Maintaining strong relationships with counterparties is essential for buy-side firms to enhance their performance, agreed panellists at this year’s CMX event, and is something that will not fade in importance with the rise of automation.
Knowing your client and tailoring your offering to meet each customer’s needs is vital, explained Nina Marsh, senior equity trader at AustralianSuper. Everyone works differently, she said, and adapting broker panels to specific requirements is an important part of her firm’s approach.
Using a lot of data to speak to counterparties is “a great starting point”, added Dan Dewar, head dealer for fixed income at Invesco Henley, but qualified that data is not the be-all end-all; the facts of the data can differ from trader intuition.
Beginning with fact-based conversations and seeing where things go from there was Dewar’s top piece of advice for the audience.
Considering the use of counterparties, Abrdn tends to stick to the top five options regionally, shared Eoghan O’Reilly, senior fixed income trader at Abrdn. He advised taking a partnership approach, explaining that the firm is open in its goals and intentions and encourages its counterparties to do the same. Part of this is relationship management.
“We can’t do our job without brokers and vice versa, so we value those relationships,” Marsh noted.
To be able to take full advantage of banks and their liquidity, banks need to know what buy-side firms are trying to achieve, added Dewar; saying that Invesco Henley goes against the traditional, information-secretive approach.
“It’s important to be open with people,” Marsh agreed. “They can only work with what you give them.”
If that relationship doesn’t work, “it’s usually due to a combination of factors that have not been addressed over time”, said Dewar. It is important that both sides benefit from collaboration; “not every trade is going to make money, but over the course of a year it should be beneficial for both parties,” explained O’Reilly. If things are not going well, it’s crucial to address issues early on before they have an impact on firms’ ability to provide liquidity to their clients.
As low-touch, automation-based approaches continue to gain traction, the relationship between buy-side firms and counterparties looks set to evolve. However, high-touch activities are where value is added, stated Marsh.
“That trusted relationship is how you get stuff done,” she said. “Managing relationships is a life skill.”
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