Rowley Aird, Head of Trading and Execution Services, Europe at CLSA talks to HoT about his career path and current strategies.
RA: My career started twenty years ago at Bloomberg in London. At the end of 2002 I was moved to Hong Kong where I spent the next eleven years.
I was employer number two at Liquidnet in Asia. I set that business up in Hong Kong and then helped set up the Japan, Australia and Singapore offices. I spent six years at Liquidnet and then moved to the electronic trading desk at UBS where I headed up sales on the DMA and Algo desks.
Two years ago I moved from UBS in Hong Kong to CSLA in London and since then I’ve been running all the execution services at CLSA in Europe which includes Asian Sales Trading, Global Portfolio Trading, US and Asian ALGO and US Sales Trading.
CLSA is a leading independent agency broker headquartered in Hong Kong, it was started thirty years ago set up by two journalists with research backgrounds
We have a dominant market share in many of the Asian Pacific markets and we have seats on every single exchange in Asia. We are an agency only business so our clients tend to be exclusively long-only and hedge funds. We’re non-exotic, and we concentrate on high-touch commission dollars, although in the last few years, with the takeover of Citic, we have started to expand our product offering into prime brokerage services (still via Citic) and even fixed income.
We mainly trade in vanilla equities, we don’t have a swaps platform, we don’t do derivatives and we tend to be a high-touch trading desk that has historically relied on a strong research product. We’ve had to differentiate ourselves from the research and sales angles, due to various regulations like MiFID II and other regulatory pressures.
Since the 2008 crash systematic controls are much tighter across all levels of execution platforms, there are now so many risk parameters that go into all of our programming that our algorithms have highly developed risk controls, price checks and volume checks. So we have much more sophisticated surveillance systems, market monitoring and market abuse tools, plus other third party applications that help us deal with any big events.
Our predominant role in Europe is servicing over 350 long-only and hedge-fund clients that trade into Asia or into the US from Europe. We can execute European equities although we’re not members of exchanges here, that’s not our speciality so I don’t think we’ve been affected as much by regulations as predominantly European houses. With respect to MiFID II in particular, we like to segregate ourselves on to the trading side, away from the sales and research side of the business to achieve best execution for our clients.
My aim is to have the best stand-alone trading desk in our niche areas; not having to pay commission dollars through a research budget has hugely impacted the way we have to run our desk. We have to be pro-active, we have to call our clients and can’t afford to wait for them to call us because the days of a big research report coming out and then the phone ringing two minutes later with the order have disappeared. A client recently said, ‘We now need a reason to trade with brokers, because we’re so segregated away from the PMs and the research side of it, that we purely look at it from a best execution perspective.’ So I run the desk in a much more pro-active way, we tightly monitor the outgoing phone calls and the amount of client interaction that we have. We have to be on the front foot with our clients, we have to advertise our flows much better, we need to have smarter IOI systems and overall, better technology.
In terms of clearing, we have a third party service that we use over in Asia Pacific, it’s called Set Clear and it’s 100% owned by CLSA. However, other brokers can piggyback off our technology and resources. We’ve just gone through a huge OMS change, which we’ve developed in house, traditionally we have had to use third party trading platforms at huge cost and very limited upside, i.e., paying a lot for very little from a very commoditised platform. So we developed our own Order Management System that has given us a much stronger trading platform than we had previously. I have been very involved in the look and feel of the platform and the way it interacts with all of our offices around the world. We have local seats in all of the Asia Pacific countries with a minimum of two sales trades plus two execution dealers, so the ability to communicate over various time zones using efficient trading platforms is absolutely critical.
CLSA is, historically, a research driven house but if we relied solely on that research in order to get trades I’d be unemployed very quickly. I’ve tried to implement a much stronger pro-active work environment to achieve best execution. The measures that we have in place as a desk now are of a much higher quality. We use third party TCA systems to monitor best execution, in order to monitor benchmark analysis, liquidity impacts and venue analysis so I think we have much more sophisticated tools at our disposal. I’ve had to work much closer with our clients and our risk team to show clients how we achieve best execution. It’s an interesting exercise, comparing best execution with perfect execution.
Without doubt, the new regulations, particularly MiFID II, have taken sales trading and execution services to another level.