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just “added another layer to the
process”.
“Alpha doesn’t just happen at the
point of execution, it’s about pre-
“Timing is always difficult, but on
a three-to-five-year view the fixed
income trading world will look very
different. The rate of change will
accelerate more and more.”
trade analysis too, and for me, the
EMS is not the place you want to
have that discussion,” he said during
the panel. “We have built a pre-
trade tool which is embedded into
our OMS, with our own rules that
gives us our own unique data.”
He also asserts that TCA, at least
the version that is widely adopted
and used within the equity markets,
has no place in fixed income as the
methodology is far too simplified
and outcome-driven. Although
he still maintains that position,
James does recognise the changing
environment as a result of MiFID II
means that TCA data holds greater
relevance than it once did for fixed
income trading.
“The regulator will see, or we can
demonstrate, the whole way down
the process and why we have done
a good job,” he explains. “When we
sit with clients and talk through
what we do, we can show that we
do a broker review, qualitative and
quantitative reviews, we just punch
it up on the screen, it’s all live.”
New era
Given his experience within the in-
dustry, James is well placed to view
and analyse the evolution of various
asset class markets and how trading
relationships have changed. He says
36 // TheTrade // Spring 2019
that from the 1980’s, dominated by relationship-based
trading, there has been a huge shift to today’s environ-
ment, where fixed income is now seeing far greater lev-
els of electronic trading coming to the fore of strategies.
He has seen fixed income markets shift away from the
relationship-based trading that dominated the 1980’s
towards greater levels of electronification that has
become a core part of many trading strategies.
“That is quite a strong signal,” he says. “Timing is al-
ways difficult, but on a three-to-five-year view the fixed
income trading world will look very different. The rate
of change will accelerate more and more; technology
is getting cheaper and more available to do interesting
things.”
James details that Pictet Asset Management is now
building its own, in-house trading platform, using the
style of the Apple iPhone as a foundation for the plat-
form with applications in the background, as “the deal-
er doesn’t really care which one they use as long as it’s
the best one, and the technology behind the platform
will push them that way.”
Like most buy-side firms, Pictet has had to adapt
to the increasing pace of technology evolution and
integrate this into the trading desk workflow. When
reviewing the progress of systematic trading at Pictet
so far, James says he is pleased with the results and the
way in which the team has adapted to it, with one of the
dealers doing the “heavy lifting” on the project.
The concept of expanding trader bandwidth to allow
greater focus on more complex deals is one that is often
held up as the key benefit of increased automation,
but James disputes the idea that the value add here is
relatively low.
“That’s what I used to say, but when we do back-test-
ing we have found it is because we have put that
technology in that we had added value,” he explains.
“The portfolio managers now know that we are doing
this, so they are giving us orders that fit. It changes the
behaviour of the order generation or the person that
comes up with that idea.
“That is interesting and has changed the view, which
means that when we do our back-testing review or best
execution, we learn and learn. Whether it is dark pools
or auction-based we are looking at different ways to
execute.”
Being able to change with new trading or market
conditions has been a hallmark of James’ career in the
financial industry, and he of course has an eye on what
is coming next for fixed income and what changes he