Citi Australia and New Zealand’s markets business has expanded its team with seven appointments across markets sales, asset-backed securitisation and financing, G10 rates trading, corporate access, FX and equities electronic execution.
The firm said the appointments follow “strong performance” from the markets team, which has seen double digit year over year revenue growth.
Cristina Chang
Cristina Chang, Citi Australia and New Zealand head of markets said: “The Australia and New Zealand Markets business is experiencing material growth, and these recent appointments will strengthen our ability to deliver increased value to our clients.”
Dan Birch joins Citi as head of markets sales, New Zealand responsible for driving client engagement in New Zealand.
Birch has been appointed as director and joins from Perennial Partners where he was head of institutional sales.
Peter Hext has moved to head of asset-backed securitisation and financing for Australia and New Zealand. Hext is a director and has been with Citi for more than 13 years, most recently as the head of commercial asset-backed securitisation in New York.
Ankit Khandelwal has joined the G10 rates trading team. Khandelwal joins from Bank of America Merrill Lynch where he held several trading and risk roles.
Melanie Vandervord, who joins the access strategies team covering Australia and New Zealand. Vandervord brings more than 20 years’ experience in corporate access from her time at Goldman Sachs and most recently as corporate access specialist at MST Financial.
Citi has also expanded its corporate FX sales team with two appointments and has added a new sales trader to the equities electronic execution team.
August’s volatility spike sparked widespread panic across financial markets and left many fearing that another global economic crisis was on its way. Although markets soon recovered, the Bank for International Settlements (BIS) warned that leveraged carry trades continue to pose a threat.
In its bulletin ‘The market turbulence and carry trade unwind of August 2024’, the Bank for International Settlements (BIS) reported that risk-taking in financial markets is still high, the majority of low-volatility, cheap yen-funded trades have been unwound (or are being unwound at a slow pace), and leveraged positions are already being rebuilt. With these underlying vulnerabilities still in play, the bank shared concerns that any market shocks could see volatility easily spike once again.
What happened?
A number of elements interacted in the early summer to create a perfect storm for yen carry trades. The summer saw a brief equity sell-off (24 July), along with rumbling concerns around AI and tech stocks and a subsequent US$1 trillion valuation drop. Following rumours of interventions from the Bank of Japan, depreciation in the yen reversed in the first half of July, altering the incentives for many leveraged speculators.
In FX markets, the yen, the predominant carry trade funding currency, appreciated. Traders that took a leveraged short position in yen faced margin calls, and closed out their trades in response.
In its bulletin, BIS highlights the potential of leverage to amplify market moves. “[This] hints at a key role of amplifying factors, most notably deleveraging pressures amid thin markets (as is common in August),” it stated. “The vehemence of the move reflects in part the prolonged prior phase of risk-taking amid unusually low volatility,” an environment encouraging a build-up of leveraged positions such as currency carry trades.
The following week, Japanese markets were faced with the unwinding of leveraged positions and carry trades, prompting a 12% decline in the TOPIX index, while the Nikkei volatility index spiked to crisis levels. Over the next few hours, other APAC markets reported volatility and losses before the hurricane made its way over to Europe and the US. Cboe’s volatility index (VIX) passed 60 in off-hours trading, the S&P 500 slipped another 3%, Eurostoxx dropped 1.7% and the MSCI Asia Pacific Index recorded its most significant drop in a year.
Various funding currencies were caught in the carry trade unwind, BIS said, with the Swiss franc seeing a 3.5% appreciation compared with 6% for the yen as of 5 August. The crisis highlighted the impact on currencies that are not generally used in carry trade funding, including the offshore renminbi and the Malaysian ringgit, both of which saw notable appreciation. Investment currencies including the Mexican peso, the Brazilian real and the South African rand were all hit by the event.
As the VIX index shows, fear levels were high. However, by the end of the week the storm had abated. The S&P 500 recovered all its losses, TOPIX most of them. Although the fear index remained elevated, it was back to more normal levels by the end of the week.
“The spike in the VIX was associated with immediate deleveraging pressures,” BIS affirmed. An initial rise in volatility put pressure on market participants to cover their leveraged positions through outright sales to meet margin calls or options and VIX futures purchases, it explained. As a result, volatility continued to rise – in a spike which “far exceeded what should have been expected based on the historical relationship between the VIX and S&P 500 returns,” the BIS added.
The foundations for the crisis were laid long before this summer, BIS continued. Since the Covid pandemic, it said, Japan retail margin traders had mostly shorted the yen while trading volumes grew. As a broader set of positions by retail traders had to unwind, margin calls may have prompted the closure of positions “even in seemingly unrelated assets”, it explained, adding to the shockwaves of the event.
What now?
“Overall, markets showed substantial resilience in the face of considerable volatility. The speed of their recovery was remarkable,” BIS concludes. That being said, the events of this summer necessitate a look at structural instability in the financial system.
Market-based finance is a particular concern, BIS said, especially when this enables a build-up of large positions during low volatility and requires quick unwinding when fear levels spike. Relying on leverage for many of these positions encourages strong reactions to adverse shocks, it explained, which can lead to a vicious cycle of hiked-up volatility in a nervous environment and increase the pressure on markets, infrastructures and intermediaries.
Appital, the peer-to-peer price discovery and liquidity sourcing technology for asset managers, has added Virtu Financial’s POSIT MTF as an European execution venue, expanding Appital’s European equity coverage to more than 21,000 equities across 24 European countries.
Virtu Financial is also now an executing broker for client flows negotiated on Appital’s BookBuilder platform, offering the buy side community enhanced options for executing large orders.
Brian Guckian
Brian Guckian, chief business development officer at Appital, said: “Our collaboration with Virtu Financial was driven by client demand and provides asset managers with price discovery and execution capabilities in outsized equity positions, within a seamless workflow.
“To date, Appital has reached US$13.5 billion of buy side liquidity on its platform, with opportunities between US$1 million and US$260 million. 43 asset managers with more than US$20 trillion AUM are now signed up, with 60+ more in the onboarding stage, managing an additional US$30 trillion AUM.”
Rob Boardman, CEO of Virtu Execution Services, EMEA, said the collaboration with Appital gives clients additional liquidity and price discovery functionality in a market for size. The collaborations with Virtu Financial’s POSIT MTF and its Execution Services complement existing integrations with Turquoise MTF and executing brokers Instinet and Bernstein.
Natan Tiefenbrun, global head of cash equities, Cboe Global Markets
Cboe Europe has secured the support of a range of participants for Cboe BIDS VWAP-X, its new trading service allowing algo traders worried about adverse selection to source and match liquidity at a forward benchmark price. The service is scheduled to launch on 21 October, subject to regulatory approvals.
First announced in July, the service combines two elements, volume-weighted average price (VWAP) trading and trajectory crossing, that have been offered by sell-side firms and brokers for a number of years. Fear of information leakage has given Cboe Europe an opening, and Bernstein, BNP Paribas, BMO Capital Markets, Instinet Europe, Jefferies, KCx and Virtu Financial have already signed up. At launch, the service will be accessible by sell side participants through FIX connectivity.
Natan Tiefenbrun, president of North American and European equities, Cboe Global Markets
Natan Tiefenbrun, president, North American and European equities, Cboe Global Markets, said: “This demonstrates that we’ve listened to our participants to meet their needs for an exchange-regulated crossing platform to execute participative volume at an interval-based price. We’re excited to be bringing this first-of-its-kind service to the European equities market and help enhance execution outcomes for end investors.”
Cboe BIDS VWAP-X is an exchange-operated trajectory crossing service for European equities, which allows participants to source and match liquidity at a forward benchmark price. It is being provided as a service of Cboe BIDS Europe, a block trading platform, utilising BIDS’ conditional trade negotiation and execution workflow to match orders based on a standard, exchange-regulated volume weighted average price (VWAP) methodology.
Cboe BIDS VWAP-X will allow market participants to submit conditional VWAP indications of interest (IOIs) into the service – without them being visible in an order book that might tip off other traders and affect prices. Once a potential match is found, firms will be invited to firm-up their IOIs, and after eligible order quantities are matched a standard matching cycle will take place to calculate the interval-VWAP trade price. Trades will be reported as off-book, on-exchange executions in real-time, allowing them to be centrally cleared through Cboe Europe’s interoperable clearing model.
The service will benefit from BIDS’ established protections against information leakage surrounding IOIs, including disclosure and interactions controlled by customisable tools and counterparty score-carding and filtering based on past trading behaviour.
Eric Stockland, co-head of global electronic trading, BMO Capital Markets, said: “Trajectory crossing in EMEA is a major development for the institutional investor because it helps minimise tracking error to benchmark performance and helps mitigate adverse selection faced on other multilateral trading facilities (MTFs) and liquidity pools.”
Cboe Global Markets is to acquire a minority equity ownership stake in Japannext, a provider of financial services and market solutions focused on operating an alternative market.
Cboe will purchase the 14.8% ownership interest in Japannext from SBI Holdings. Financial details of the deal have not been disclosed. Cboe hopes the acquisition will help strengthen relationships within the industry and expand its presence beyond ownership of Cboe Japan, which it plans to continue to operate independent of Japannext.
Fred Tomczyk, CEO, Cboe Global Markets
Fred Tomczyk, CEO at Cboe Global Markets, said: “Japan is one of the world’s largest and most important capital marketplaces and this investment reaffirms Cboe’s strong commitment to Japan.”
Japannext CEO Masakatsu Yamada said Cboe becoming a shareholder in the company will promote innovation in the Japanese capital markets in ways that increase competitiveness, reduce trading costs and provide more choices for investors.
Yoshitaka Kitao, chair, president and CEO at SBI, said: “We recognise that Cboe and our group share many commonalities, such as leading innovation in the financial industry by leveraging cutting-edge technology. We hope to further promote initiatives that will bring new changes to the Japanese financial market and benefit Japanese investors, especially individual investors.”
The European Securities and Markets Authority (ESMA) has said markets remain “very sensitive”, despite lower volatility earlier this year.
Markets remain sensitive to interest rate changes, deteriorating credit risk and to political and electoral developments, the regulator said, with a “high risk” of corrections within the context of market liquidity in equities and other markets.
Verena Ross, chair, ESMA
ESMA chair, Verena Ross, said: “Markets are getting more nervous about the economic outlook and political events, as the dip in equity valuations in early August and market volatility around recent European and French elections shows.
“Close monitoring of the financial markets in our remit and strong coordination of supervisory efforts with national authorities remains our priority.
We continue to see risks in the fund area linked to liquidity mis-matches, particularly in the real estate sector, and deteriorating quality of assets linked to interest rate, credit risk and valuation issues.”
The findings come from ESMA’s second risk monitoring report of the year, which also provides an update on structural developments and the status of key sectors of financial markets, during the first half of 2024.
The risk monitoring report found that capital availability for European corporates through capital markets has been broadly stable in 2024 so far. Despite the market environment remaining “very challenging” for equity issuance, there were signs of improvement in IPO activity.
Corporate bond issuance was high in the first quarter of 2024 but fell in the second quarter of the year. “The corporate bond outlook continues to show a significant upcoming maturity wall from 2024 until 2028. In this context, corporate debt sustainability remains a considerable risk, especially in lower quality segments.”
In securities markets, ESMA found that asset prices in early 2024 trended upwards with little volatility suggesting future rate cuts were being anticipated.
Episodes of market volatility took place linked to elections in the EU in June and July, and a short-lived dip in global equity valuations in early August was associated with weaker-than-expected US macroeconomic indicators.
In fixed income markets, corporate bond spreads have continued to fall, especially for high-yield corporates while the credit quality of high-yield non-financials has continued to decline, particularly real estate. “This may indicate search-for-yield behaviour with a possible underestimation of risks,” ESMA noted.
In asset management, EU fund performance was positive across categories and funds exposed to fixed income instruments (bond funds and MMFs) recorded inflows.
The increase in interest rates has been offset by a broad-based market perception of declining credit risk, reflected in low credit spreads.
However, bond fund portfolio credit quality, as measured by credit rating, has continued to deteriorate, ESMA found, raising the risk of a disorderly repricing of risky assets.
“Risks continue around liquidity risks and potential losses related to interest rate, credit risk and valuation issues. Open-ended real estate funds remain particularly vulnerable given their structural liquidity mismatch and downward pressure on valuations in housing markets,” ESMA noted.
Ian McGinley, director of the enforcement division, CFTC
Nasdaq Futures has received a US$22 million penalty from the Commodity Futures Trading Commission (CFTC) for failing to sufficiently establish, monitor or enforce rules related to an incentive programme offered to certain debt capital market (DCM) traders.
From July 2015 to July 2018, the CFTC says, Nasdaq Futures offered a range of incentive programmes to certain traders in the contract market while operating as a DCM focused on energy commodity futures contracts.
One such incentive was the Designated Market Maker (DMM) programme, which paid a fixed monthly stipend to market makers and was disclosed both to the CFTC and the public. However, the commission found that certain programme participants were also given payments based on the total number of contracts that they traded, an element that was not disclosed. In rule submissions, Nasdaq Futures either omitted or explicitly denied the existence of these volume-based incentives within the programme, and interviews with staff on the topic garnered equal denials.
Recommendations from Nasdaq Futures’ regulatory service provider to contact three DMM programme participants about particular trading activities were not followed, nor was documentation made of why these actions were not taken.
“Nasdaq Futures, Inc. reasonably should have known all such denials, statements, and omissions were false and misleading at the time,” the CFTC stated.
The firm’s lack of disclosure to the CFTC, the public, its own compliance staff and its regulatory service provider violated a number of DCM Core Principles mandated in the Commodity Exchange Act (CEA) and commission regulations, it concluded.
Ian McGinley, director of enforcement at the CFTC, commented: “The CFTC’s oversight regime depends upon CFTC-designated exchanges providing the CFTC and market participants accurate information. Nasdaq Futures’ conduct here represents significant violations of both its duty to provide such information and several statutory core principles applicable to CFTC-designated exchanges.”
Kepler Cheuvreux has appointed Eric Kohler as a member of its high touch trading team.
Based in New York, he will contribute to the continued growth of the firm’s execution footprint and North American presence, a strategic priority for the company.
Kohler has 15 years of industry experience and joins Kepler Cheuvreux from Citi, where he was most recently an international equity trader. He also held a sales and trading analyst role in the firm’s commodities division, before which he worked in product control on the G10 rates and finance desk.
Prior to this, Kohler spent a year as a hedge fund profit and loss analyst at Citco and was a finance operations associate within Morgan Stanley’s wealth management team.
Commenting via LinkedIn, Kohler said he was “excited for the opportunity and looking forward to joining”.
Arnaud Bouyer, incoming head of investment banking for France BeLux, Barclays
Barclays has appointed Arnaud Bouyer as head of investment banking for France BeLux, effective September.
Taking overall responsibility for the French investment banking business, Bouyer will work with Francois Baroin, chairman of Barclays in France and global chairman of investment banking, and Raoul Salomon, France CEO, as the firm continues to expand its business in the region.
Baroin commented: “We have ambitious aims to further accelerate growth in France and Arnaud’s appointment will provide strong leadership for Investment Banking and additional momentum as we plan to move to new offices later next year.”
Bouyer has more than two decades of industry experience and joins Barclays from GBL, where has been an investment partner since 2022. The majority of his career has been spent at Morgan Stanley, where he was co-head and later managing director of investment banking for France.
Tim Main, head of investment banking for EMEA at Barclays, added: “Success in France is key to our overall European growth plan. Arnaud is an experienced banker with a great reputation and the combination of his experience and expertise with that of Francois Baroin will provide unique benefits for our clients.”
Chris McConville, Serge Reydellet & Anvar Karimson.
Kepler Cheuvreux’s Chris McConville, global head of execution services and trading, Serge Reydellet, head of quant execution, and Anvar Karimson, chief technology officer, discuss how the trading landscape has changed over the years – and the value that algo traders bring to the firm.
How has trading evolved over the last decade?
Chris McConville [CMC]: The biggest shift in execution has happened with the growth of electronic trading. Electronic trading integrates computer science and financial markets knowledge to execute orders based on programmed instructions. Utilising a variety of strategies, buy-side and sell-side dealers leverage electronic trading extensively in today’s financial markets. Also known as low-touch, automated, or algo trading, these algorithms use programming languages to follow predefined instructions for placing orders or portfolios of orders. These instructions are built into multi-factor models, considering factors such as volume-weighted average price, time-weighted average price, quantity, liquidity access, index fund rebalancing, and arbitrage opportunities. Buy-side desks can determine the timing for opening and closing trades. In theory, algo trading enhances market liquidity and mitigates the influence of human emotions, promoting more efficient trade execution in contrast to human trading, which is often affected by behaviourally biased factors.
What are the potential benefits and drawbacks of algorithmic trading?
CMC: Algo trading depends heavily on technology and data, meaning that technical issues can disrupt trading and impact profit and loss (P&L). Algorithmic trading must adhere to strict regulatory requirements, that are often detailed and time-consuming, necessitating the hiring of additional compliance and risk management personnel. Developing algo trading models requires a significant investment due to the high costs associated with software and reference/market data fees.
The biggest benefit of algo trading is the ability to integrate multiple factors that affect optimal trading behaviour into a single model. It is simply impossible for a human trader to be able to exhibit the same decision-making at the same speed. More advanced algorithmic trading is also able to continually learn from past behaviour and incorporate new patterns, adjusting intraday. Additionally, algo trading ensures best execution by executing trades at optimal prices, provides low latency through accurately timed order placement, and reduces transaction costs.
How do you integrate algo trading at KCx?
CMC: We introduced the algo trader role as a new addition to KCx in response to increasing client demand for personnel with advanced technical skillsets . As clients become more knowledgeable about mathematical models, technology, and data, they seek deeper insights and support. In just two years, it has become evident that clients greatly appreciate this addition.
Serge Reydellet [SR]: The algo trader role bridges the gaps between trading, sales trading, and quants, breaking down traditional barriers across teams. Our investment into this role demonstrates our commitments to people and innovation, as represented by new hires in quant execution and internal promotions. Algo traders embody a new era of integrated financial services, providing a seamless connection between various departments that historically operated in silos. By fostering collaboration and innovation, this role ensures that KCx remains at the forefront of technological advancements and client service excellence.
How do algo traders enhance client service?
CMC: Algo traders collaborate with our sales traders and traders to enhance our white glove service, providing real-time support, creating bespoke TCA reports, and interacting with exchanges during outages. Their expertise in computer science and financial markets enables them to work closely with technology and operations to develop new UI tools for order performance monitoring, pre-trade, live TCA, and post-trade analysis. This hands-on approach ensures that our clients receive the highest level of service and support, tailored to their specific needs and objectives.
Can you give us some examples where the algo trading team contributes to innovation?
SR: Algo traders have been crucial, working with technology teams to build the KCx API Analytical Suite and opening our algo logic directly to clients. Additionally, they play a key role in developing our custom framework for creating bespoke algorithms tailored to individual client needs. This framework allows us to design and implement strategies that align perfectly with the unique requirements of each client, enhancing their trading performance, execution and operational efficiency. The ability to offer personalised solutions sets KCx apart in a competitive market, showcasing our dedication to meeting and exceeding client expectations.
Anvar Karimson [AK]: Following our partnership with Adaptive to build KCx Omni, the NextGen trade execution platform, algo traders collaborated with technology teams to design the intuitive UI, known as Algo Centre, for live monitoring of outliers and outperformers. This ambitious project aims to create a proprietary, scalable, sequencer-based architecture that operates both on-premises and in the cloud, allowing KCx to continue innovating at a rapid pace.
CMC: In product innovation, algo traders work with quant to develop portfolio optimisers and new ETF algorithms, ensuring functionality on a global scale and across different regions such as the US and APAC. They are also essential in connecting and validating new venues, ELP SIs, and periodic auctions. This collaborative effort ensures that our product offerings are robust, versatile, and capable of meeting the diverse needs of our global client base. By continually refining and expanding our product suite, we maintain our position as a leader in the financial services industry.
What are the key skills required from an algo trader?
AK: For algo traders to succeed, they must possess skills in computer software, hardware, and financial markets. This unique combination of expertise enables them to navigate the complexities of modern trading environments and deliver exceptional results. Algo traders need to exhibit a blend of computer science expertise and interpersonal skills. We are in fact seeing a growing interest among finance professionals in mastering programming skills, especially around the use of Python. Python’s simplicity and versatility make it an attractive option for developing sophisticated trading algorithms and analytical tools. In conclusion, the Algo Trader role embodies the values of diversity and agility, driving innovation and excellence at KCx.
CMC: By leveraging a diverse skill set and fostering a culture of continuous improvement, we ensure that KCx remains at the cutting edge of financial technology and client service. The integration of algo traders into our team has not only enhanced our capabilities but also has reinforced our commitment to delivering outstanding value to our clients. As we look to the future, the algo trader role will continue to be a key driver of our success, enabling us to adapt to evolving market demands and capitalise on new opportunities.
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