When people talk about the advantages of outsourcing the trading desk, they often think solely about execution and whether an asset manager can achieve a desired trading goal. But what happens before and after a transaction can be just as important. From pre-trade analytics through to post-trade transaction cost analysis (TCA) reports, Cowen understands that every step of the trade lifecycle is vital. As a full-service outsourced trading desk provider, we focus on aspects of trading that can sometimes be taken for granted. In the second of our Q&As with the Cowen trading team, we hear from Vinnie Singh, who provides us with an operational perspective which surrounds the execution function of the desk.
Q: Your role encompasses trading operations, which typically does not get as much attention as execution and sourcing liquidity. Could you start by explaining why trading ops are so important.
Absolutely. I have 20 years’ experience working in trading and trading operations. Sometimes a client might not be aware of the potential settlement issues or corporate action issues that could be linked to a transaction. This is the case for clients that have outsourced all of their trading requirements, but also where clients use Cowen to supplement their trading function. It is important to act as a second pair of eyes for them and flag potential issues.
For instance, imagine the trading desk is working on an execution strategy for a client that involves seeking liquidity in a tricky mid cap or market maker only name that necessitates execution through a non-standard local broker or market maker. The traders may outperform from an execution perspective. But once you’ve executed a trade, you have to confirm it and settle it. And if that fails, it could undermine all the hard work that the trading desk has just done by adding unforeseen settlement costs or creating general operational issues.
Where we think we differ from other providers is that we devote more time and focus to the operational side. We have a large team of experienced traders who have extensive operational knowledge. We are ready to bring operational issues into the discussion at an early stage, rather than just reacting when issues arise. This has become even more pertinent with the advent of the forthcoming CSDR regulations that could impose mandatory Buy-Ins for settlement fails.
Q: Are settlement pitfalls only related to equity trading?
A: No not at all. Imagine a portfolio manager looking to settle an emerging market bond ‘in domestic’, meaning to settle it in the local market. But that may be difficult because it may not be a liquid market and we would need to deal with domestic agents and local brokers. Ideally, we would want to settle this in Clearstream or Euroclear for example.
If we were dealing with that, we probably first would ask where they held the bond. We then would be able to advise them about the extra complications they might face or the possibility of delays or costs if they still want to settle in domestic. For clients that have outsourced their full trading requirements, they might not be aware of all the settlement issues that can arise.
Q: How important is the technical side to trade ops support?
A: When we onboard a client, not only do we think about the trading side but also the operational workflow. Clients have all kinds of different order management systems, and each client has a unique set-up that we need to tailor our service to. We have in house developers who can make sure that we provide exactly what the client needs.
So, when we start a relationship, salespeople are involved, the Onboarding team are involved and Client Services are involved – just so that everyone knows what service the client requires, from front to back, not just how they want to trade. Will they be using electronic confirmation systems like CTM or Traiana for swaps? What sort of timeframe do they need for confirmation? Do they need a file sent to a custodian or third party? We have to identify all that from the start and make sure that we deliver it quickly.
We also have instances where the client wants positions loaded back into their OMS. We have to make sure our systems can talk to their systems and have this mapped out right from the start.
Q: What is your role in that process?
A: You have so many touch points from the front-end connectivity, the confirmations, the settlement side, where and when clients want to files sent etc. Normally each team is responsible for its own area.
My job is to coordinate everything from front to back, before we go live with a client. I will check with the salesperson and our operations team and go over the client’s needs and what we’ve set up. Sometimes, a client will want to make changes with the arrangement early on and we need to coordinate between different groups.
Q: Supporting clients throughout the trade lifecycle often means being reactive and responsive. Are you proactive as well?
A: Yes, and here’s an example of that. We have a standard ‘how to’ document that is sent to every client. It’s very detailed, long, and technical. To help with the process, I will produce a customised guide based on that particular client’s account. It will have screenshots of what their account will look when they log in, rather than just a generic screen with various limits. I created customised guides as I had to learn the systems myself for when I trade. The clients really appreciate it.
Q: Last question. What is the most enjoyable part of your work?
A: I like talking to clients. In the outsourced trading space, there’s always so much innovation. There are so many systems out there, so many ways of trading, all kinds of different people, different trading strategies. Everything changes so quickly. In this business, not only do you have to be at the forefront of that change, you have to decide whether that change is good overall for the client. Discussing new and different ways to achieve a better outcome for the client is very rewarding.
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