Ed Wicks, head of the Global Trading Team at LGIM discusses how his experienced and resilient team deftly navigated the pandemic and their strong standing for the future.
How did your desk deal with the pandemic and what skillsets were required?
My stock answer is that we dealt with it well, but if you take a step back it was down to our organisational structure which has a mix of asset class specialists and generalists across London, Hong Kong and Chicago. This blend of skills and people helped us manage the spikes that characterised the early days of the pandemic. Looking at the full year of 2020, we supported over £6 trillion on notional which was a 20% year-on-year increase.
We also have an in-built resiliency because our team is experienced, and deliberately so. They can trade everything from the simple FX spot to the more esoteric OTC product. This depth and breadth of knowledge was vital during the early days of the pandemic but also in helping clients navigate their way through in general.
What lessons do you think have been learned?
In the global financial crisis, we learnt the importance of working more closely with the portfolio manager and to share ideas as well as what was going on in the market. During this crisis, I think we learnt how to technically get people up and running from their homes. Telephony solutions will continue to be an important area of focus going forward if hybrid models are adopted. I also think that the industry in general will be looking more at business recovery plans, such as what is the function of a fixed disaster recovery programme if we are working remotely?
The other thing we learnt is onboarding new employees remotely. We worked very closely with our tech teams to ensure that the set-up was done efficiently and appropriately. We had to make sure that they had the right support and we used Microsoft Teams to co-ordinate and take people through the processes.
One year on and how do you envision the trading desk of the future. There has been a lot of talk about a hybrid model but how do you think it will evolve?
Firms in the industry are working on this, but the one thing I can say with a degree of certainty is that there will be greater flexibility in terms of how much time people are in the office. The extent of that flexibility will depend on each firm and how it is structured as well as the different circumstances of people.
What is LGIM doing?
The hybrid model at LGIM has been incredibly successful and gives us confidence going forward. I think there will be a degree of flexibility but there are different jobs on trading desks. For example, at LGIM, the team comprises both traders and quantitative analysts, and clearly the role will to some extent dictate how flexible the working pattern might be. I can imagine that quant analysts would want greater flexibility than traders. There might also be some people who just want to work in the office every day while others won’t. This means that we need to have the appropriate technology in place to make that experience as seamless as possible.
What is crucial to us as a trading team is that we maintain the LGIM culture, the collaborative nature and collegiate way that we work. There will be periods which I expect to label as ‘team days’ where everyone should come in if they can
What do you think the impact of Brexit will be?
It is a fast-moving topic and while there are interesting developments, it is difficult to predict the long-term effect. At the beginning of the year, we did see changes to the derivative trading obligation post Brexit, which had significant impact on trading workflows, even taking into account the FCA’s use of temporary transitional power. The Chancellor in the UK has also launched a consultation, looking at the removal of the share trading obligation which will also have an impact.
How have trading desks changed over the year?
Their role is constantly evolving, and you need to keep up with the evolution of the industry. Data skills, for example, have become increasingly important because traders are having more input. At LGIM, they are collaborating more with internal research teams who are harnessing the data to make better and more informed investment decisions. As a result, we are providing more training and education in programming languages such as Python. However, you need to embrace these changes without losing the importance of relationships.
How are trading desks adapting to sustainable investing?
We have always had a fully integrated framework across the group. For example, we have just rolled out our core, fixed income ETF which incorporates both liquidity and ESG into the investment process. This includes minimum issuance thresholds and a balance between portfolio and bond liquidity versus performance trade-offs. Also, just as we have provided training for Python for our traders, we have an ESG Academy to educate and build greater knowledge for the trading team. One of the things I do is look across all our counterparties, and ESG scores are a big consideration, along with our credit analysis when we evaluate them.
How has your role changed given increased regulation; how do you see it evolving?
Governance is a big part of my role and I spend a lot of time ensuring that as a global trading desk, all our policies are in place, accurate and followed in every region. Given the raft of regulation, it always seems like there is something to do. Given the complexity and pace of change, we have had more support from the business.
How has technology changed your role? What tools are the most important today and what do you think will be needed in the future?
One of our major projects this year is to finish the installation of a new OMS (order management system) for OTC derivatives. It has been a huge area of growth for us over the past two years and very important to what we do, so we want to create greater efficiencies. We are hoping to complete the migration in the third quarter.
In general, we as well as the industry are looking at improving workflows and electronic connectivity as it continues to increase. We are a 35 strong global team and have done 1.2m tickets this year, so we have to be as efficient as possible if we want to cater for the volumes, whether it be in FX, equities or rates. All eyes are also on straight through processing as part of this process.
I think going forward we will be leveraging artificial intelligence and machine learning and working more closely with third parties. For example, parts of fixed income such as credit issuance is stubbornly manual and still requires an incredible amount of time. We are all motivated to improve the new issuance workflow. The same with repo which is very manual and relies on voice. We are keen to support other market participants who want to move to a platform base to execute orders.
Looking farther ahead what are the challenges and opportunities?
We will continue to significantly expand our headcount to support our fast-growing business. However, this means delivering the right amount of flexibility post pandemic. Work patterns will be a key differentiator between firms so at the moment we are listening as much as possible before making any plan of action.
On the opportunity side, I think there is a huge opportunity with data and automation, and we will continue to collaborate and support different initiatives.
Ed Wicks leads the Global Trading Team at Legal & General Investment Management (LGIM). He has overall responsibility for the trading function, as well as oversight of LGIM’s suite of liquidity funds. Wicks joined LGIM in 2015 from BlackRock where he was responsible for designing and implementing trading strategies for the beta, liability driven investment (LDI) and transition groups. Prior to that he was a Delta 1 trader at JP Morgan, responsible for several index trading books and derivative market making activities. Wicks graduated from Loughborough University and holds an MSc in Business Management as well as a BA (hons) in Economics and Politics.