Profile | Matthew Cousens & James Hilton James Hilton
What were the drivers behind the restructuring in February? Hilton: To be honest they were good drivers in that the AES management had done a good job in building a successful business and because of that the management team was seen in a positive light. As a result, some of the team have been deployed to help develop other parts of the business. For example, Rob Maher, (who was previously head of AES sales, Europe at Credit Suisse), has gone to the fixed income division as global head of EFX sales.
Cousens: The other reason is that other asset classes aside from equities are looking to modernise the way they trade and the bank is leveraging our experience.
What if any impact have the cutbacks had on your operations? Cousens: The restructuring that we underwent in February had nothing to do with costs. AES is in good shape.
In fact the number of personnel has not changed over the last five and half years. What has changed is the functionality and our emphasis on trading coverage versus new-sales origination. We have become even more client focused and are out of the office more talking to them about their requirements and how we can help them optimise their trading strategies.
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Hilton: The electronic trading business model has matured and as a result our roles have changed. Our coverage desk has more people and on the sales side, we are having different conversations with our buyside clients. We have a significant number of clients on board now and they understand how to use algos and are clued up on best execution but they need new services so that they can trade more effectively. We have also developed new products such as the AES Alpha Scorecard which we launched last year. It analyses the quality of execution-flow across different trading venues on a short-term basis. The programme then steers clients to the most appropriate venue and matches their risk profiles.
What was the reason behind the launch of this product? Cousens: Let me put it into context. There are huge concerns over the increasing levels of high frequency trading and the Alpha Scorecard enables our clients to better understand who they are interacting with in the dark pool. It builds a profile of the client over time, not just on a trade- by-trade basis. This has given clients a lot more confidence and it is proving very successful at allowing us to monitor participants in the pool. One of the biggest issues in the past was that there was no quantifiable way to measure a profile, until now. We relied on generalised, subjective categorisations. The AES Alpha Scorecard gives clients transparency in terms of who they are trading with.
Do you think high frequency trading will be regulated? Hilton: There are many arguments against high frequency trading but the fact is that quant-based strategies account for more of the current market activity and if you were to strip them out then you would see a significant reduction in the availability of liquidity. Spreads would widen and in turn trading would become more expensive. However, there are also different types of high frequency traders and it is important for the regulator and brokers to understand the differences.
Best Execution | Autumn 2012
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