Joseph tells us about his experiences and challenges as head of trading at Comgest, sharing his thoughts on present-day trading and how markets have changed over the years.
Can you describe a typical day in the office at Comgest?
I think it is fair to say that no two days are ever the same at Comgest but essentially the day is composed of interactions with PM’s, Brokers and the Middle Office. There are always live trades in different stages of their life cycles that require specific treatment which creates an interesting workflow. The traders generally open the day digesting how the US faired in the previous session and the knock-on effect into the open Asian session. Earnings and upcoming events are digested, and this data is fed back to the PMs with any significant market related moves on the relevant names in the Comgest investment universe.
As head of trading, how would you describe the differences between each asset class that you trade giving examples (if you can) of the pros and cons of each and which areas you would like to see further development?
Comgest is practically 100% Equity invested, with Index futures and currency hedging on our hedged portfolios. I would define Equities as a buoyant market where the advantages are gained in finding quality liquidity. The landscape is changing as traders endeavour to find new ways to avoid market impact. The FX market is an RFQ battleground with ever tightening spreads with the usual FX benchmarks still being used to cut many daily NAVs across the industry. Trading futures requires a lot of preparatory work to evaluate the market depth and the hedging coverage you wish to obtain with each future traded. Roll cost must also be established prior to placing orders to avoid costly trades!
Do you have a preferred asset class and can you tell us why?
The Equity market would currently be my preferred asset class as it is continually evolving, particularly in Europe. Each day new venues are being “turned on or off” at different broker houses as the results from their data crunching quant teams persevere to evaluate toxicity. We have concentrated portfolios and can sometimes be a meaningful portion of daily liquidity and therefore have invested our time heavily in upgrading our TCA to efficiently aggregate this data into meaningful pre-trade indications. This adds a tangible quant driven layer to the broker selection process and improves the vigour of our best execution process. It is a fortunate fit that Comgest is a long-only investor in long-term quality growth companies.
Does having knowledge gained through previous roles such as Chief Operations Officer help you influence and steer your trading desk so that it runs to its maximum efficiency?
Absolutely. The skill set required to manage the day to day operational running of a bank forces you to see the bigger strategic picture and consider every aspect of management. It has greatly aided in the extrinsic administration of costs/performance management/upgrading of skills as well as the intrinsic sense of purpose/value and fulfilment in the role.
What challenges do you face and how do these challenges compare to those in previous roles?
Firstly, sourcing quality liquidity is a key challenge for any trading desk in the current MiFID II environment. This requires a specific skill set and understanding of the markets to accomplish. A further challenge we surmounted was to effectively trawl through individual fill level data and to evaluate this in a meaningful way.
The sheer volume of data is mind boggling and it must be stored efficiently to have meaningful interactions with it.
Our approach is to continually refine this post-trade information and use it to enhance our pre-trade process at the order initiation stage to ensure best execution. This data also allows us to fulfil our MiFID II transaction reporting requirements.
We are also actively working with our brokers to evaluate RTS 27 data, although this is still in the infancy stage.
How do you think trading in general has changed since you joined the markets?
I think every fellow head trader I have met over the years speaks fondly of the “excel spreadsheet” days when orders were sent manually. Prior to FIX Protocol, orders were generally sent via spreadsheets or indeed verbally.
The biggest change I have felt over the years has been the gradual transition from “blind” trading through high touch brokers to completely transparent execution of orders by the buy side.
Electronic trading has created a massive shift of trading responsibility from the sell side to the buy side, requiring a very specific skill set.
While the debate continues on the level of transparency MiFID II has brought to market transactions, the regime has certainly increased transparency on execution reporting as our trading desk’s reporting obligations have expanded not only to regulators but also to savvy clients requesting Transaction Cost Analysis (TCA) reports.
What made you choose trading as a career?
To be honest I sort of stumbled into trading. I originally wanted to write music for films post university but found it immensely difficult to break into a very tight knit marketplace. I then decided to capitalise on my maths and language skills and take a job as a junior trader at an Italian asset manager and the rest is history.
What are the key takeaways from working in the industry over the last 16 years?
No matter how much you think you know, there is always someone with more information than you! I always seek to hire people smarter than myself. Our industry is continually evolving, in order to stay relevant, you must have an open mind and a willingness to continue learning. My biggest personal lesson was from the Lehman Brother’s implosion - a trade is never complete until physically settled in one’s account. You need to appreciate the full life cycle of a trade from idea generation right through to settlement.
Can you tell us your top 3 tips to be a successful buy side trader?
You really must be disciplined when working in the markets, if you are undisciplined you are a slave to your emotions and mistakes can happen.
You must have humility in spades
Be completely open about mistakes as this is the only way to hone your skills and improve
Do you have any interests outside of work that help to give you a better work life balance?
I always make a conscious effort to get off the desk for a run at lunchtime at least twice a week, sometimes more. I have never had an issue on the desk that couldn’t be resolved by reflecting on it while exercising. I also enjoy getting out for a game of tennis in the evening.
What do you like about the Alpha Trader Forum? Why is it an interesting meeting?
Any opportunity to get together with peers in your industry is valuable.
I am a fervent believer in peer to peer sharing of information as it can only improve the whole experience for all. In this fragmented market, it is more and more important to understand where quality liquidity can be found, and the Alpha Trader Forum opens that discussion.
Read the article in The Buy-side Perspectives: https://joom.ag/NN6a/p42