Vision for the Future
When Reg NMS is finally in place, I think we will finally have a solidification of all these interconnected systems. I think in the next few years, everyone will have the opportunity to be everywhere.
Fun Facts
Tell us something interesting that few people know about your professional or personal background.
I currently serve on the advisory panel for a number of trading organizations including Liquidnet, Nasdaq ITAC, ITG's Posit and Pipeline. I also serve as a member of Advanced Trading's Reader Advisory Board.
INTERNATIONAL TRADING
In which international markets do you trade?
In Orinda, we only trade with the U.S. and Canada. There are Europe Funds and Japan Funds. And globally we are starting to trade more in South America. Again, each market, such as London or Singapore, has its own local traders.
Who do you use as a custodian bank?
State Street and two or three other custodian banks.
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AXA Rosenberg
4 Orinda Way
Building E
Orinda, CA 94563
Assets under management:
Approximately $100 billion, about 40 percent of which is in the U.S.
Fund(s) for which you trade:
N/A
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Daily volume in equities:
It can vary day to day. But typically, between 10 million and 20 million shares.
Types of products traded:
Domestic equities.
Education:
B.S. from Northwestern University; M.S. from Polytechnic Institute; M.B.A. from Harvard Business School.
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Structure of trading department:
Domestically, we are headquartered in Orinda, Calif. We also maintain a New York office and have offices in London, Tokyo and Singapore, each with their own local traders. Each local office has its own head trader, or cohead traders, who in turn report to the CIO of that local office.
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Previous Positions:
I joined AXA Rosenberg as a trader in 1988 and have been head trader since 1999. Prior to joining AXA Rosenberg, I was an associate at Citicorp Investment Bank in New York, working with the sales and trading teams. From 1982 to 1986, I was a systems engineer at New York Telephone.
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TECHNOLOGY
Technology budget for trading:
N/A
Technology used to trade equities:
We use a proprietary OMS, called GTA, which helps us manage our cash and look at what our model wants us to buy and sell. Other than that, we use Flextrade, Posit, Liquidnet and Pipeline. Really though, we will try any system that looks like it has potential, that provides us liquidity at a good price and allows us to be under the radar.
Chief Information Officer:
Bill Ricks
How do you work with your CIO when it comes to getting new technology on the trading desk?
We don't necessarily speak every day. I am always looking out for tools that are useful on the desk, and Bill is the person who approves those tools. But most of the time, he will give me the green light to go ahead if I think something will be helpful. For that same reason, I am on a lot of advisory committees, such as Liquidnet, Pipeline or Posit. But again, Bill gives me the autonomy to try things I find useful.
Rumor has it that you have 12 screens on your desk. Why so many?
I need to look at a lot of things; I need to watch cash, my OMS, DMA, market data and IOIs. You need some type of dashboard that tells you how it is all coming together - to show you where you stand at any moment in time. We have built an in-house integration platform that allows our traders to manage their multiple screens. [Coleman says he is still adding new applications to the mix, but is determined to use this software to keep the number of screens at 12, where it has been for many years.] It helps when vendors incorporate features of other vendors' products in their own, such as FlexTrade, our execution management system, which manages all of our algorithms, including those from other providers.
When introducing a new product, how long do you allow for a trial period?
There is increasing resistance to saturating trading desks with vendor products that require an extra investment of time to learn. Our trial period for major software installations has decreased from two years to six months. Traders want something that can fit on their desks, has an easy interface and gets the job done. People don't have the time to learn all the bells and whistles.
PORTFOLIO MANAGEMENT
Describe your relationship with your portfolio managers. How do you work with them?
We don't have portfolio managers per se. We have what we call "strategy engineers" with whom we interact and who sit in proximity to the trading desk. These engineers work with our quantitative model and make sure that the model or the computer is putting out the right data and is similar to the benchmarks the portfolios are supposed to be following.
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LOOKING AHEAD
What trends/regulations/issues do you think will transform your role as a trader?
There is certainly a trend toward electronic trading, and then there is the merger between Arca and the NYSE. There is also the growing trend of ATSs and ECNs becoming interlinked. All of these trends will help with liquidity, providing one has the right tools.
What do you hope technology can change to make your role easier?
There is no silver bullet. We have a proprietary system, and we are working on improving it. I think the real bottleneck will probably be resources. There are a lot of things to do and take advantage of, but there aren't that many specialized programmers who can crank things out in a day or two. This is a fast-moving business. In many ways it's moving faster than the technology to take advantage of it. That is a growing challenge for everyone.
What are your thoughts on the future roles of the buy- and sell-side trader?
On the buy side, the traders of the future will have to be technologically adept. They will farm out your job if you are not adept. On the sell side, the only guys on the sales desk who survive will be those who can act as consultants, who know how to use the Hybrid floor, algorithms, etc. ... They will need a whole new skill set.
ALGORITHMS
Types of algorithms used to trade:
We really are just investigating the use of algorithms, although we do use VWAP. But in general, we are more-passive traders and use limit orders. We are looking for something that would recreate that style of trading, but we haven't really seen that yet.
Do you use algorithms for equities only?
Yes.
Which brokers' algorithms do you use?
Right now we use the ones that are built into Flextrade. But again, we use those sparingly. Flextrade is used as more of a DMA [provider].
Do you build your own algorithms?
No. But in the future, it is something we will consider.
How do you rate your brokers and determine which broker will get your order flow? We rate them quarterly using multiple benchmarks and comparing them against the average of all brokers. We also rate them on their clearing abilities and look at other qualitative items.
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Interview by Glenn Curtis
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