Jefferies Comes of Age on Electronic Trading


There is a sense of excitement building on the Jefferies trading floor in mid-town Manhattan.

The global investment bank owned by Leucadia National Corp., long known for its high-touch trading expertise in small and mid-cap stocks, has pushed aggressively into electronic trading in the last few years.  The firm has seen its share of US equity trading volume grow 120% in the last 18 months – and they are not done expanding.  Markets Media recently had the opportunity to speak to a few of the architects behind this renaissance including Bill Bell- global head of electronic trading, Anthony Pallone – head of U.S. electronic trading, Jatin Suryawanshi- global head of quantitative trading and Matt Foulds- global head of sales.

“My initial mandate upon arriving at Jefferies 18 months ago was to expand the client distribution efforts in the U.S.,” explained Bell.  “We saw significant growth in the US during this period and then turned our attention to applying the same model globally – first in Europe and, more recently, Asia”.

“Our trading philosophy and message resonates with clients across the globe,” Bell added, referring to the fact Jefferies does not operate its own dark pool.  “We engage clients from a unique vantage point offering them the chance to use a product that engages the markets with a venue neutral, conflict-free approach.  Our sole focus is partnering with our clients to help them achieve best execution. We don’t have peripheral concerns such as growing ATS market share.”

Paramount to this growth has been the strength of its algorithmic trading suite which is designed to be flexible in order to satisfy the demands of various trading styles.

“Trading algorithms in today’s fragmented markets require a totally new approach to trading,” Suryawanshi said. “Rules based algorithms whose behavior is inflexible and non-adaptive to a trader’s needs and market conditions are a thing of the past. Today we build trading solutions that require a deep understanding of market micro-structure, behavior of other participants and the dynamics of a complex trade. Our state of the art technical infrastructure and unique analytical design forms the core of our ability to be able to respond immediately to market structure changes and offer customizations which go beyond a simple tweak to an existing strategy.”

The rapid growth in the firm’s electronic business is not solely due to the efforts of its electronic trading team, though.

“In the last few years we have focused a lot of time and energy on diversifying the mix of business here at Jefferies,” Foulds said.  “Many of us that have joined the firm in the last 3 years quickly came to the realization that our client relationships ran very deep, particularly on the high touch cash trading side.  It was imperative that we leveraged those relationships to penetrate clients with our electronic product.  The response and cooperation across the broader floor has been tremendous.”

Foulds added that at the end of the day Jefferies is completely indifferent as to how its clients pay the firm.

“Our expectation is that all of our traders and salespeople are able to articulate that Jefferies offers a world class experience across all of our execution verticals be it high touch, program, or algorithmic trading.”

And the proof of Jefferies success so far was evidenced in a recent Woodbine and Associates report where 49 long-only institutional traders voted on the quality of Wall Street’s brokers. In this report Jefferies placed in the top quartile for quality of its low-touch coverage – besting firms such as ConvergEx, Barclays, State Street Global Markets and Citi.

But Jefferies knows it work is far from finished – a fact echoed in speaking with all of Jefferies’ executives.

“We feel like we are only just scratching the surface,” Bell said.  “We see opportunities for growth in all markets with heightened emphasis on Europe and Asia. Our experience in the U.S. has given us the blueprint for global success. We continue to look for opportunities to expand our franchise by hiring the best and brightest talent available.  Jefferies provides a unique entrepreneurial culture offering its employees tremendous opportunities to grow both professionally and personally.”

Featured image by Toh Kheng Ho/PhotoSpin


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