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Transcript for Championing Trading Desk Power: How To Elevate Your Trading Desk's Impact

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Hello, this is CM Extra, the Capital Markets Exchange Podcast.

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Welcome or welcome back.

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Whether you joined us for the previous

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episodes of the podcast earlier in the year, our most

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recent episode on Dealer Wallet Chair all

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were in London for the inaugural in-person

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event.

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You're all very welcome to the CMX universe.

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A reminder that we've lined up a diverse array

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of conversations with experts from throughout

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the capital markets community, everything

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from mastering syndication and issuance to

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how to survive market blackouts.

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They're all on the agenda here on the podcast.

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But if there's a topic you'd like us to

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cover either on the podcast or at an event, then

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well, do get in touch.

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Find us at the CMX on LinkedIn.

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Here today, though, we're all about showcasing desk power.

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In the current financial landscape, heightened

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market volatility, increased regulatory scrutiny

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and rapid technological advancements have

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all conspired to make trading more challenging.

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What's more, geopolitical tensions and economic

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uncertainties have led to unpredictable market

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movements, making it difficult for trading

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teams to execute strategies with precision.

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Add to that, of course, intensified

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competition thanks to algorithmic trading and artificial

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intelligence.

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And it's clear that traders are under more

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pressure to adapt quickly and demonstrate

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value add than ever before.

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Joining us today are two guests with a rich

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understanding of the context and challenges

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that traders face today and with a wealth of quick wins and strategies, we hope, to

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help desks realize and demonstrate value.

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So joining us are senior trader for currency

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solutions at Insight Investments, Rich Turner.

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Hello, Rich.

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Hello, how are you?

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I'm good.

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Thank you.

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I hope you are too.

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And also joining us, we have global head

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of fixed income trading at Invesco, Ray Oui.

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Hello, Ray.

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How are you doing?

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I'm good.

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Thank you for both joining us here on today's show.

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And as an opener, an icebreaker, I guess, just let's do some introductions.

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And Rich, I'll come to you first of all.

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Give us 30 seconds on who you are and what

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responsibilities you have, where you are,

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along with an answer to this question.

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Are you an alpha contributor or a cost center and why?

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Take it away, Rich.

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Hey, Rich Turner, Insight Investment.

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I've been a trader for 20 years in FX.

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We trade electronically using algorithms.

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And I certainly think that we do add alpha to the whole process.

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The last bit of that is why.

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You are very adamant that you do.

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I guess my question is, to what extent

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would everybody where you work agree with that?

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Well, I think the stakeholders we have here,

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there's always a two-way conversation between

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the stakeholders who are driving orders and us

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who are executing the orders in the marketplace.

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But I think, to answer the question, why?

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The fact we have that conversation mean

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that we are trying to impact the alpha and the

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decision making and the trades that we're trying to do.

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So I think part and parcel of that, or

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communication, is the fact that we do add to the alpha.

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Very good.

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Thank you.

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Same question to you, Ray.

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From where you work and what responsibility you have there.

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And that same, are you an alpha contributor

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or a cost center and would others agree with

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your view?

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Yes.

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So thanks, David.

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Ray Uy, I've been with Invesco for the past 12 years.

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Currently, I am head of our global fixed

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income currency and commodity trading desk.

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I've been in the industry for 30 years,

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mostly in the global macro space and emphatically

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within fixed income and FX, our desk definitely adds alpha.

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And I guess the reason I would say that is

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because within OTC markets, trading desks

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are a much more integrated part of the

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investment process and are likely to be embedded in

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that investment process on a day-to-day basis

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communicating with our portfolio managers

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to generate the best outcomes for clients.

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Yeah, the extent to which desks in different shops are embedded or not.

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I know we're going to come on to that in just a moment.

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But Ray, do you feel as though, given how

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you're positioned and how you're organized,

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there is a job that you need to do in terms

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of promoting, in terms of acting as an internal

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champion for your desk?

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Or are things so well integrated, so well

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communicated there that actually performance

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speaks for itself?

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No, I wish it did.

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I think the active dialogue and lines of

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communication are an essential feature for a well-functioning

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communication are an essential feature for a

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well-functioning desk.

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And certainly that's something that my team

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in partnership with our investment teams work

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very hard at ensuring is operating at an optimal level.

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So given how you're set up there, Ray, do

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you find that you kind of don't really have

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to promote what it is that you do, that

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you don't need to go on that kind of internal

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selling piece because the performance speaks for itself?

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Or is there still a job to do there?

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Yeah, there's still definitely a job to do.

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And I think the advocacy for the desk is a

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consistent feature of my job, but not something

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that is overtly explicit.

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I think the trading desk functions as a conduit more.

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The value is in being a good conduit as opposed to the actual execution.

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And so I think you can tell the level of

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efficiency that you're operating with just by

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the level of dialogue across your teams and the portfolio managers.

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Same to you, Rich, is promoting and being

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that internal champion for your trading desk

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something that you have to work hard at where you are?

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I think it's something that we historically haven't done very well.

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So I think really it's part of my modus

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operandi is to wave the flag about what it is we do

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and show what we do is intricate and there are skills to it.

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So I think it's very important that we do wave the flag as it were.

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And what is your flag waving technique?

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How do you best go and let stakeholders,

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let the rest of the business know how well you

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are performing?

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Is this just a case of going and giving presentations?

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Is it a case of getting some data and

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really demonstrating the value in various ways?

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I think the most important thing is to have

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a very, I mean, we've a very open plan office

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here, but it's most important that anybody

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is welcome to come and sit by your side as

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you're doing your job.

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So I think that's definitely one of the most

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important things is to being always open to

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approaches and also being transparent and very, very open.

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But again, to your point, yes, there is a

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degree where it is about perhaps getting people

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in the room and sharing them what it is you do.

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But we're the best one in the world, the

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best place to see it is at the cold face, which

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is at my desk.

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And Ray, you spoke about your setup there

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being pretty well integrated, but based on

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your experience outside of that setup, there

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are some real challenges, are there not between

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being integrated with PMs versus having centralized desks?

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Can you chat us through what they are?

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Sure.

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I think if you were in a purely active shop,

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and generally this is the historical structure

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of most trading desks, traders were embedded

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within the investment teams that they serviced,

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generally because most of the investment

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strategies and to that extent desks by extension

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were largely organized around market sectors.

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And so your traders were part, had a

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specialty that aligned with the investment teams that

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they served.

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And so they were naturally embedded within

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that structure or part of that structure.

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As the managers have grown and become more

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diverse in the types of mandates that they

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manage for their clients, centralized structure came more into prominence.

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And especially for us, we have a fairly

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broad and diverse set of portfolios that the desk services, ranging

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from all the flavors from passive to complicated active strategies.

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So we need to hit that sweet spot in

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in terms of having a centralized organizational

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structure, but having a more flexible functioning structure.

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And for some of my team, we sit together and

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it's a centralized pod that sits exclusively

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within our areas of the trading area of the

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floor, whereas other members of my team are

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more embedded and integrated with the

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portfolio managers that they work with and those tend

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portfolio managers that they work with and those tend

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to be all on the active side.

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And so that's trying to centralize

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centralized because you want to adapt the

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operational scale and efficiency of the

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platform, but still you need to recognize that there

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are some functional elements that you just

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can't get away from given the importance of

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communication and the point that Rich and

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I raised at the outset, whereby I think for

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fixed income and currency trading, that

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trading is sort of an embedded part of the investment

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process.

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And in terms of when it comes to

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demonstrating the value to stakeholders who need to see

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that, the analytics piece behind that,

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Ray, you know, it's the saying goes, there are

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lies, there are damn lies, and then there are statistics.

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To what extent do you use data and analytics to demonstrate the value add?

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And what are the potential pitfalls that shops can fall into when they do that?

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Yeah, so that's a great question.

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And I would say, I think from a pure

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analytic perspective, the area that we utilize

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it the most is probably just TCA and for a

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whole host of reasons related to governance

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and other regulatory requirements,

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that tends to be the area where we, I would

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say, are most analytically heavy.

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And I don't think it's a great, I haven't

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found, I should say, a great framework for

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adapting a quantitative or analytical framework to

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quantify alpha for your trading desk contribution.

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I personally think that most of those

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structures can lead to a misalignment of incentives and

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incentivize people to game the system.

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And at the end of the day, especially for

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active mandates, really what's more critical

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is ensuring that you're able to execute and

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establish the exposure that you want for your

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portfolio, adding another layer of complexity

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or execution phase to carve out alpha is probably

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not as valuable as the overall investment objective.

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And so that's kind of where we sit on that.

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Candidly, I think the other bit that probably

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makes more sense to deploy your analytical firepower is

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within pre-trade market intelligence.

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So I'll leave it there.

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OK, Rich, over to you on the analytics piece.

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Among the concerns that Ray has there is

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about, well, marking your own homework and a skewed

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viewed of the skewed view of the data.

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What's your take?

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Well, I think the first thing, and we're very

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active about this, is keeping things very transparent.

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So effectively, we're not marking our homework.

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So I think if you're keeping the data

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transparent around the TCA, then it's for everybody to see.

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And we have a separate team here that are looking

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at the data analytics who sit very far away from us.

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So they come to us and say, this is what we found.

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What do you make of this?

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So we take the decision making away from us, as it

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were, around whether or not something looks good.

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But I think the other thing to bear in mind is that

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you need different benchmarks for different strategies.

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So a passive strategy and an active strategy will have very different approaches.

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And so I think that's very, very important is picking the

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appropriate benchmarks for the strategy or be taken on board.

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And I think as explaining and looking at things

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and explain to people from the outside of trading,

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we sometimes within trading, we talk a foreign language and it's very hard for

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people to understand what the heck it is we're talking about.

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So invariably, what we try and do is keep things very simple so that we can explain

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what it is, what we do to other people within the organization.

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I think that's a very, very important thing as well.

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As one of the pitfalls, as you would be alluded to, is the fact that you could have

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reams and reams of data that you analyze to the nth degree

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and just come up with a very, very confusing chart of sorts.

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So it's about keeping things simple.

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On the quantitative side, obviously, data really, really important.

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Is there anything that you take in from the qualitative

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side here as well that you feed into performance management?

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Yes, I think Ray alluded to it.

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He was talking about before the trade arrives,

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have you done your analytics of what's going on?

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And the same trade could arrive on your desk five times in the market.

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It could be in a very, very different environment as

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the world stands nowadays with everything so electronic.

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The noise, as it were, that you used to hear about when

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lots of flows going through the market isn't there anymore.

01:14:15,875 → 01:14:19,375

So invariably, up until the point you actually hit go or start a trade,

01:14:19,541 → 01:14:23,166

you don't know what the market is going to look like, but you can use your

01:14:23,166 → 01:14:26,333

intuition and your qualitative approach to sort

01:14:26,333 → 01:14:29,166

of get an idea of what state the market is in.

01:14:29,625 → 01:14:32,041

And Ray, any builds on what Rich was saying from

01:14:32,041 → 01:14:36,125

that qualitative as well as the quantitative approach?

01:14:36,583 → 01:14:40,750

And I guess as we try to understand if it is possible to

01:14:40,750 → 01:14:43,708

put a dollar value on the alpha generation from your desks.

01:14:44,416 → 01:14:50,166

I think the value add or, you know, specific to your question on the quantitative

01:14:50,166 → 01:14:57,041

and qualitative, it's really more about a process than a pinpoint number.

01:14:57,291 → 01:15:00,250

Facts and circumstances can kind of dictate how

01:15:00,250 → 01:15:04,333

outcomes are perceived or your performance is evaluated.

01:15:04,375 → 01:15:11,500

I think one of the hallmarks qualitatively that I like to observe is if you have a

01:15:11,500 → 01:15:17,500

desk that brings value and your traders are operating at a high level, you tend to

01:15:17,500 → 01:15:20,750

see a lot of traffic by the portfolio managers to your area, right?

01:15:20,750 → 01:15:27,333

I think there's that sort of natural process of your team being sought out for

01:15:27,333 → 01:15:33,833

consultation for a whole host of portfolio items, whether that's

01:15:33,833 → 01:15:38,875

an assessment of market conditions, whether that's help in structuring a trade

01:15:38,875 → 01:15:43,500

or the best way to structure a trade or a strategy and those type of things.

01:15:43,541 → 01:15:50,208

And so you can sort of the frequency of traffic tends to be a pretty good hallmark

01:15:50,208 → 01:15:53,166

of just how well your team is doing, in my opinion.

01:15:54,125 → 01:16:00,291

OK, OK. So again, we've spoken about the different ways in which desks that are

01:16:00,291 → 01:16:03,416

centralized, you can have desks that traders who are

01:16:03,416 → 01:16:07,333

very much integrated within the investment process.

01:16:07,916 → 01:16:11,166

And again, different members of our audience

01:16:11,166 → 01:16:13,625

today will have different experiences of all of those.

01:16:13,875 → 01:16:19,333

But based, Rich, on your experiences, both where you are and also in your peer

01:16:19,333 → 01:16:26,041

group, in terms of the ways in which you can heighten engagement in the investment

01:16:26,041 → 01:16:34,625

process, what are the ways that you've seen it work successfully to involve traders

01:16:34,625 → 01:16:37,500

at the trading desk in the investment process?

01:16:37,500 → 01:16:41,833

Make sure that they just aren't part of the execution. But there's a feedback loop

01:16:41,833 → 01:16:47,166

there that enables them to add maximum value right from the beginning, right

01:16:47,166 → 01:16:50,333

through to the end and then feed back into the beginning next time around again.

01:16:51,416 → 01:16:55,458

Yes, I think part and parcel of the answer to the question is being flexible. Some

01:16:55,458 → 01:16:59,125

days, for example, we have a discretionary trader, some days he wants some input

01:16:59,125 → 01:17:01,125

into what he's about to do, other days it's

01:17:01,125 → 01:17:02,875

just, you know, let's please just get this done.

01:17:02,958 → 01:17:07,791

And there's no conversation, but I think, again, we have quantitative strategies

01:17:07,791 → 01:17:12,541

that, you know, we're involved with. And sometimes those quantitative strategies

01:17:12,541 → 01:17:17,291

need some sort of input, which will be done on a holistic basis over, say, a three

01:17:17,291 → 01:17:19,250

month to six month period or even a year long.

01:17:19,750 → 01:17:24,333

So it's changing your approach for, you know, changing your approach and knowing

01:17:24,333 → 01:17:28,666

the stakeholder that is, you know, being involved in sending the order to the

01:17:28,666 → 01:17:31,708

trading desk and working out when it's appropriate for you to

01:17:31,708 → 01:17:35,458

involve yourself in that process, and when not to.

01:17:35,458 → 01:17:40,291

And same to you, Ray, in terms of making sure, depending upon how you're set up,

01:17:40,500 → 01:17:45,583

but I guess the best piece of advice to make sure that the traders are as

01:17:45,583 → 01:17:50,875

integrated are as involved and have the opportunity to add as much value as they

01:17:50,875 → 01:17:54,458

are able to into the end to end process. What would you say?

01:17:55,541 → 01:18:00,375

Yeah, so I think if we can divide that question along two dimensions;

01:18:00,375 → 01:18:08,541

to Rich's point, I think for the areas of our operations that are related to more

01:18:08,708 → 01:18:13,666

passive strategies, we organize our workflows very systematically, right?

01:18:13,708 → 01:18:19,250

So that we can be very efficient and handle a lot of volumes seamlessly leveraging

01:18:19,250 → 01:18:24,541

all of the trading technology at our disposal. The other side, in terms of

01:18:24,541 → 01:18:30,416

handling active portfolio mandates, a couple of key things that I think

01:18:30,416 → 01:18:34,083

make a huge difference is number one, the traders

01:18:34,083 → 01:18:38,041

need to understand the portfolios that they're servicing,

01:18:38,041 → 01:18:42,416

the objectives, risk tolerances, much in the same way that

01:18:42,416 → 01:18:45,041

the portfolio manager does, right? So understanding the

01:18:45,041 → 01:18:49,416

client needs and objectives and guidelines is critical.

01:18:50,166 → 01:18:55,083

A second feature that I think is very important and certainly one that isn't

01:18:55,083 → 01:18:58,583

necessarily controlled by the trading team, depending on

01:18:58,583 → 01:19:02,708

the organization, is participation in investment meetings.

01:19:03,041 → 01:19:04,375

I certainly encourage my team to the extent that it's feasible in their day to day

01:19:04,375 → 01:19:07,958

I certainly encourage my team to the extent that it's feasible in their day to day

01:19:07,958 → 01:19:11,666

to be involved in the regular cycle of investment strategy

01:19:11,666 → 01:19:15,000

meetings that fixed income investors have.

01:19:15,000 → 01:19:20,375

And I think that allows them, A, to glean insights into how the portfolio managers

01:19:20,375 → 01:19:25,625

are thinking about it, how we're thinking about risk at the macro level and asset

01:19:25,625 → 01:19:31,875

allocation, but then also gives them a forum to demonstrate their expertise, their

01:19:31,875 → 01:19:36,833

insights and increase, or strengthen the bonds

01:19:36,833 → 01:19:40,833

between traders and portfolio managers.

01:19:40,833 → 01:19:45,833

And I think that all comes back to the way of looking at it, that traders are the

01:19:45,833 → 01:19:50,875

eyes and ears of the market, the portfolio managers, aren't they? They are there on

01:19:50,875 → 01:19:58,166

the front line and that's with that insight, with that horizon scanning that near

01:19:58,166 → 01:19:59,875

and long view, there's definite value that they can add there.

01:19:59,916 → 01:20:07,166

Rich, just as we start to wrap up, we've spoke about the challenges that traders

01:20:07,166 → 01:20:12,333

are facing and, you know, whether it's geopolitical this or, you know, all the rest

01:20:12,333 → 01:20:18,875

of the market instability that everyone in all markets are facing right now and

01:20:18,875 → 01:20:25,166

what that means for traders. What do you see as the biggest near term challenge and

01:20:25,166 → 01:20:27,916

what it is that you are trying to do to make sure that traders are doing the best they can?

01:20:30,000 → 01:20:35,250

Are continuing, you know, as a leader in this space, what are you, what's your top

01:20:35,250 → 01:20:39,250

thing that you're trying to do at the moment to ensure that leaders are able to

01:20:39,250 → 01:20:42,666

continue to add the most value? And it sounds as though you've got it pretty much

01:20:42,666 → 01:20:46,083

sorted, you've got a very good stable platform there as it is.

01:20:46,333 → 01:20:48,375

But clearly there are challenges out there. So what are

01:20:48,375 → 01:20:54,125

you doing to ensure that this positive outcome continues?

01:20:55,166 → 01:20:59,375

Yeah, so front and center insight investment is our, you know, policy around best

01:20:59,375 → 01:21:02,958

execution and making sure we're getting the best results for all of our clients and

01:21:02,958 → 01:21:06,875

satisfying all the regulatory needs. So I think that's very front and center.

01:21:06,916 → 01:21:12,083

But I think in all of the things that we do in this is regarding, you know,

01:21:12,083 → 01:21:18,041

actually trading communication with people discussions. It is all boils down to

01:21:18,041 → 01:21:23,458

having a process for everything that comes across our desk and not just having a

01:21:23,458 → 01:21:26,500

process, but having a process that has a feedback loop so

01:21:26,500 → 01:21:29,708

that when things change, the world changes very quickly.

01:21:30,041 → 01:21:34,416

And, you know, we have, we're open to the process of change as well. So I think

01:21:34,416 → 01:21:36,333

that's very important is that you have the processes

01:21:36,333 → 01:21:39,166

and you're very open to the process of change as well.

01:21:39,666 → 01:21:44,000

And those changes we spoke earlier on about technological changes and the world

01:21:44,000 → 01:21:47,541

becoming more and more algorithmified, more algo,

01:21:47,791 → 01:21:50,083

more AI and all of that sort of stuff, those changes.

01:21:52,000 → 01:21:56,583

I guess you prepare, you don't know what is around the corner, but as long to your

01:21:56,583 → 01:22:00,833

point as you've got some processes that will enable you to understand, to analyze

01:22:00,833 → 01:22:04,541

what this may mean, then you've got a process

01:22:04,541 → 01:22:06,791

for dealing with the change, whatever it is.

01:22:07,750 → 01:22:07,875

Yes, 100%.

01:22:07,916 → 01:22:15,166

And Ray, same to you. Again, you have a very mature, pragmatic approach where you

01:22:15,166 → 01:22:19,916

are. But in terms of the challenges, the known unknowns and maybe the unknown

01:22:19,916 → 01:22:25,500

unknowns, how do you best prepare yourself for those challenges, you and your

01:22:25,500 → 01:22:31,750

teams, for those challenges and make sure that you are able to continue to

01:22:31,750 → 01:22:34,875

demonstrate value, to add the value as well.

01:22:35,916 → 01:22:40,875

Yes, echoing Richard's sentiment, I think it's critical that your

01:22:40,875 → 01:22:47,291

platform is able to integrate and adapt to the changes that technology and the

01:22:47,291 → 01:22:50,375

abundance of data has brought forth into the

01:22:50,375 → 01:22:54,625

market structure and into the workflows in this space.

01:22:54,625 → 01:22:59,291

But one of the key things that I think is really important is despite all

01:22:59,291 → 01:23:07,333

of the advancement in quantitative methods, technology in the market structure,

01:23:07,333 → 01:23:13,208

while that requires increasing levels of analytical literacy from your trading team,

01:23:13,958 → 01:23:18,458

at the end of the day, the function itself is still one that's relationship driven,

01:23:18,458 → 01:23:25,916

both internal and external. And I think without having a very well established

01:23:25,916 → 01:23:33,500

muscle around communication and relationship building, it makes the other aspects

01:23:33,500 → 01:23:37,458

of the job harder to implement effectively, in my opinion.

01:23:38,083 → 01:23:42,291

Are relationships, given the different ways in which we're working, given the

01:23:42,291 → 01:23:48,250

different ways in which we're engaging with technology in order to execute on our

01:23:48,250 → 01:23:53,041

work, are those relationships that maybe we once took for granted now something

01:23:53,041 → 01:23:58,958

that we have to work more consciously to enable and to develop in order to enable

01:23:58,958 → 01:24:02,333

the kind of smooth flow that you speak of there, Ray?

01:24:02,333 → 01:24:06,083

Yeah, I think, at the core, having great relationships

01:24:06,083 → 01:24:10,125

or being able to establish, good relationships and lines of communication

01:24:10,125 → 01:24:12,500

with external and internal constituents

01:24:12,833 → 01:24:16,083

are table stakes really for having a

01:24:16,083 → 01:24:19,666

well functioning operation as a trading desk.

01:24:19,666 → 01:24:23,416

Thank you. I tell you what, we'll leave it there for now. And this whole thing

01:24:23,416 → 01:24:28,375

about relationships, this is a constant theme, no matter whether we're talking

01:24:28,375 → 01:24:33,250

about technology or leadership or high performance and the ways in which technology

01:24:33,250 → 01:24:39,166

is changing the nature of the relationships that we have with team members. But

01:24:39,166 → 01:24:42,958

like I say, we'll come back to that another time. But we'll leave it there for now.

01:24:43,000 → 01:24:48,791

Rich, Ray, thank you very much for joining us. Thank you. And a reminder that you

01:24:48,791 → 01:24:53,833

can catch up with our previous episode on AI in Trading, Leadership and Culture,

01:24:54,083 → 01:24:55,750

Dealer Wallet Share, all of that good

01:24:55,750 → 01:24:58,958

stuff. And more wherever you found this episode.

01:24:59,000 → 01:25:07,458

And also you can find it on the cmx.com that's the hyphen cmx.com, as well as in

01:25:07,458 → 01:25:11,500

all the normal places where you'll find your podcasts. And if you like what you've

01:25:11,500 → 01:25:15,750

heard today, then well share it with your colleagues, leave us feedback, the cmx

01:25:15,750 → 01:25:17,958

page on LinkedIn is a great place for that.

01:25:18,000 → 01:25:22,250

And while you're there, perhaps tell us what you'd like us to cover in future. And

01:25:22,250 → 01:25:28,708

speaking of the future, some finance hive in person dates for your diary in q4 24

01:25:28,708 → 01:25:34,625

November 14 is the fixed income hive members meeting in London December the fifth

01:25:34,625 → 01:25:39,958

is the FX hive members meeting also in London, and looking forward to 2025.

01:25:40,000 → 01:25:47,291

It's cmx 2025 on Thursday, the third of July 2025 back at the Woolwich works

01:25:47,291 → 01:25:52,958

remember the Woolwich works from those heady days earlier in summer 2020 for join

01:25:52,958 → 01:25:58,875

us again on Thursday, the third of July 2025 and if you want to find out more about

01:25:58,875 → 01:26:03,958

any of those head on over to the hyphen cmx.com.

01:26:04,875 → 01:26:09,791

But that's all for now, from me, David, from our guests, Richard and Ray, and from

01:26:09,791 → 01:26:13,666

all of the cmx production team. Thanks for joining us. Until next time.

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