Michael Mollemans, who says he's happy to be back in Tokyo where he “started his career”, recently took up his post as head of electronic trading for Japan at Credit Suisse, after being head of electronic sales for Daiwa Capital Markets in New York.
He was greeted back to Tokyo by a huge typhoon which shook high buildings and almost brought the capital to a standstill last week, after having experienced the recent earthquake and hurricane in New York.
In his new role, Mollemans is responsible for Credit Suisse's advanced execution services suite of trading tools, including algos, crossing engines and smart order routing.
Having kept in touch with what has been happening in Tokyo through his work at Daiwa, Mollemans says the huge changes that have occurred in the trading landscape over the last few years were no surprise to him on his return.
“For the last ten years I've been able to do a compare and contrast of what's been happening in the Japanese and US markets,” said Mollemans.
“I've watched a lot of the developments not only on the technical side – the sophistication of algos, smart order routing, dark pools and crossing engines – but also changes in the regulatory environment, slowly work their way into Asia,” he said.
Unlike some observers in Asia, Mollemans sees the region following the same path that electronic trading has taken in the US and Europe, “just lagging a couple of years behind”.
Mollemans believes Credit Suisse's history as a pioneer in electronic trading, going back to “Dan Mathisson and his team in the US that really started algos”, has given the company an edge that it has maintained over the intervening decade.
“Something I've noticed since coming to Credit Suisse is how solid the technology is and how it's building on something that has been in place for a relatively long time,” he added.
According to Mollemans, an example of Credit Suisse staying at the forefront is the way its programmers have been working to improve the performance of algos, which are increasingly also being used in Asia for small caps, to cope with the recent market volatility.
Despite algo trading still attracting some criticism for exacerbating market volatility during turbulent times, Mollemans doesn't envisage regulators clamping down hard in Asia.
The regulatory breeze
“Trends in regulation tend to drift like hanging clouds making their way to Asia. Forms of regulations such the Volcker Rule or Frank-Dodd, that are fairly new in the US, are already beginning to surface here in Japan,” said Mollemans, who also hears discussion of self-regulation within the industry.
Looking forward, Mollemans sees best execution policies as being at the heart of the development of electronic trading in Tokyo.
“There will slowly be more focus on best-execution in Japan. Currently it's just seen as getting the best price, but there's a lot more that goes with it. I see the need in Japan for more sophisticated best-execution policies and rules,” suggested Mollemans. “I don't necessarily mean it is going to come from regulators, but it will come from the needs of clients as more US-based asset managers put trading desks in Asia.”
“The real drivers of growth for electronic trading in Japan and Asia will be clients' rising expectations about what best execution means. I think this could also bring about innovations such as portfolio and cross-asset algos over time.”