Universal and private banks trade on behalf of a vast number of customers, each with individual accounts. For their trading desk this creates a multiplicity of potential challenges, from finding best execution for each customer, to efficient management of trade allocations.
Trader TV spoke with Marcel Schnellmann of Zurcher Kantonalbank and Erik Tham of MarketAxess to understand how banks can address these hurdles, the role of technology partnerships in supporting them and the benefits that customers see through better trading.
Transcript
Dan Barnes Welcome to Trading TV, your insight into institutional trading. I’m Dan Barnes. Private banks optimize value for their clients by managing huge volumes of trade instructions while delivering best execution for each one. Here to discuss how to achieve this, are Marcel Schnellmann of Zurcher Kantonalbank and Erik Tham of MarketAxess. Erik, Marcel welcome to the show.
Marcel Schnellmann and Erik Tham Thank you. Thank you.
Dan Barnes Marcel, starting with you, what sort of operational challenges do private banks typically face when they’re trying to deliver better value for their investors? And how does that reflect your wider business?
Marcel Schnellmann I think it’s key to focus on the needs of your client, which are very distinct in the private sector compared to institutional trading. So when looking at the average retail investor who doesn’t have access to recent market colour, pricing information and so on, it’s a challenge for him and this leads to a challenge for us at the desk, right? We tend to get a lot of orders which are probably slightly off market. Sometimes in bonds which are less liquid and not tradable. So it’s very different from the asset management floor we facilitate, where traders have informed decisions and the portfolio manager as well. So we are trying to collect as many data points as we possibly can internally and then distribute that through various channels to our client advisors so that when they send the order, we end up with the proper order in a liquid instrument limited at a price that is actually achievable or close to the market, because that will save us some back and forth and really create more efficiency on the client side as well. The biggest operational challenge in my situation is really monitoring these limits and monitoring the massive amount of orders. Being able to spot liquidity when it pops up, which is why we are working with partners such as MarketAxess in order to bring in all the liquidity points, enhance our workflow and to get the optimal output for our retail traders.
Dan Barnes Fantastic. Thank you. How did the partnership develop between MarketAxess and ZKB? Erik, what were the starting points for you?
Erik Tham Well, before I joined MarketAxess back in 2018, I was running a team at a large Swiss wealth manager where I was responsible for electronic trading automation, smart-order routing, EMS design, you name it. And actually on the team I worked together with Marcel, so we shared a long common history and we also share, I guess, a vision of what can be done and should be done with technology and a shared passion for efficient workflows.
Dan Barnes And the tool that you guys have developed, Access IQ. Can you talk a bit about what that does? And then also, Marcel, perhaps after that, can you talk about the value that you get from that?
Erik Tham When I came to MarketAxess, the company was mostly focused on large institutional investors. I came with a mandate to come up with a solution for private banks, wealth managers, retail execution desks. So desks that have to deal with many, many orders across all sizes, across the full spectrum of fixed income. Often with limits with long validities, that is done by a team of execution traders who also tend to work in shifts or even spread across multiple time zones or regional locations. Access IQ really is an execution management system tailored to the needs of those execution desks. It brings together all the liquidity, all the data we have on MarketAxess and a lot of efficiency features and puts it into a one stop shop. It brings together an order management component, it has an execution management component, data aggregation. It has a lot of automation from low-touch, even to zero-touch, no-touch intervention and a lot of best execution features. I tend to refer to it as a Swiss army knife for the execution desk. All the tools you need in one little compact solution ready to use whenever you need it.
Dan Barnes Marcel, what does that actually do for you in terms of performance? Are there any metrics you can sort of see improvements on.
Marcel Schnellmann So first of all, we see quicker executions because of the higher level of automation and the more efficient workflows which benefits our retail base because they tend to focus on click to trade, basically. They know this model from the equity side compared to the three minute RFQs we tend to have on the fixed income side. So automation is certainly a key to speed up execution and provide a better outcome or user experience for the client themselves. At the same time, we’re able to facilitate a lot more flow. When you run a PB execution desk, it’s really all about efficiency and scalability. And just like Erik said, we have on any given day, somewhere between 500 to 1000 orders we need to execute quite quickly. We need to monitor limits and the tool Erik provides for us actually allows us to do this by just, you know, simple things like displaying data where we need to it, being able to screen the market, seeing the composite price available next to the limit. We have adding simple features like the one click submit or the auto ex button, which significantly reduces the time a trader spends clicking on a bond and trying to gather information. We are trying to just unburden our traders to focus more on the relationship pieces. Focus more on the high touch tickets. Also for that, we need to cooperate with our partners in order to keep costs down while scaling the business.
Dan Barnes And then looking more broadly at the sort of macro trends at the moment which are impacting workflows within private banking. Erik do you want to talk about what you’re seeing?
Erik Tham Well, what we can see on a more global scale is a certain transition of the whole wealth management industry, driven by digitalization. In the old world, previously, typically wealth managers were focusing on high net worth, ultra high net worth clients. Now, with the help of technology and digitalization, they can finally expand the client base to their, what we call the mass affluent segment. So even retail client segments. Using things like electronic order channels, e-banking, AI-driven bots, robo advisors, you name it. And this brings obviously many more orders in smaller sizes. And in order to handle those orders, these many more orders for many more customers. Obviously, the trading desk can’t be the bottleneck. The trading desk also has to automate and be able to do more without more headcount on the desk. Across all the Access IQ client base, we currently see a zero-intervention ratio of 60% of all the trades. For some clients depending on their specific flow, we see peaks between 80 and 90%. And remember, we’re talking about fixed income credit here, not equities, not FX, not treasuries, fixed income credit, 60% zero-intervention average 80 to 90% peak for some clients. This is an enormous enabler because it also allows desk like Marcel’s to spend more time on the more institutional size tickets coming from maybe family offices, asset managers, ultra-high net worth clients while the retail flow really is being taken care of.
Dan Barnes I’d like to thank Marcel and Erik for their insights today and of course, you for watching. To catch up on our other shows and to vote on the 2025 Trader TV Awards, subscribe at Tradertv.net.
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