WBR ELS: T Rowe’s Williams Talks SEC and MiFID II
The buy-side has many things on its collective mind and one trading head at a major asset manager isn’t afraid to speak them.
In the Buyside Keynote address here at the WBR Equities Leaders Summit in Miami, Florida, Clive Williams, Head of Global Trading at T. Rowe Price kicked of Day Two of the summit in a one-on-one sit down with UBS’ Vlad Khandros, Global Head of Market Structure & Liquidity Strategy, to talk about some of the issues facing the institutional trader and desk.
First, Khandros inquired as to why the buy-side isn’t as public in terms of speaking out on market issues. Or, why is T.Rowe Price outspoken?
“Others (buy-side firms) don’t speak, we do,” Williams told Khandros and the audience. “While we don’t speak on every issue we do want to represent our clients and our own interests. And we’re not always going to agree with the sell-side on them.”
Khandros and Williams agreed that based on their own individual dealings with the Securities and Exchange Commission and requests for comment, the need for the buy-side to step up its game and get into the debates of the day is sorely needed. Even the SEC itself, Williams said, wants more institutional input and not the usual commentators and pundits submitting letters.
“I implore you to speak up and let them hear your voice,” Williams said directly to the buy-siders in the crowd.
Khandos then asked Williams on his views about MiFID II and its effects on T. Rowe’s business – as the firm operates globally, manages $1 trillion in assets and runs four trading desks round the world.
Williams began to explain that his firm had spent “a lot of time” preparing for MiFID II and to-date hasn’t seen a great deal of change in its broker list composition or research provision – especially in emerging and frontier brokers and markets. However, the composition could change as time and market conditions warrant, headed, if broker’s interests do not align with T.Rowe’s clients.
“We’ve got to be unbundled and still have to generate CSA’s (Commission Sharing Agreements) to pay for research,” Williams told the crowd. “The days of traders worrying about paying for research are gone. But we are still concerned with the unintended consequences of MiFID II.”
And what if the SEC goes the MiFID II route here in the U.S., Khandros asked.
“The SEC is caught in a tough spot by Europe on this one,” Williams began. “There is pressure from some clients and consultants – not the buy-side or us. The SEC will find that the sell-side thinks its ok to accept a check for research. Some are pushing back on this though and that speaks to their own interests and not ours.”
Continuing to address the sell-side, Williams told Khandros (who is on the sell-side himself) that new partnerships and acquisitions are forcing firms like T.Rowe Price to reconsider who it does business with.
“We’re going to continue to see market participants come into the space that haven’t been there before,” hence opening new opportunities to source liquidity, Williams said. “This has the bulge worried a bit as they now have to figure out how to get these volumes into their own dark pools before others.”
Khandros agreed on the point about doing business with new entrants.
“We are now considering doing business with firms that hadn’t been here five years ago,” he said.
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There are three key areas where action is required.
Some material changes have come out of ESMA’s review of algorithmic trading.
A consolidated tape will significantly improve transparency and create a level playing field.
AFME said there should be mandatory free data contribution to the consolidated tape.
The review is an opportunity to recalibrate MiFID II regulations post-Brexit.