FINGER ON THE PULSE.
Supurna VedBrat, Global Head of Trading at BlackRock explains to Lynn Strongin Dodds why staying current, flexible and dynamic is crucial in today’s ever-changing global marketplace.
Supurna VedBrat is Global Head of Trading, BlackRock and a member of BlackRock’s Trading and Liquidity Strategy Executive Committee, Global Operating Committee as well as the Human Capital Committee.
Previously, she was BlackRock’s Deputy Head of Trading. Prior to joining BlackRock, she consulted for the firm she founded, Strategic Solutions Consulting Corp., and held various positions at Bank of America, ING Barings in London and Lehman Brothers in New York. She started her career as a software engineer with IBM at their research centre in New York.
Externally VedBrat sits on the CFTC Technology Advisory Committee (TAC) and the CFTC Global Markets Advisory Committee (GMAC). She has a Computer Science degree from Rutgers University, US, and a Mathematics (Hons) degree from Delhi University, India.
What have been the fundamental changes in the post MiFID II world?
From a buyside perspective, we look at MiFID II from two different angles. The first is from a liquidity standpoint and how it is changing the liquidity pools around us. It is still too early to tell, but we have not seen a material change in terms of the availability of sellside liquidity. Over the last few years we have increased the trading flow that we do electronically, which has also expanded the list of counterparties providing us liquidity through electronic platforms. The other angle is from the dual sided reporting requirement, which has been a big lift from an infrastructure perspective for all buyside firms. Prior to MiFID II, you were able to delegate reporting to one side or the other.
What is the impact of unbundling? Have you adopted a global approach?
We already had a model where the portfolio managers were responsible for investment strategy and alpha generation, while the traders were responsible for execution. We have a central trading desk with a global footprint, which allows us to trade in the region or time zone that offers us the best liquidity, and that translates into competitive pricing for our clients. It is necessary to have a consistent global approach which may have an overlay of regional elements or requirements. In addition, a robust best execution methodology with proper oversight has always been part of the BlackRock DNA, which means we did not have to materially change our best execution practices to meet MiFID II requirements. Most of our execution policies and procedures were already aligned with the regulatory requirements.
I have read that over the past two years, BlackRock has created a more dynamic team structure and trading strategy. What skillsets does the trader of today need?
Advances in technology and data science are influencing trading and investment decision making. Trade execution today requires efficient ways to aggregate fragmented liquidity and the knowledge on how to use algos and analytics combined with time sensitivity of pricing. From an organisational structure standpoint we look to create a more dynamic structure by rotating traders among asset classes so that they can become specialists in more than one asset class. In the past, traders tended to specialise in a narrow and deep sector of an asset class. But today there is a need to be more flexible and agile to respond to changing market conditions and client needs. This has resulted in better trading capacity management at the firm level and a career path where traders gain broader experience. It also helps satisfy employees’ desire to keep learning and growing their skill base.
Financial markets have become much more electronic, and the modern trader needs to have the savvy to be able to keep reinventing themselves to stay ahead of the market curve. To trade today, you need to have a strong understanding of how the market works, a good calibration of where liquidity resides and the expertise to use transaction cost analysis. In fact, this is more critical today than five to ten years ago because the luxury to call three to four brokers and have them move the risk is no longer available.
In general, how has BlackRock leveraged technology in the trading process?
Technology is constantly evolving and trading must evolve as well to keep up with the changes. It means being proactive and adopting a much more holistic approach, including considering whether we need to redefine our trading strategies or use new methods to trade. In the past few years there has been a proliferation of data, particularly in markets that were previously less transparent like fixed income. At the same time, the use of algos and artificial intelligence has increased, enabling us to compute using a larger set of attributes in a shorter time frame.
We have always used data as part of our trading research efforts, but advancements in computing power and technology have enabled us to look at performance in greater detail. For example, we have a feedback loop where our trading research team provides insights on how we can adjust trading to improve performance. Put simply, technology and data has made our decision-making smarter.
How has the changing dynamics altered the relationship between the buy and sellside?
Our sellside counterparties are very important and are essential providers of liquidity for us. These relationships are indispensable to trading complex transactions, minimising information leakage or providing the buyside with a suite of algorithms. That being said, the style with which the buyside and sellside interacts has changed. In the past we would trade many of the liquid instruments via voice with the sellside and now we trade these instruments via their algos. Trading by voice today is now limited to large risk transfers or trading in less liquid instruments.
There is a lot of talk about diversity and inclusion but are firms doing enough? It is often tied to hiring more women but is progress being made across different ethnic and socio-economic groups?
At BlackRock, our hiring practice requires interviewing a diverse slate of candidates. We train our managers to value diversity of thought and experience in their teams. We also aim to make people much more aware of their unconscious biases, not only through training but also by building a culture where people feel comfortable talking about these issues. Talent management includes not only creating a career path where employees can learn new skills and advance in the organisation, but also developing their leadership skills, collaboration skills, and people management skills to name a few.
In trading, we look at the team dynamics and see what is missing, and then consider how best to fill the gaps to ensure that the team is strong. When someone leaves a role, it may be a chance to give a stretch opportunity to a high performer or to fill a skills gap in the team. Sometimes it pays to slow down the process, wait, and be much more thoughtful about what is needed.
BlackRock has also created a few customised leadership programs, such as the Emerging Leaders at BlackRock (ELAB) and the Women’s Leadership Forum (WLF), designed to help high-performers to enhance their leadership skills and advance their careers. Furthermore, the BlackRock Founders Scholarship program gives high-performing students from underrepresented communities the opportunity to learn and contribute to the firm through merit awards and a position in our summer internship program. This has helped increase the diversity of our analyst classes. We also sponsor a number of employee networks that help foster community and support for the many diverse groups that our employees identify with.
Looking ahead what do you see as the opportunities and challenges?
In the UK, the uncertainty around Brexit has forced firms to prepare for multiple outcomes across multiple work streams. We are also focused on China and making sure we’re prepared to trade as that market opens up. Again, it is about preparation and being able to effectively execute our plans. Lastly, I think we will see more development on the use of artificial intelligence and data science, which will impact and improve the investment and trading decision making process.
©Best Execution 2019