[ B U Y- S I D E
I N T E R V I E W
of the dynamics of the market, we
work hard to position ourselves to
proactively adapt to that change.
How has BlackRock adjusted its
trading tactics over the last few
years?
SV: Let me give you some ex-
amples; the credit markets have
been trying to evolve for the past
several years. We have adapted
how we trade to include the use
of dark pools and the use of a new
protocol, open trading, for bonds.
Through the use of dark pools we
gain additional liquidity with less
information leakage. Using the
open trading protocol for liquid
bonds up to a certain notional size,
we gain efficiency and competi-
tive pricing by sending a request
for quote to all participants on a
platform rather than to only two or
three participants. In fixed income
and FX, we have changed our trad-
ing tactics for some of our small
notional trades where, based on
certain criteria, trades are automat-
ically routed to preferred strategies
54
TheTrade
Summer 2017
|
B L A C K R O C K ]
and executed. In FX, this brings a
certain amount of efficiency for the
trading team, creating capacity so
they can focus on trades associated
with more complex risk.
On average, how much of your
derivatives trading is executed
electronically?
SV: Electronic trading can be
defined in so many different ways.
Almost 100% of our trades are
touched electronically at some
stage of the trade lifecycle from
execution to settlement. Depend-
ing on the asset class, the readiness
to trade electronically may also
differ. FX and equities are much
more electronic relative to fixed
income as they are standardised
products. We also need to consider
the market impact on pricing for
the size or risk that you are trading.
At times, using electronic chan-
nels such as ECNs and exchanges
may not be the best option to get
the best price. The infrastructure
in the market may not be devel-
oped enough in certain products,
asset classes or regions to support
electronic trading. For instance,
we would like to see some of the
options markets become more
electronic from a price discovery
standpoint. Currently, some of
the cross asset class transactions
or basket trades cannot be easily
traded electronically.
What is your outlook for global
trading including market structure,
liquidity, and disruptive technol-
ogy?
SV: Technology advancements and
availability of data are influencing
how trading is changing today.
Operational efficiency is achieved
by systematising a series of manual
or operational steps. Depending on
the asset class, quality of available
data and complexity of product,
varying degrees of data science,
event-driven or algorithmic trading
is used to trade.
There are certain behaviour
changes taking place across the
trading ecosystem. The buy-
side is finding ways to aggregate
fragmented liquidity and the vast
amount of information flow that