Vision for the Future
Right now I am interested in seeing how the NYSE hybrid will work with Reg NMS.
Fun Facts
Tell us something interesting that few people know about your professional or personal background.
I am quite active. I like the outdoors. Grace is not my middle name, so I do get cut up and beat up quite a bit. I mountain bike - I have bruises and scars on my legs, too, from some of the tougher terrain we ride. I'm also a gym rat. I get involved in pretty much everything. I ski and play tennis. I even have a bad back - I have a herniated disk, but that doesn't stop me. I am very type A if you have to classify me.
|
800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
Assets under management:
$28 billion.
Fund(s) for which you trade:
I trade for and manage all equity funds at First Quadrant.
|
Types of products traded:
On my desk I trade purely equities, which includes U.S. and European equities. Under that umbrella we trade large cap, mid cap and small cap. We also offer a market-neutral strategy.
Daily volume in equities:
$1.5 million shares.
|
Structure of trading department:
Our trading desk is divided by strategy, trade size and market between two traders. It's divided that way, but it's not written in stone; we need to cover each other and step in when needed.
|
Previous Positions:
I worked at Baraban Securities, a small regional retail brokerage firm in Culiver City, Calif., a couple of years prior to joining First Quadrant in 1994.
Education:
I have a B.S. in finance from California Polytechnic University.
|
TECHNOLOGY
Technology budget for trading: $1 million for the trading desk.
Technology used to trade equities:
The order management system we use is a proprietary OMS. Although we purchased Latent Zero, we don't have that implemented yet - but we will at the end of this year. We also have several execution management systems and crossing networks that we use on the desk.
Chief Information Officer:
Max Darnell
How do you work with your CIO when it comes to getting new technology on the trading desk?
We would evaluate our current systems and see where we could improve on our technology - if there is a change or upgrade needed. Once that decision is made, we would discuss the features and functionality that we would need with the new system. We get the technology group involved, and they would evaluate the vendor systems for the features that we specified. The CIO and COO would sign off once a system is chosen.
LOOKING AHEAD
What trends/regulations/issues do you think will transform your role as a trader?
The proliferation of algorithms has changed the role of the buy-side trader.
We need to be more technologically savvy and be in greater control of our own trade. We need to be more cognitive of our transaction costs by using different algorithms or ATSs to trade ourselves upstairs.
What do you hope technology can change to make your role easier?
I am just waiting for the new order management [system] to come on, and the implementation to finish up, so I can have dynamic cash numbers as well as some other features. That is something we need here at First Quadrant.
INTERNATIONAL TRADING
In which international markets do you trade?
The Pan-Euro markets.
Do you have separate traders for international trading?
There are no separate traders for this.
Who do you use as a custodian bank?
We clear through a number of custodians - State Street, Mellon, Bank of New York; Investors Bank and Trust, and Northern Trust for our long-only accounts. For long, short or market-neutral accounts, we use prime brokers such as Goldman Sachs, Morgan Stanley, Deutsche and Citigroup.
|
 |
PORTFOLIO MANAGEMENT
How do you work with your portfolio managers?
We are a quantitative firm, so we don't have your traditional portfolio managers. What we have are portfolio strategists, which are equivalent to the Street portfolio managers. The role of a portfolio strategist here is to build models according to the strategy that he or she manages. Once he or she is done and satisfied with the results, the next process goes to the portfolio engineering group, which in turn will rebalance the portfolio to get the optimum portfolio. And once that is done, that gets passed on to the trading desk, and the desk gets the trade electronically from the portfolio engineering group loaded into our order management system. The portfolio strategist and the trader group then review the optimal portfolio and discuss how we will implement it and our strategy on how to go about implementing it. As far as updating the strategists, the trader would call or e-mail the strategist about daily market needs or unusual circumstances that relate to the trade.
Describe your relationship with your portfolio managers. Has it changed recently? Do you expect it to change?
It's pretty much the same; it depends on the strategist. We have a number of different strategists. They have different styles of management, of course, and some strategists are more involved in the implementation process than others. So if one is to become more involved, then he or she would ask to be kept more informed of the trade implementation process.
ALGORITHMS
Types of algorithms used to trade:
We use an array of algorithms - anything from VWAP, implementation shortfall, volume participation, small cap and a number of different algorithms. It just depends on the strategy and the trade itself.
Which algorithms do you use most often?
I use VWAP for large-cap or low-touch baskets. Implementation shortfall might be another good strategy for that. For high-touch, harder-to-trade baskets, I review each trade and maybe use volume participation algorithms if it makes sense. And in some cases an algorithm is not appropriate.
Do you use algorithms for equities only?
Yes.
Which brokers' algorithms do you use?
We've reviewed a few, but right now, primarily, we use Instinet and ITG.
Do you build your own algorithms?
Not currently, but we won't rule it out for the future.
How do you rate your brokers and determine which broker will get your order flow? Each of our brokers is rated quarterly by a third party, and we also have an in-house TCA that we do. And, according to that, that is how I determine which brokers get what order flow.
|
Interview by Leslie Kramer, Contributing Writer
|
Download and Print Profile
