Outgoing Security Traders Association chairman Lisa Utasi exudes enthusiasm about the business of equity trading. In a recent interview with Traders Magazine, Utasi reviewed the issues that traders face today, as well as her experience in the last year. Change in equity trading was expected as a result of Regulation NMS and the New York Stock Exchange moving to automated executions, she says. Still, traders were caught off guard.
“It’s the velocity of the change that has taken us by surprise,” says Utasi, a director and senior equity trader at ClearBridge Advisors. “I’ve been calling it a revolution.” Consequently, equity trading has transitioned from a manual process to an electronic one, she says.
Despite the rapid change, Utasi says there are unseen benefits on the horizon for traders. For example, as a result of the NYSE and Euronext merger, there will be new ways to access liquidity on a global basis, she says.
“We haven’t cracked the surface on those benefits just yet. I think it is going to be really exciting,” Utasi believes.
Performance has always been an important topic of discussion among buyside traders, and still is, but now there’s a new subject traders passionately discuss.
“The other main topic of conversation is the rise of so many venues to find liquidity,” she says, in reference to the 40-plus dark pools that host non-displayed liquidity. This topic, Utasi adds, raises two critical issues: How does one find liquidity, and how does one get best execution in such a fragmented marketplace?
Systems are another key issue, Utasi says. Only a few years ago, the conversation was about having a “stealth” order management system. “Now the main question is whether you have a good broker-neutral execution management system,” Utasi says.
A broker-neutral system is important. That’s because the buyside wants to pay its research providers for money-making stock picks and other alpha-generating ideas. Many of these shops either don’t have trading desks, or, if they do, they can’t handle the “velocity” of order flow their clients generate. Client commission arrangements give the buyside new power in deciding where to execute and how bills should be paid.
Looking back on her year as chairman of the STA, Utasi says she enjoyed attending 17 STA affiliate conferences. Since she works in New York, she says it is important for the STA chairman to get out among the trading professionals around the country. The STA leader must hear their views on various issues.
“There are mini-Wall Streets all over America and Canada,” Utasi says. And there are also more and more Wall Streets abroad. So she also sees STA becoming more of a global organization as exchanges merge, like the NYSE and Euronext.
On the legislative and regulatory front, Utasi says she is impressed with how STA has “subtly” influenced Congress and now “has a seat at the table.” She cites an example of this. When there was a recent turnover in chairmen of the financial committees in Congress, the STA was approached. It was told that it would be used as an information source for issues pertaining to market structure and other trading issues, Utasi says.
“They wanted to meet with us right off the bat,” she says. “People don’t realize how incredibly we’ve done in representing the entire trading community, because we’re not a large PAC [with a lot of money].”