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August 1, 2012

Deutsche Strives For Top 5 in Equities

By John D'Antona Jr.

Drive for five. That's Deutsche Bank's ambition for U.S. equities, to leapfrog into the highest echelon of brokers and be among the top five firms, according to Andre Crawford-Brunt, global head of equity trading at the firm.

In the last year, things have been looking up at Deutsche. In Greenwich Associates' recent annual survey, Deutsche worked its way up the market share ladder, climbing to number seven in U.S. equities. Just a few years ago, Deutsche was twelfth.

"We view U.S. equities as a key growth area and our goal is to be [in the] top five in the U.S.," Crawford-Brunt told Traders Magazine.

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How has Deutsche moved up the ranks? Some suggest that a stronger electronic trading group has helped. One industry executive traces Deutsche's rise in the ranks to the hiring of Jose Marques in early 2010. A number of initiatives have been put into place under his watch.

Others say Deutsche has benefitted from the buyside leveraging relationships. This has come at the expense of agency brokers and others, as money managers have cut down on their number of trading partners. Some commissions from agency brokers have flowed to Deutsche, they suggest.

Deutsche credits high touch as a factor for its success. Its strategy so far has been to alter how its high-touch desk interacts with the buyside. First, Deutsche has expanded the roles for both traders and sales traders, giving each more of the other's responsibilities. Now sector traders are increasingly talking to the buyside, providing sector color and getting orders. Also, cash sales traders are executing orders on behalf of the buyside via algorithms.

The end result? The buyside gets its orders executed faster with a "unified" touch point with clients. In addition, Deutsche is providing the buyside with more transparency on high-touch trades.

One large buysider said the strategy is working so far. He told Traders Magazine that Deustche Bank is one of his "core brokers."

"They do a good job on the cash equity front," the buysider said. "The bank has solid high-touch coverage."

Crawford-Brunt has brought on new hires to spearhead the assault. The bank has hired three sales traders for its electronic trading business. Most recently, Scott Chinitz, a 12-year veteran, joined from RBS. Rob Lippert, a 14-year pro, joins this month. A former buysider, he most recently was at Goldman Sachs. In the first week of September, Ryan Lee, a 10-year veteran, will join from ITG. All three report to Jay Fraser.

On the technology front, the firm recently introduced a new algorithm dubbed TargetClose that is designed to project each day's closing volume based on real-time and historical market data. It continuously adapts to market conditions in order to minimize the trade's deviation from the closing price on the date of the trade.

Crawford-Brunt explained that the trend in equity volumes suggests the market is approaching a turning point. He looks at unemployment figures, which are a lagging indicator of a growing economy, that suggest that U.S. equity volumes should begin to turn up in the second half of the year.

With personnel and new technology in place, Crawford-Brunt is now lying in wait for trading volumes to rebound.

"My expectation is that volumes will snap back in the next six to 12 months, and we have to be ready for that," he said.

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