Q&A with Barclays Capital's Brian Fagen
Traders Magazine Online News, August 24, 2010
Amid a torrent of new market structure proposals from the Securities and Exchange Commission, Congress and market pundits, Brian Fagen, head of equities electronic trading sales, spoke with Traders Magazine about some of the issues confronting the markets and investors, as well as trends in electronic trading and order routing.
Brian Fagen, Barclays Capital
Traders Magazine: What's going on or new at Barclays Capital's Electronic Trading Group?
Brian Fagen: At the high level, our focus over the last year as been on building the European and Asia franchises as BarCap didn't have a full service equities business prior to the acquisition of Lehman Brothers. We've been busy; both hiring people on the teams and building the technology and products required for the client business. We've been able to utilize a lot of the legacy Lehman architecture, which was global, and export it to the other regions to build out the core systems and infrastructure under the BarCap banner. But at the same time, BarCap did have some interesting technology and products that we've been able to utilize as well to build a 'best of both worlds' platform.
We were able to look at the two platforms and choose the best components of each to create a new platform. This includes algorithmic products, smart order routing products, internalization products, and analytics.
TM: It was reported recently that there will be job cuts at the firm. Will electronic trading be affected?
BF: The cuts will be in the back office and not affect the front office. We're hiring and continue adding to the group this year. The majority of the hiring recently has been in Europe and Asia where we started with very small team in 2008. Most of the European hiring was completed during 2009 and Asia is being completed this summer..
TM: How about the U.S.?
BF: Here in the U.S. we are still hiring in our distribution team as well as our product and technology groups, which handles the construction of all of our electronic products.
TM: Describe the state of algorithms today? What is the next generation of algorithm technology going to look like?
BF: I think we've gotten to the point on the algorithmic side where the algo platforms are having a more difficult time differentiating themselves. The concept of the next great algo or the definitive "best" new algo has become somewhat like the white elephant, in that it might not be attainable. The needs and demands of the buyside trader are very different and unique to each one of them. Every trader is trading for different types of fund management complexes, fund managers, investment products etc. and each trade has a unique alpha horizon or decay that requires a different type of trading. The trading needs are quite varied so it is hard to build one particular algo that would meet all of those needs. You've seen a gradual slowing in the pace of new algo delivery over the last few years i.e. we're not seeing new algos come out every week or every month like you used to. There's a lot more work on customization of algorithms to specific trader's needs with the goal of aligning the trading strategy with the particular trade's alpha to achieve best execution.
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