs for clients to making sure that everybody in the team is comfortable with the new hybrid way of working.
The qualifications that people need to go into trading have evolved a lot. When I started it was about having a broad base of knowledge and being able to relate to people. Today you need to have all that plus you need to have coding and data analysis skills.
On the buyside there are plenty of women trading. In my team overall we are very close to parity and we need to make sure that it’s balanced and diverse in every way, which is actually helped by hybrid working.
I’m pleased to say that there are still young people who really like trading. I think it’s a fascinating environment, and there are not many places where you can learn something new every day. You can do this for many years without ever feeling that you’re doing the same thing because the market changes the way we approach problems, what we trade, and the way we interact with counterparties and exchanges.
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