Rising to the occasion: Q&A with Newton's Tony Russell

Tony Russell, head of trading at Newton Investment Management, has been tipped as the rising star of buy-side trading by the same peers who he is working tirelessly with to navigate through an ever-changing regulatory environment.

You were named as ‘The Rising Star of Buy-side Trading’ at K&K Global Consulting’s buy-side trader awards – what approach have you taken to your role that you feel led to this?

From my perspective it was a great award to win because it was nominated and voted for by my buy-side peers.

I’m obviously doing some right things in the industry, not only for myself and Newton, but in being committed to driving industry initiatives forward in the right manner as well.

At Newton my biggest drive currently is around the processes, procedures and risks that I manage and making sure I do this as efficiently as possible. Where I can improve processes and eliminate risk I will strive to do so.

I also try to apply that mentality externally by sitting down with other heads of desks and senior peers to look at the challenges we all face and how we can overcome these by working together as a group.

For the award itself, I’d like to think some of the initiatives I am involved in, working on and trying to drive forward, were contributing factors in winning this award. With peers acknowledging that I’m trying to drive change not only for Newton but the industry as a whole.

Are buy-siders working together now more than ever to overcome the numerous regulatory hurdles? 

We are seeing this much more in the industry with heads of desks and senior dealers working together to meet challenges head on. 

We all sit at many forums and conferences together with everyone facing similar challenges. It really takes the buyside working together in order to tackle these issues head on.

I’m involved anywhere I think processes can be improved. Where we can apply technology to these processes to make things simpler or eliminate risk then again I’m a huge driver of this change.

I sit alongside many peers who feel the same way. But it does take a lot of work and commitment together to drive this forward. We want to evoke change but you need to have fellow support to make it happen.

I’ve certainly seen the buy-side working together more now than ever to make these changes happen. People are now very willing to sit together and talk these things over to make the change, rather than tackling the issues on their own.

When you tackle an issue on your own you never quite know if you are approaching it the right way, if it’s the best solution to what you need and it also takes up a lot of resource.

Most investment management companies don’t have the resources to commit to huge projects so have to choose wisely. The co-operation between investment management companies is a very sensible way to tackle this. 

Is it just the buy-side working together on these issues?

We are seeing a lot of the new initiatives gaining a positive reaction from the sell side. The sell-side are very happy to interact with the buy-side and are keen to help and participate as much as they can. This hasn’t always been the case in years gone by.

When it comes to the heavy milestone of regulation, we all have to go through this transition; and have to attack it. We can do this individually or we can work through this collectively to achieve a smoother and better result. 

I intend to carry on always looking for new initiatives to solve what faces us. 

When you actually start to see that there is headway internally and externally that gives you a huge positive feeling to keep driving forward and make other changes where needed.

Which regulations are you and the other buy-siders coming together on to overcome?

Other than MiFID II which will be the biggest piece of work to overcome for the next two years?

MiFID II has a huge impact in my area and the financial industry as a whole. In its entirety, it really is a big piece of regulation to get our heads around over the next two years. There will be a lot of system and process changes to implement.

How we navigate through all this in an efficient manner is what’s keeping me awake at night. Here at Newton, I feel we are in a good place with the committees and governance structures we have set up.  We are at the forefront of being able to deal with these changes head on.

It’s hard to see where regulation will go next. It is hard for the regulators to give real guidance because they don’t seem to say anything for a while, then they give you a huge paper like MiFID II and you have to get your head around it all. So there’s no real guidance on what’s on the radar but if I had to mention one area and that is around Fixed Income. Equities have come under scrutiny for many years and the time has come for Fixed Income to be in the spotlight.

There is a lot of uncertainty of where the regulations are going next but I think overall the market is in a better place now than where we were although it’s ever evolving, and through MiFID II will see that there is more transparency than ever before.

Are there any specific parts of MiFID II that concern you the most?

One is the transparency of trade reporting and the impact it has on the cost of trading. Under MiFID II they are changing the cut off times for trade reporting and the direct impact of this could be to the pricing of capital.

I sit on the buy-side trading committee of the Investment Association with other peers, as well as the FIX Trading committee. These are a couple of the industry committees I am involved with and within these groups there are plenty of discussions around the implications of the new trade reporting rules.

Recently at a meeting where AFME [Association for Financial Markets in Europe] were in attendance, there was a lot of discussion around these cut off times and where the bar is being set in terms of liquid and non-liquid securities. Personally I feel there have been too many instruments included in the liquid bracket.

The trade reporting cut off times will have an impact on trading because ultimately the cost of capital execution will increase. So in terms of transparency it is great that the end client gets transparency, but there is ultimately a cost to that. 

Because of the way they are setting the trade reporting rules, capital will simply cost more.

This is where you need to be careful what you wish for, the transparency is needed but at the cost of having to pay more for it – are the end clients really going to be happy with that? 

Do you think the regulatory changes have benefitted the industry?

Yes. Some of the regulation does benefit the market; transparency for example is great for the end investor we just need to be mindful that this is spread across all asset classes.

Regulation has a huge part to play but you have to be very mindful of what you wish for and what you give up in the process. 

It is great to have the regulation changes to increase transparency but what are you giving up at that expense. As long as you aren’t giving up anything to the end investor and you always have their best interests then that is the most important thing. 

Costs are a huge focus; if these cost implications are being passed on to the end client because of the regulation, then that isn’t a good thing in my eyes.

Overall do you feel there is more pressure on the trading desk than ever before?

There are pressures across the desk in terms of the number of people being asked to do more things. That becomes a strain across the desk’s resources. That is the same when I speak to many heads of desks – they have barely sufficient resources but the increasing burdens make this become very stretched. 

There is more power and trading tools being pushed back to the buy-side trading desk and this is again a test of resource and skillset.

If you went back 10 years, the sell-side desks would take your orders and really work for you. Because of algorithms, crossing platforms and many other technologies to find liquidity that have been introduced, we seem to have more tools on our desktop, that we need, but this comes with added pressure and a strain on resource. 

Because the buy-side trader has to manage the many execution tools himself that becomes an increased responsibility.

But do our desks have more resources? No. Has our businesses grown? Yes. Has liquidity shrunk? Yes. These are just some of the challenges we face.

So if you look at the challenges we face, we have more complex trading tools across our desk but the resource hasn’t risen and liquidity has shrunk. 

You put all these things together and you see a tough environment for buy-side trading desks to navigate through. Then you drop in the regulation arriving on top of that.

We have come a long way, but it’s a tough period with resources tight and a lot of challenges ahead.