03.10.2013

Front and Middle Offices Coalesce

03.10.2013
Terry Flanagan

In today’s complex financial markets, buy side traders need to collaborate with their counterparts on the portfolio management side in order to generate alpha.

“The only way to achieve best execution is to understand the complexities of today’s environment, such including market structure, technology and regulations,” said Ryan Larson, head of U.S. equity trading at RBC Global Management. “That requires not only educating the trader, but the portfolio manager as well.”

RBC Global Asset Management, which managed $282 billion in assets worldwide as of January 31, 2013, provides a comprehensive range of investment products and services to both individual and institutional investors.

Institutional investors have access to RBC investment teams in Asia, Europe and North America that are active across capital markets and asset classes, deploying traditional and innovative strategies.

The goal of achieving real-time risk management or straight-through integration of trading and risk management processes, intraday limits capabilities, and delivery of data for risk and capital optimization remains elusive, however, according to a report by research firm Celent.

When asked to assess the alignment between the front, middle and back offices, 60% of firms surveyed by Celent responded that they have only a partial alignment with significant manual processes and checks, and a lack of integration between front office and middle/back office market, credit and capital management systems.

Technology and data issues are present in the form of fragmentation of systems and trading risk data sources, and the need for stronger front office risk tolls and products, according to Celent.

“The emerging consensus seems to be that firms must have at least an aggregated, near-real time view of positions and exposures, and a timely predeal delivery of risk and capital metrics, such that the front line can be effective in making risk-adjusted pricing and trading decisions,” said Celent analyst Cubillas Ding.

RBC Global Asset Management’s integrated investment platform ensures investors are well positioned to benefit from investment opportunities across all asset classes and geographic regions.

In the company’s view, a disciplined process is one that methodically seeks to uncover the best investment opportunities and is “market agnostic” – remaining constant despite changing market conditions.

Its portfolio construction techniques reflect a commitment to an investment process that is transparent, repeatable and systematic, and this carries over to the trading floor.

“We view the buy side trading desk as a direct extension of the investment process,” said Larson. “We look at our buy side desks as valuable information sources. So both the portfolio manager and the trader need to be attuned to the complexities of the market.”

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