The bottom line at any financial institution is always the bottom line, as in the dollars and cents. As he wrapped up a panel discussion on the consolidation of trading desks and multi-asset class strategies, it was appropriate that moderator Greg Wood, the director of algorithmic execution in listed derivatives and foreign exchange (FX) at Deutsche Bank, asked the panelists whether the projects had been worth it in the wallet.
"From a trading point of view, I just look at what it's costing me to trade," says Michael Levas, founder of Olympian Capital Management. "If I can reduce my cost to trade, that to me is the most important thing. By the same token I don't want to lose the quality of execution. For example, if you're using a smart order router effectively, there are rebates, there are various little gifts that one gets. From my point of view, it's strictly in reducing the cost of trading."
Deborah Mittelman, global head of product management for direct execution at UBS, adds: "We're constantly trying to measure profitability of a client. What does it cost us to trade with this client and what is your ratio of people to revenues that you should see getting better over time if your technology is performing more effectively. And the final measure, of course, is always earnings per share."
At Credit Suisse, Nachi Muthu, the global head of multi-asset electronic trading, listed derivatives and over-the-counter (OTC) clearing IT, has been tracking the degree to which traders have focused on different asset classes on his multi-asset class platform. The cross-pollination was not particularly high; in fact it was lower than he'd guessed. The usefulness of the platform for the IT side is different, though.
"On that side it makes a lot of sense because the same team is providing coverage from a relationship point of view to the clients as well as providing the core platforms," he says. "The costs are pretty easy to measure and say we have enough savings. From a revenue perspective, at least from a cross-pollination point of view, it was surprising to see it was not that much."
Bill Murphy, CTO of Blackstone, once again joins the podcast to discuss the private equity firm's new offices, designed to house its innovations team.Subscribe to Weekly Wrap emails