Royal London Asset Management’s (RLAM) trading team is no stranger to change. The London-based asset manager has undergone not one but three makeovers in recent years as it continues to evolve with the demands of the street. After moving to a centralised equity dealing desk in 2002, the institution added fixed income to the mix to create a multi-asset offering in 2018.
Brought in to set up the firm’s fixed income desk was current head of trading and execution analytics, Kevin Flood, who joined RLAM with an extensive trading career previously under his belt, having already served for 15 years at Deutsche Bank. The fixed income offering at RLAM would be the second of its kind set up by Flood, after also being tasked with setting up a London based fixed income desk for DWS Group – Deutsche Bank’s asset management arm – in 2016. The desk was subsequently migrated to Frankfurt following Brexit, leading Flood to his current role at RLAM.
More recently though, RLAM’s trading team has undergone another revamp. Historically, the trading teams were siloed by asset class with separate equity and fixed income teams trading their own products alongside FX and derivatives. However, following another spate of change in the last year, RLAM’s trading team brought together these siloed divisions in favour of a centralised dealing desk with a pod structure. The desk now consists of three pods for equities, fixed income, and derivatives and foreign exchange.
“We now have the ability to move resources around within the team when we need to,” says Flood. “I’m not trying to make every single trader into a multi-asset trader and spread them across every asset class we trade. It’s too broad. Each trader has their specialism, but it allows for better coverage and consistency, and allows traders to get involved with asset classes that they may not deal with every single day.
“We have a very strong, talented desk. At the end of the day, they’re just really good traders. They’re hungry and they’re aggressive and they want to get the best result every time for our clients. But they’re also curious and inquisitive around how we improve processes and deliver efficiencies for the business.”
Each pod is responsible for its own efficiency whether that be through improvements to its automation or workflows. This is something that the trading team tells The TRADE became especially prominent across pods in light of the recent US shift to T+1. London-based RLAM does not operate under a follow the sun model and has therefore had to rely on technology solutions to ensure orders are affirmed amid the shortened settlement cycle.
“We found that there was a process from one provider which was very useful and ticked all the boxes that we needed it to. When it comes to some of our overnight orders, we were able to get those to auto-match and allocate, which is what I think the regulator wants to see,” explains RLAM fixed income trader Ben Wheeler who was responsible for assessing solutions to the T+1 conundrum on the desk.
“Automation regarding the US market moving to T+1 is important given we have a presence in USD products. We are a UK firm and this limits the available hours to get trades matched and settled. Automation has been very important in credit more widely given we are an active manager. It has allowed us to efficiently execute low touch trades while spending more time on the high touch/high profile trades which have a higher contribution to our fund managers and ultimately clients’ alpha.”
Wheeler has worn several hats in his career to date. Joining RLAM in 2022, he had already spent over a decade on the buy-side at AIG Asset Management rising up through the ranks to take up the reins as head of London public credit trading, simultaneously managing the execution and fund management.
He sits in a pod of three in fixed income including himself, Flood and a soon to be new addition that has not yet been announced covering the credit and rates markets, exchange traded derivatives (ETD) and derivatives.
Execution analytics
Now un-siloed, the RLAM trading desk has also been working on yet more recent changes to its structure but this time with a data focus. Seemingly never sitting still, the desk has redesigned itself as the trading and execution analytics team in the last year, refocusing its attentions on data as well as trading.
The team tells The TRADE that through their renewed focus, they intend to leverage the plethora of data crossing the desk every day to create tools and data products that can be utilised both within the execution team and across the trade lifecycle in the wider institution.
“Initially what we’re really looking to do is aggregate and clean the data that’s coming into us. We will then store and disseminate it to the PMs in a meaningful way, be it in the means of either trading ideas, liquidity opportunities, or missed liquidity opportunities,” says Flood.
“I see the trading desk as a conduit for the firm. We’re in a very enviable position in that we have a huge amount of data coming into us. Some of it in the form of more structured data like IOIs, axes, market data, TCA, pre- and post-trade execution data or more unstructured in the form of qualitative trader colour or market positioning. As a trading desk for an active asset manager, the exciting challenge is harnessing that data to feed it back into the investment process in a meaningful way.”
Central to the desk’s new identity are two elements: a newly streamlined system and a brand-new trading analyst. In December last year, RLAM streamlined its workflows through the migration from two separate order management systems (OMS) to BlackRock’s Aladdin.
“We had two order management systems. We have consolidated onto one platform and this has made communication a lot easier. It includes all data and data cloud in one place. It’s made our job as traders a lot easier to have all the data in one place,” says Mark Jenkins, senior derivatives trader at RLAM.
Jenkins has been on the RLAM trading desk since 2019, joining from abrdn – formerly Aberdeen Standard Investments – where he had been a senior derivatives trader. His speciality, he tells The TRADE, is FX rates and derivatives flow. His pod also includes William Knight who joined RLAM from Investec in 2013.
The rates environment globally has kept the pair busy in periods of volatility in recent months, something that Jenkins confirms he expects to continue.
“The way the PMs have been looking to trade has changed. Historically, trading might have been fewer tickets but of larger size,” he says. “Now, we’re seeing an increase in the number of tickets but they are smaller in size due to volatility and not having to handle such a large position to get the alpha that you’re expecting from the positions. It’s an increase in tactical trading.”
New faces
The backbone of the desk’s new data-focused identity, however, is the addition of trading analyst Jennifer Cornell. Cornell joined the desk in April from Tradeweb where she had been working within its AiEX and workflow solutions business. Prior to joining Tradeweb, she had spent three months as a fixed income quant research intern at BlackRock.
“As a desk, we’ve always been data led. By bringing Jenny on board, we’re adding another string to that bow,” says Flood. “Part of being a buy-side trading desk is improving efficiencies, adding value and trying to add alpha. But as traders, we’re also very busy executing our flow, so having that additional resource sat on the desk who can continue to work on projects or develop code when we’re tied up means we can continue to move forward.
“All of the traders have ideas on the desk about how they would like to see and access data. Jenny can help with that. She can be our conduit between quant teams and internal tech teams.”
RLAM is in the process of centralising its data platform following the streamlining of its OMS. Just three months into her role, Cornell is now responsible for piecing together and cleaning data sourced in-house and from external sources in order to create new data-based tools to be used throughout the trading team and the wider RLAM organisation to quantify performance and improve on future strategies.
“Having all that internal and external data in one place allows us to better quantify the value add of the trading role,” says Cornell.
“You can take into account not just the price they executed, but also how large the order was and the general liquidity at the time. Taking in all of these data points and contextualising the work that traders are doing helps to quantify the value add of their work. Rather than just looking at 2D pricing information across the day, once you’ve added these other dimensions of time and size, you get a much fuller picture of how good the trade was.
“They [traders] can use different tools for pre-trade analysis using various data sources that I put together for them. For example, looking at axe data or data on Mifid reporting which gives them transparency around liquidity or historic trading levels. My place in aiding the trading experience is around building the data solutions for the traders and PMs.”
Given the fixed income focus of her previous roles, Cornell will be focused on that area of the desk for the time being with plans to extend out into other asset classes in the future.
“Fixed income is such an opaque landscape,” she says. “There’s not a lot of transparency around a lot of that data, which makes it exciting because there’s so much that you can do to improve the process. There’s more room for progress.”
Data, data and more data
It’s unsurprising RLAM has opted for a data-led strategy going forwards. Data has become the lifeblood of the execution process. Each day brings with it new data sources and solutions that offer those willing to leverage them a chance to get the edge on their competitors. Meanwhile, regulators across the globe are undergoing changes to transparency regimes across asset classes which traders must take note of.
Given the cost of data and how transparent assets such as equities are in comparison with other asset classes – something only set to increase with the implementation of an equities consolidated tape – desks are increasingly looking to build out their own inhouse data capabilities in order to remove their reliance on third parties and reduce their market impact.
“There’s too much data and it can be used against you. The more we can build in house with people like Jennifer leading the way, the less reliant we are on broker provided data,” says senior RLAM equity trader Chris Hughes.
Hughes is one of the trading desk’s longest standing members of staff. Originally joining the then two-man setup in 2004, he took responsibility for equities trading in 2013. He began his career in the city in 1999 in a back-office settlements role.
For him, having Cornell and increased data capabilities on the desk means the team will be able to build out its own pre-trade analysis tools such as inhouse market impact estimates that will give the desk and wider organisation an edge over its competitors.
“That would be a really easy win because the market solutions can be misleading because they don’t know the motivation of what you’re doing,” he says.
Europe is closer than it’s ever been before to implementing a consolidated tape for equities. Set to open in H1 of 2025, the tender process will decide on the provider of the tape with the aim of having something implemented by 2026. For Hughes, a consolidated and consistent data source in Europe and the UK will prove essential for trading strategies going forward – in particular the use of volume weighted algorithms.
“Why are you using a VWAP strategy when volume is an unknown number or we’ve all got a different number for volume?” he implores. “The industry needs to embrace the consolidated tape. It’s going to be difficult because it’s not for profit.
“At the moment, the biggest problem is that not all machines are clever enough to read the tag for addressable vs non-addressable. On Bloomberg, you click a button and you can have a completely different volume number just by changing one filter. I’m hoping this [FCA post-trade flags changes] is the start of the clean-up and it finishes with the consolidated equity tape.
“We are pre-positioning ourselves via our data strategy with the help of Jennifer to be able to receive and utilise this cleaned up data.”
Nirvana
The majority of RLAM’s equity trading flow doesn’t typically lend itself to an overly low touch execution model, the equity trading team tells The TRADE. Instead, they favour electronic methods to find mid-point block liquidity.
“That’s the nirvana. What we’re trying to do is find that big block which isn’t available on the screen,” says Hughes. “Lit liquidity is terrible, the spreads are tight but there’s nothing on them. There’s no point me buying 27 shares and moving it a penny. The Nirvana is to be in as many smart venues as you can and hope to try and get that meaningful block in the middle.
“You have 10% ideally sat in a passive dark with a little bit of lit, but then you’d have 90% of it sat in the conditional ready for that big block. If you do grab that big block your day is over at that point. It’s wonderful. If you can trade intraday, you don’t need to wait with everyone else to clear at the closing level that the bigger players have decided on. I’m very happy if I can intraday get the blocks and avoid having to get involved with systematic volumes.”
Hughes is the most senior of a team of equity traders covering cash equity, programs, exchange traded funds (ETFs) and ETDs. Also within this team are Sam Vaughan-Jones and Simon Cuthbert, who joined from Close Brothers in 2015 and Majedie Investments in 2022, respectively. The team favours a “three-to-four-pronged approach” to execution, Hughes confirms.
“The best small cap brokers know where the holders are, who to interact with, who not to interact with, and who may be trading in short term or long term,” he explains. “That’s the manual element of it. Then you do the same exploratory stuff on the electronic venues using data to try and find out who’s toxic, and if that is a good venue or algo suite to use for this type of flow.”
The trading desk at RLAM has proven itself a fluid and flexible entity willing to adapt with the times as the market landscape changes around it. With markets becoming increasingly complex thanks to regulatory changes and advancements in data, these characteristics will likely become more and more of a requirement for desks of the same ilk going forward.
