Last year, institutional broker-dealer JonesTrading celebrated its centenary. The firm is a rarity in that it dates back to the turbulent years following The Great Crash of 1929, and is still executing trades in today’s high-speed, electronic market.
For JonesTrading’s current Executive Chairman, William “Packy” Jones, grandson of firm patriarch George Jones Sr., it has been an exciting journey.
“The 80s and the 90s were very exciting, because we were able to make many of our employees shareholders and owners,” Jones told Traders Magazine. “That’s really helped drive our business forward, because when you have people who own the business, they seem to do a better job.”
Packy Jones assumed the role of Executive Chairman and CEO in 2004, and the firm was reorganized under the name JonesTrading Institutional Services. It attracted additional top talent from Wall Street, including 18 former heads of trad-ing desks from major firms, Jones said.
In 2000, JonesTrading reached a milestone: $100 million in annual revenue from trading, which was a goal Packy’s ailing father had set years earlier. “When I told him we had achieved his lifelong goal Dad said: ‘can you beat that!’ My Dad died soon after this achievement. I think he hung around just to make sure we got there.”
“We had the biggest month ever in March last year,” Jones said. “I added up my two days’ of work that whole month and realized I was probably not the factor I once was, and the business would be just fine without me, and people like Alan Hill (CEO) and Andy Volz (COO) would carry the firm forward.”
JonesTrading named Volz Chief Operating Officer in May 2020. He had spearheaded the firm’s moves into prime services and outsourced trading since joining in 2016.
“Jones has tremendous assets in our history and client relationships,” Volz said. When he joined, “I felt that Jones had a great opportunity to expand into some new business lines…I’m now shifting my focus a little bit beyond prime, out-sourced and algos.”
Executives say the firm’s differentiator is its people.
“Ideologically, the firm remains the same, with what the Jones family established in the mid-1970s: a focus on relationships and integrity. Our success is entirely due to the trust we, our employees, have cultivated on The Street. We cover our clients, we know our clients, we take care of our clients,” Volz said.
Volz noted that clients trust JonesTrading to execute large-size trades, which can be sus-ceptible to information leakage in the wrong hands. “We couldn’t cross as many blocks as we do, every day, without the trust of our clients,” Volz said.
JonesTrading’s core competency, dating back to the 1970s, is agency block trading for large asset managers. The firm expanded its offerings starting in the 2000s, moving into areas such as derivatives, capital markets, prime brokerage, and outsourced trading. The next plan is to bring a stock loan offering to the market.
With regard to outsourced trading, the service has gained traction as asset managers better understand its cost advantages and other benefits. “Our focus has been on enterprise outsource trading where we endeavor to replicate the value, the efficiencies and the feel of having a trader sitting in your office next to you,” Volz said. “If you have an outsourced provider, it’s easier to expand and in unfortunate circum-stances it is easier to contract.”
Ultimately a broker lives or dies through the liquidity it can offer, and Volz said JonesTrading has “tremendous” natural and crossable liquidity.
“We’re able to provide great opportunities for natural liquidity to our broader client base by handling 100% of the order flow for certain large institutional asset managers on the outsource side,” Volz said, noting that JonesTrading’s network spans 280 brokers. “Our outsourced clients also benefit from all that natural li-quidity that’s within the Jones system.”
Volz continued: “It’s a combination of your trading intelligently in lit and dark markets and seeking liquidity that way, while leveraging again, our strength, which is client relationships, to find block crossing opportunities.”
JonesTrading emphasizes technology, Volz said: “We invest time and money in bringing in the best third-party systems out there.”
“We’re on Fidessa, one of the largest OMS vendors in the world, for our internal sell-side OMS. On the outsource side, we have Enfusion, LiquidityBook, Eze, etc. and we’re leveraging different tools from Bloomberg.”
Volz believes that the firm is still in growth and diversification mode. “If you looked at the firm in the year 2000, we were either 100%, or somewhere in the high 90s percentage revenue from agency block trading, as the firm has grown and expanded numbers, we’re probably somewhere today between 60 and 70.”
Going forward, Volz expects more evolution in market structure, as well as increased costs from newer regulations such as the updated SEC Rule 606, which mandates brokers to disclose more information about their routing and execution.
“(Rule) 606 in some ways benefits us because we do use a lot of different tools, and we access liquidity a lot of different places,” Volz said. “If you looked at our 606 report, you would see us having a lot more diversity among our brokers, I would say, than some of our peers.”
While technical specs such as order routing can be brought up to speed, “the one thing you can’t easily replicate is our human network, our people and our relationships,” Volz concluded.