BMO will now offer a range of trading opportunities tailored to their institutional client base through OptimX.

“BMO has been at the forefront of delivering cutting-edge trading technology to its global clients,” said Peter McStay, head of OptimX EMEA.  

“We are thrilled to partner with a leading European broker and are eager to expand this collaboration across global markets in the near future.”

The two firms noted that the strategic partnership meets increasing demand from institutional traders for a centralised technology that provides improved access to significant liquidity.

Watch now: BMO Capital Markets on the success of their collaborative approach

“We welcome the opportunity to expand our partnership with OptimX and deliver an opportunity to help facilitate blocks for our institutional clients,” said Mike Green, managing director, chief operating officer, EMEA electronic trading at BMO Capital.

The post BMO Capital and OptimX Markets partner to deliver flow in European markets appeared first on The TRADE.

He joins Citi as head of electronic trading for its EMEA equities business after over a year with BMO, according to sources familiar with the matter.

Citi declined to comment. BMO had not responded to a request for comment at the time of publishing.

Asl joined BMO ahead of the expansion of its electronic business into EMEA in May last year alongside Michael Green who was appointed chief operating officer and EMEA head of electronic trading, Kavel Patel who joined in an EMEA electronic sales position, and Toby Benzie in an EMEA broker dealer sales position.

Prior to joining BMO, Asl served in an electronic trading role at Exane – now part of BNP Paribas – for four years and as co-head of Autobahn equity for EMEA at Deutsche Bank for nearly a decade.

He also previously served in electronic equity trading roles at G-Trade, ING and Pershing, beginning his career as an equity trader at EBI in 2002.

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Setting off from the Arc De Triomphe on Wednesday afternoon was an exhilarating way to kick off our multi-day migration back to London – particularly for those of us that had been on stage less than an hour before swapping panels for pedals. Surrounded by cars heading off in what seemed like every direction, the team got a quick group photo before setting off through the Paris streets in the peak of rush hour.

Our first 64-kilometre leg was comparatively short when compared with those that followed on Thursday and Friday, aptly designed to ease us into the journey after the whirlwind that was TradeTech. The route took us past Versailles and through some of Paris’ most beautiful parks and we arrived at our fairytale-style gîte that evening slightly later than scheduled but in time for a hearty lasagne and an early night.

At dinner, discussion turned to the next day. Thursday was to be the flattest but also the longest leg of our journey, cycling 150 kilometres to Dieppe where we would make our ferry crossing to England. As a novice to the world of cycling, I figured 150 kilometres was simply three lots of 50, a distance I had cycled with ease as part of my training, and I was therefore blissfully unaware of the challenge that lay before us.

A plethora of punctures

On Thursday morning we rose early, ate breakfast and hit the road, at which point any prior blissful ignorance quickly wore off. Strong headwinds meant we were battling forwards for the first 70-kilometre stint of the day. We regrouped for lunch at a boulangerie on route before setting off to complete the next 80 kilometres, with the promise from our route organisers that the final portion of the journey included a steady descent into Dieppe along a repurposed railway line that was now dedicated to cyclists.

Despite this latter half of the journey being extremely stop-and-start thanks to “a plethora of punctures” – there’s an editorial job here waiting for you if you want it Duncan – the scenery was beautiful and our spirits remained high as we cruised into Dieppe tired yet happy and ready for a carbohydrate load before the next morning’s early start for the ferry.

Day three for a novice cyclist was nothing short of a baptism of fire. We commenced the day with a 4:30 am start for a 6:30 ferry crossing to Newhaven where we were greeted with the traditional English welcome of cold and rain. After a brief stop in a Lidl carpark to pump up our tyres and fill up our water bottles we hit the road. Sore legs from the two days prior meant day three was a slow starter, well for me anyway. The final 111-kilometre leg of journey from Newhaven to Tower Bridge in London, including the rolling hills of Surrey and Kent, was billed as the most challenging, and this was by no means wrong. Our mental and physical resilience were tested as we climbed hills that sometimes lasted for kilometres at a time.

It was here that Nick – who had joined us that morning after a tussle with French customs over the delivery of his bike – asked me which three words I would use to describe our journey. At the time, covered head to toe in mud, uncomfortable in my saddle and preparing for the next climbing ordeal there were several words that came to mind and not all of them print worthy. However, alongside the exhaustion and discomfort were feelings of elation and pride every time we crested a hill and another mile passed.

I’m not ashamed to say I shed a few tears as we crossed the finish line next to Tower Bridge, and these tears were almost repeated when we turned the corner into Liverpool Street and there waiting was a gathering of BMO colleagues and friends to congratulate us and usher us inside for a shower and some well-deserved pizza and drinks.

We rode 325 kilometres in two and a half days and raised over £12,000 in total for Farms for City Children! Thank you to BMO’s Mo Akanji for all the photos and support and to TraFIX’s Russell Thornton and Sustainable Trading’s Duncan Higgins for organising such a rewarding and exhilarating trip… but I might get the Eurostar home next year.

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What are the new market data rules imposed by the SEC and why are they contentious?

With respect to market data, there is very little competition in terms of how people can source it. The new rule basically outlines new competition as well as a new model of competing consolidators to participate in the market data distribution business. It’s really trying to find a way to introduce more competition. Ultimately, the goal is to lower the costs of market data for investors and for market participants to be on a level playing field, see the same type of data, and use it in a way that could help them continue to drive innovation.

Exchanges have typically offered proprietary data feeds, and if people feel that’s important to their business, they should be able to have it, but what they shouldn’t have is an informational advantage in terms of what they can get versus what the rest of the market can get. That includes things like depth-of-book, which is something that you can buy from an exchange but you couldn’t get on the SIP. Closing and opening auctions have become exceedingly critical, thereby making auction data more essential for traders. That data, along with odd lot data, were things that were only available in the proprietary data feeds.. The regulation is not addressing the speed or the cost of the market—the SEC can’t fix prices—but these changes address the definition of core market data. I think that that was probably the most contentious part. Now it’s been upheld as something that the Securities and Exchanges Commission (SEC) can move forward with.

The Transaction Fee Pilot proposal was defeated in the courts, and it was concluded that the SEC did not have the authority to conduct market-wide or potentially disruptive pilot programmes, but they could in fact make rules. This market data proposal actually has become a rule now. That was challenged and upheld, so the precedent is good in terms of the court backing the SEC’s ability to make new rules. Gensler has laid out a very specific agenda for what he wants to see. It’s a major overhaul, more or less a Reg NMS 2.0, that’s expected to come out later this year and no doubt is going to be challenged in the courts. 

What is the core aim of Gensler’s proposals?

The core changes are to make the market not only more accessible, but more efficient and more effective for investors. Ultimately, if you look at this Reg NMS 2.0, the outline is addressing issues like tick size, order flow, and how order flow competition can further enhance clients’ ability to interact with natural liquidity. Retail investors are able to participate in the markets in a way that they’ve never had before due to things like 0% commissions, and you have good execution quality around that, but that doesn’t mean you stop there. Currently, retail is predominantly disintermediated from other natural liquidity—specifically institutional liquidity that resides on-exchange or in dark pools in the US—and that’s something that still needs to be addressed. 

Do you see similarities with regulatory approaches in the EU/UK markets?

I definitely see similarities. The UK regulators as well as US/Canadian regulators all recognise that the better their markets perform, the better the access to liquidity is, the more transparency there is, and the less friction that there is in interacting in the market, the lower the cost is, and the better it is for investors and for investment in those markets. Europe’s been talking about consolidated tape for as long as I’ve been in the business. There’s no question that that has been a hallmark of the US market structure, even though it hasn’t been perfect and it needs to be reformed.

How do you expect a consolidated tape will impact continental Europe?

The more transparency you have and the more holistic your view of the markets is, the more competitive the market becomes to deliver better execution quality. It’ll be easier to hold execution providers accountable, easier to measure performance, and easier to see what a good price is. It’s something that we’ve been talking about for a long time. I think that brokers and technology providers have done a good job of putting the market together in a way that they can go and access liquidity effectively, and that has definitely inspired a tremendous amount of competition around execution quality and performance. The next step of having a real consolidated tape makes it easier for investors to understand and appreciate what and where pricing is. 

Do you expect retail to take hold in Europe in the same way that it has in the US?

Retail is extremely important. The proliferation and democratisation of access to the financial markets for retail has been incredibly positive for markets. In any economy that’s looking for people to invest, see the plan for their retirements, and grow their own wealth and net worth, it is important. Europe and the rest of the globe is seeing that, and I think they’re making changes to the market structure to make that more open, more transparent, more accessible. 

BMO recently launched a desk in Europe, how’s that going?

What we’ve been able to do in Europe in the short time that we’ve been live, and will continue to do over the course of the next few years, is really thanks to our deep understanding of market microstructure and our expertise in building algorithms tuned to the market structure. . Our holistic approach is all about being empirical about everything, having the ability to be iterative and run experiments, and then ultimately being collaborative with our client base. The European institutional community has really embraced that philosophy, especially with the type of technology and the people that we have behind it. We’re looking forward to continuing to grow. Next year is going to be a huge year of growth for us.

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According to his LinkedIn profile, Egbert started his new role in March 2022, joining from his former position as senior advisor with financial services SaaS startup GlobalSource Direct, where he spent two years.

Egbert was the head of equity product management for the Americas for Barclays from 2008-2015, before joining Nomura to act in various roles including as head of global markets research, Americas. In 2017 he moved to Goldman Sachs, where he was managing director and co-head of Americas equity research until 2019, when he moved into the FinTech space.

His move is the latest in BMO’s recent US hiring spree as it seeks to build out its equities sales and trading business, including the recent appointment of Thomas Guagliardo and Robert Luzzo as co-head of global prime finance and head of global prime sales, respectively.

The Toronto-headquarted BMO is relatively small in North America compared to the bigger US banks, but is making a strong play for expansion on both sides of the pond. In Europe, the bank is currently working on developing its electronic trading team, led by former Citi trader Kavel Patel, who joined in November 2021.

BMO has been focusing on electronic trading since its 2020 purchase of Clearpool, an algorithmic trading specialist founded by former Knight Capital traders. Another Knight Capital veteran, Eric Stockland, joined the firm in 2020 as managing director of the electronic trading division, responsible for product development and building new client relationships.

The post BMO hires new director of research for the US appeared first on The TRADE.

These ambassadors sales trade North American equity to a European and UK-based client base, remaining dedicated to the markets well into the evening local time. As a specialist and non-domestic market, success for these sales traders rests firmly on long-term client relationships. The set of skills and network required makes for a limited pool of specialist talent in this field. In this market, inter-competitor poaching is common. When individuals do switch allegiances, it’s usually for a rival institution in the same role. This natural displacement means when one person moves, others follow in a domino effect.

In the last two years, this community has undergone one of these rounds of musical chairs. In September earlier this year, long-term US sales trader Rob Thomas moved from Instinet after seven years to join Stifel as director of US equities sales and trading. Also embroiled in the shuffle was 15-year US equity sales trader, Luke House, who joined competitor BMO Capital Markets from Stifel in the same role this March. Harriet Sand, formerly an equity sales trader at Stifel for almost seven years, also moved to Berenberg this June in a US centric role. The list goes on.

“It is quite often sparked by one person moving or an event of some kind and then it is exactly that, you get that shift of the chairs. If I’m going out to try and hire somebody for the desk, then by and large I’m going to need somebody with a bit of experience depending on the make-up of the desk,” says Sean Taylor, US sales trader at pan-European broker Berenberg.

A specialist market  

It is because this market is non-domestic that it is considered specialist. As one would expect, a non-domestic market differs from a core one across the board, from the most complex nuances right down to the basic elements including how stocks trade, how clients like to trade them, the liquidity landscape and what the visibility is like versus other markets. All of this knowledge makes those already operating in this space valuable commodities that desks are looking to acquire.

“If you want to go and hire somebody who has got experience, knows the client base, knows how to trade that market, then you need to go and find them from the pool of US sales traders. It’s symptomatic of the number of people trading it as much as anything else. This isn’t just specific to the US; you can see this happening in Scandinavian market too for instance. Somebody moves and then number of guys who trade Scandinavia in London shift around. It tends to be more specific to trading a secondary market within a geography,” adds Taylor.

“If you’re trading the UK within the UK that is the core market and there tends to be quite a broad spread of people that are sales trading and covering accounts etc. So in terms of movement there it tends to be a forever changing landscape.”

Taylor’s turn to move chairs came at the end of 2019 when he joined Berenberg as a US sales trader from rival Stifel where he had been head of the division in London for nearly 15 years. Pan-European broker Berenberg has had a North American presence for 10 years and has been trading in the region for six of those. It’s been focused on significantly expanding its sales trading remit in the last two years, seeing 25% growth through the addition of new analysts and sales personnel.

Trust and long-term relationships

North American equity sales traders are, in effect, an outsourced extension of a client’s trading desk, acting as a bridge between the client local time and the foreign market. For this reason, trust and long-term relationships are extremely important.

Sales traders often take responsibility for orders through the UK market close, when clients are also focused on their global portfolios, and through the US market close, which takes place at 9pm UK time when most clients have logged off for the day. They want to leave someone they trust at the wheel, and in order to build up this trust they need to be close by and easily accessible. As a local reference point in their own time zone, clients can easily convey to sales traders based in the UK and Europe what they want. 

“Prior to moving to the sell-side I spent 10 years on the buy-side and seven of those on the trading desk and I always liked to have the brokers I was speaking to quite close. It means you can meet each other more often. It boils down to the relationships,” says Matthew Penfold, director of US sales trading at Cowen. “There’s been a lot of movement [of sales traders] recently but generally it’s been a business where people have historically stayed in seats for a long time. Ultimately, as people become embedded in firms then I think there’s less inclination to move elsewhere.”

Like many of his peers, Penfold joined his current company from a competitor firm, in this case Macquarie Group, where he had operated as a US sales trader for institutional investors for nine years. He joined Cowen as a director for its US equity sales trading team in July last year. Prior to joining Macquarie in 2010, Penfold also served as a US sales trader for investment bank Piper Jaffray for three years.

This embedding effect combined with the essential long-term relationships with clients means those operating in this space are rarely junior. While the rest of the sell-side has undergone significant juniorisation, demand for experience is much higher in the US sales trading space.

So why do these individuals commit to living out their professional careers in another time zone? Charlie Green joined RBC as a North American equity sales trader in 2015 from Cantor Fitzgerald Europe, having previously already operated as head trader at Abydos Capital and in an international sales trading role at Canaccord Capital. According to him, its North America that moves the needle for the rest of the market. “North America is the region that primarily drives global markets. Europe will often wait for the US market to wake up and it’s the risk appetite of North America that will dictate the pace and direction of the afternoon,” Green says.

RBC, as one of the longer standing players, opened its first London branch in 1910 and has served a European and UK institutional client base with an interest in North America ever since.

Miles away

A typical day will involve arriving any time from 9-11am UK time and preparing for the US open at 2.30pm in the afternoon. Like in other markets, most will prepare and distribute a note to the Street including a breakdown of overnight market news from the US. There are peaks in volume at the market Open and Close. Some desks will hand over to an East Coast desk at around 6pm UK time, however, most will continue trading right through to the Close at 9pm UK time.

“In terms of continuity for clients, at RBC we’re accountable the whole time. Ultimately you want to make sure you’re providing your client with simple solutions for their choice of execution. They don’t want a headache, especially after six o’clock in the evening,” says Green.

US sales traders’ days differ in that their minds are constantly straddling the Atlantic Ocean. Ongoing trends impacting the US most significantly have a greater impact on the sales traders covering it. For example, the growing influence of retail investors which has over the last two years continue to boil until eventually reaching a crescendo during the volatility caused by the GameStop saga. According to data by the Securities and Exchange Commission (SEC), almost 900,000 individual retail accounts – up from 10,000 trading a day at the start of the year – traded GameStop in a single day. The event saw shares in the brick-and-mortar shop rise 2,700% across three weeks in January.

Around 60% of US equity flows are now driven by retail investors while only 25% are driven by traditional bottom-up equity investors, according to recent data by JP Morgan, and this growing swarm is a power that US sales traders are only too aware of.

“In the US, we have clearly seen an increasing prevalence of retail trading and the volume this segment of the market brings to the broader tape, a theme of which institutional investors have been very keen to understand more. Along with this year, in particular, the well-publicised outsized moves in meme stocks,” adds Cowen’s Penfold.

Cowen was one of the institutions to launch a new tool aimed at helping institutional investors navigate the growing retail swarm. Named Inaccessible Liquidity Adjustment, the tool gives clients the opportunity to adjust their trading liquidity deemed to be inaccessible due to retail trading activity on a single stock basis by calculating the percentage of inaccessible liquidity for each US security on a weekly basis using a mixture of data from the previous three months collated by the Financial Industry Regulatory Authority (FINRA) and off-exchange data.

Execution

Execution for these sales traders depends on the legal set up of the institution. Some firms will have a legal entity in London and sales traders or their cash traders will execute via this, however, some desks will act purely as an introducing broker and direct orders to a parent institution based in North America. The majority of those based in London are able to execute themselves as many prefer the autonomy.

Like the wider market, execution has a changing face. Sales traders can use anything from risk, capital or algorithms depending on an order’s characteristics including average daily volume, how a stock trades or what the portfolio manager prefers. The increasing prevalence of electronic trading combined with the shifting regulatory and liquidity landscape means something that worked last week might prove unsuccessful tomorrow. This level of customisation has preserved the need for high-touch trading alongside automised solutions. However, the influx of these electronic and algorithmic solutions has also meant that a much larger portion of the wallet has become low touch and clients have greater autonomy over orders.

For this reason, institutions will often have a high-touch desk service for less liquid orders and a comprehensive electronic or algorithmic service for low touch orders with smaller market impact. Berenberg, for example, offers data-driven algorithmic strategies, global portfolio trading, and ETF liquidity aggregation alongside its high-touch service.

“I think clients trading themselves has been a big theme in the industry with much more of the wallet being low touch now,” says Cowen’s Penfold. “Clients are using a Cowen suite of algorithms to trade even high touch orders.”

Cowen launched its suite of trading algorithms and execution products into Europe in January last year, offering a mirrored service to its products available in the US with additional enhancements to help participants navigate the market post-MiFID II. These included Cowen’s ‘heat map’ routing logic technology to improve efficiencies for clients seeking dark liquidity.

“There has been considerable growth towards electronic over the last five years as asset managers face greater regulatory pressures and trading electronically is often viewed as cheaper, with a simpler audit trail,” says RBC’s Green. “However, if larger blocks of liquidity are required, and that is often the case, then in order to achieve best execution a client will have to reach out to those that are able to provide that liquidity.”

RBC offers high touch and electronic execution services. It’s proprietary algo suite includes RBC NOW and RBC Closer which seek liquidity and attempt to achieve the Closing price respectively while managing market impact, and RBC Dark which acts as a dark aggregator and sources liquidity at selected dark venues, among others. These are powered by its in-house smart order routing technology, THOR, which interacts with the algos and with direct market access (DMA) orders, its cash desk and program trades.

North American equities desks in Europe and the UK are usually comprised of two-to-three individuals and because of this, sales traders usually cover the whole breadth of client types that that institution offers services to. While a two-person desk may sound small, as boots on the ground for a foreign sales desk, sales traders based in the UK and Europe only represent a small portion of the operation that can’t be seen in its entirety.

Following Brexit, desk configuration has become more nuanced with certain restrictions applying to certain client types and with all European institutions having to face a European counterpart. This has meant some desks have reduced their numbers to create a more distinct split of business post-Brexit, with individual sales traders focusing their efforts on one side of the channel specifically.

Keep your friends close 

This small and tightly knit community of individuals compete fiercely into the night for the attention of a mutual client base. However, given that this market segment is one with little turnover that relies on long and trusting relationships, these are people that have worked alongside each other for years, often having even crossed paths at the same institutions on the same desks. So much so that they all meet up for an annual Thanksgiving lunch. Sat at their desks late into the evening when everyone else has clocked off these individuals are acutely aware that dotted around the city there is a select few sat in the same boat as them.

“Clients are looking for seamless coverage from pre-European open to after-market hours in the US. Aligning our coverage across time zones means we’re sitting there late at night, this community that sit at their desks at nine or ten o’clock at night. Everyone knows everyone, it’s healthy, it’s competitive,” concludes Green.

The post Musical chairs and the world of US sales trading appeared first on The TRADE.

The partnership follows a successful pilot project between the pair that saw them develop a solution to speed up the valuation of autocallable notes.

BMO claimed working with Riskfuel would reduce the need to calculate pricing and risks of structured products on current slow and expensive financial models.

“Riskfuel’s leading tools and expertise will help us expand our client base, drive higher trade flows, generate new risk insights and lead to better product design and selection,” said Lucas Caliri, managing director and head of cross asset solutions, BMO Financial Group.

“This partnership is enabling us to assist our clients with more complex hedging strategies and, with accelerated pricing and analysis, help our clients make faster, smarter investment decisions.”

The partnership is the latest technology focused collaboration from BMO after it also partnered with Amazon Web Services (AWS) in June to drive its cloud transformation across its banking platforms.

As part of the deal, AWS will build cloud-based digital financial services applications and act as BMO’s strategic cloud provider, managing operational workloads for its investment banking, wealth management and other banking divisions.

“Structured notes are traditionally priced using slow numerical techniques that simulate an extremely large number of possible future states of the financial markets. Riskfuel uses deep learning to replace these slow simulators with very fast neural nets,” said Ryan Ferguson, founder and chief executive of Riskfuel.

The post BMO partners with start-up to deploy AI for derivatives structured note pricing appeared first on The TRADE.

BMO Global Asset Management enjoyed a busy month in June, appointing a new chief executive officer and promoting its new order management system.

Over the past two years, the business – which boasts some US$230 billion in assets under management – has been going through some structural changes.

In 2014, BMO acquired London-based investment group F&C Asset Management for $1.2 billion which gave BMO Global Asset Management 24 offices in 14 countries.

A year later, the group created BMO Global Asset Management (EMEA) with headquarters in London and then, last month, the parent group promoted former F&C chief executive Richard Wilson to chief executive officer and chief investment officer for BMO Global Asset Management.

During this period of change, the legacy IT and development team of F&C Investments team were working on a platform review programme to identify areas that could be rationalised. Leading the project were BMO GAM’s head of IT, Ian Barringer and head of development Sacha Anderson.

The purpose of the project was to review the existing OMS and portfolio management system arrangements and trial some new platforms on the OMS market through demos with the front office teams.

Sacha Anderson, head of development at BMO Asset Management, recalls the process that led to the business opting for Markit’s ThinkFolio.

He says: “We had demos to front desks quite early on with a short list of platforms. By a process of scoring the various platforms, front office feedback, looking at costings and scalability, we arrived at ThinkFolio. We already had experience of ThinkFolio because our Treasury desk had been using them.”

After the research process, the team spoke with rival buy-side firms to get reviews on the quality of the system where it has been used elsewhere.  The business leaders recalled receiving positive reviews from emerging markets group Ashmore among others.

Since then, the OMS has been deployed in London, Toronto, Hong Kong and the Netherlands although the majority are legacy F&C business units. It is unclear at this stage whether all of the global BMO Asset Management business units will eventually deploy the system.

Ian Barringer, head of IT for BMO told The Trade: “I think that would be the objective but we are not in a situation yet to make any decisions like that. We represent what was formally F&C.”

With Richard Wilson’s move to global chief executive officer only announced last month it is perhaps understandable that technical integration remains a work in progress.

However, there is plenty of scope with the new platform. While F&C’s Treasury team may have used it previously it is easily adapted for multiple asset classes both for order management and for portfolio management requirements, according to Anderson.

Barringer adds: “We have… vanilla equity to credit and everything in between. Those were the requirements against which the selected platform was chosen. It was chosen because it covers all the products we invest in.”

CORRECTION: A public relations representative from Markit has asked us to clarify that the conversation with Ashmore mentioned in the interview, was after the selection of the platform had been made and not part of that process. It was apparently mentioned as an illustration of the fact that IT departments of asset managers do sometimes share experiences of systems. The story has been updated to reflect this.

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