Adrian was one of the influential advisory board members ahead of planning for the 7th annual Alpha Trader Forum Global Summit 2019. With a career working both on the buy- and sell-side trading multiple asset classes, Adrian shares his expertise about buy-side fixed income and foreign exchange trading.
Which are your current priorities and asset class responsibilities?
We pretty much trade every asset class globally, in local/hard currency, through cash, listed and OTC exposures. Lombard Odier IM is fortunate enough to have trading desks in Hong Kong, Geneva, London and New York.
There is a steady stream of projects coming in, which have an impact on trading across various asset classes. We just delivered centrally cleared CDS trading ahead of schedule, and from day one we have already started to see both pricing and operational benefits.
Over the last few years the skew on project work has been regulatory, however we have managed to seek out value added propositions to trading methodology, built a bespoke liquidity index and enhanced STP.
How do you see the centralised dealing desk delivering cutting-edge value to the buy side? Is there an industry wide increased justification for centralised dealing across your asset class responsibilities?
Each house is different. Where you have a small shop with niche product suites, centralised may not be a viable option. The buy side is extremely competitive, we are challenged at many levels and having an efficient value-added trading function is just a part of the competitiveness of the industry. Fortunately, we have (the scale) that enables us to centralise and bring those benefits to the forefront of asset management.
What are the key deliverables of the fixed income trading desk in the investment process?
We have seen fixed income traders becoming much more involved in the investment process, particularly when it comes to liquidity assessment. Our traders are involved at the portfolio construction stage to help portfolio managers assess what the liquidity conditions are likely to be on the way in, and potentially the way out of the investment. This is all done prior to the pre-trade analysis at time of execution, where we have proprietary and third party tools at our disposal to help make the best informed decision and record it every time. Traders are also the eyes and ears of the market for the fund and given the number of data points hitting them today, it’s essential that we have the tools to manage this flow to benefit our funds.
What are your key messages to the buy-side firms who still solely rely on their custodian relationships for FX trading?
“Caveat Emptor!” This is still clearly a very profitable business for the clearing banks, especially in anything even remotely exotic (outside G10) or long dated. I think the case is quite easy to make to clients. We can run the stats on a particular account against benchmarks where we think we could have executed and present the P&L differences to clients to make an informed decision. Clearly this is not the only consideration when making this decision as a client, as prime brokerage relationships come at a cost, and reporting is also a consideration. However, we owe it to our clients to provide them with the information that will help them make the right decision for their needs.
How do you see trading technology increasingly adding value to the trading desk and how do you expect this to evolve over the next few years?
Technological competency is at the centre of any agile trading desk. We have seen technology that was well-established in the equity markets now becoming business-as-usual in FX and some fixed income trading. Technology adds real scale to the business in a risk managed fashion. It allows us to optimise staffing, and to draw upon the value of experienced traders on the desk.
Which hurdles are the buy-side trading desks facing to adapt new technologies and make choices between best-of-breed and multi-asset solutions?
“New Platform Fatigue”. Any buy-side head of trading will tell you that over the last few years they have been inundated with pitches to the next trading platform across multiple products. With now over 100 bond trading platforms alone, we have to clearly assess which platforms are likely to add real marginal benefit to our business. Couple this with the process of on-boarding a platform through legal, risk, compliance and operational due diligence before a go live, then writing up as part of procedures is quite a lot of heavy lifting on our side. We have partnered with our preferred platforms across each asset class and had an influential voice in their development. We are unlikely to be asking for development that can’t be used at the next buy-side client so it’s usually to the platforms’ benefit. Additionally, we also have to pick partners we know will still be in the business in five to ten years’ time.
What are the characteristics of the brokers who come out on top in the changing capital markets?
We constantly evaluate how we access our markets. Brokers that provide scalable technological solutions (automated market making, pre/post trade TCA capabilities, dynamic algorithmic suites) with balance sheet capabilities have been shown to win a greater proportion of our business.
We have seen the traditional business models challenged in recent years, whether that’s down to capital restrictions on market making or incumbents (trading platforms/ECN, ETF market makers), entering business usually dominated by the banks.
Also we like to see how our brokers cope when we have stressed markets, as we did in some EM currencies last summer and with some individual credit/equity names. These situations can be very attractive for alpha generating and we rely on our core brokers to provide liquidity on these events.
What recommendations do you have for your peers in how to streamline processes to satisfy the needs of compliance and oversight teams?
Get them on board. Understand their job and what their goals are; in my personal experience, this also becomes an enriching experience for the business. Long gone are the days when compliance, risk, and operations had an arm’s length relationship with trading. Today a trading operation has to be seen as a harmonious unit with every department pulling in the same direction. One of the benefits of regulatory change has been to bring these units together, helping to deliver faster, more robust solutions to the business.
How do you foresee the buy-side benefitting from regulatory changes across asset classes? How would you wish regulation to further improve the capital markets?
We have already seen some benefits come in, especially since MIFID II.
In certain products which have been pushed to platform, the size that are now regularly quoted have increased a lot especially in credit and FX.
I think there is a combined wish for greater price transparency on a multitude of products where perhaps a consolidated tape would be welcome. That doesn’t come without its challenges, particularly around how it is created, paid for and by whom.
Is buy-side networking important? How do the buy side benefit from interacting with each other at private roundtable meetings such as the Alpha Trader Forum?
It’s really important. What you can learn in a short space of time from peers who are facing the same issues is not only invaluable but efficient. Also, it helps sense-check that you haven’t missed anything. Given the regulatory hurdles we’ve all had to jump, we have benefitted enormously from hosting a number of peer meetings at our offices of around 20 people each time.
Have you always wanted to be a trader and how did you find yourself taking this career path?
I was lucky enough to know from the age of 17 what I wanted to do for a career. Economics was a subject interest for “A” level then at degree level. From there I could not wait to get a seat on a programme that led to a trading position. I have been fortunate to be involved in multi asset trading from the start of my career with certain periods having a more of an equity/fixed income/FX focus. I think this has allowed me to straddle the buy and sell side and I have spent long periods at both sides of the product offering.
Do you have any tips for your peers on how to balance time between your role as head of trading, family and personal interests? Who is Adrian Biesty outside of work?
For me it helps to have a pastime where I can completely switch off from work. I am a keen private pilot and regularly fly recreational planes out of Biggin Hill and Denham airports. It’s always been an interest of mine and it helps me switch off, as I have to be entirely focused while in the pilot’s seat.
When my children are slightly older it will be a great platform for adventures for the whole family as we explore the harder-to-reach areas of Europe. There are a surprising number of private airfields around, who are always very welcoming.