Type to search

Buy-side Articles Q3 2020

COVID-19: Game Changer for Traders

By Francis So, Head of Trading, APAC, BNP Paribas Asset Management

Francis So, BNP Paribas Asset Management

The COVID-19 pandemic has had a profound impact on our daily lives, from the way we live to the way we work. At BNP Paribas Asset Management (BNPP AM), the priority has always been the safety and well-being of our staff, supporting our clients, and ensuring business continuity. 

Before COVID struck, business continuity planning was always a top priority at BNPP AM. Even so, the concept of an extended period of working from home was just that – a concept (at least for traders). The reality of trading from home brought to the fore new and sometimes unexpected challenges for our trading teams. 

Just a few of the obstacles included: ensuring regulatory compliance within each jurisdiction; the lack of a recorded telephone line; hardware issues; internal and external communication; and unstable internet connections. Overcoming these issues required resilience, agility and innovative thinking. The speed at which the industry adapted and evolved has been impressive. 

In Hong Kong, we increased our focus on Business Continuity Planning in February 2020, where employees worked from three different locations (the office, a BCP site, and home). This recalibration was to ensure the safety of all employees, reduce contamination risk, and minimize disruption to the business. Our European and US offices followed later with BCP adapted to their specific markets. I have the deepest respect for my colleagues as they have shown commitment to the business and continued to support our clients, even while not physically present in the office. 

New ways of working

Globally, trading volumes have surged with higher market volatility. With pressure at unprecedented levels, traders have had to continue to handle these orders promptly and accurately – all the while operating from their home office. 

One of the major challenges of trading from home is communication, not just with external parties but also internally. Communication with our brokers, many of whom were also working from home, was slower than normal; sales and traders were separated and were either working in different locations or from home. For example, in the fixed income space, we witnessed slower responses to RFQs (Request for Quotes), wider spreads, liquidity fragmentation and hesitation to take positions (not a total surprise given heightened volatility and political uncertainties). 

Internal communication with different stakeholders (fund managers, operations, etc.) was facilitated relatively smoothly through systems such as Symphony and Skype – but having a face-to-face conversation is always more preferred. 

I cannot stress enough the importance of communication, especially with our operations/back office support who are not located in Hong Kong. Given that many markets in Asia have a buy-in regime when trades fail, close monitoring of trades and communication between the trading function and trade support is required to ensure timely and accurate settlement of trades. I am proud to say that we didn’t have a single buy-in incident during this time. 

The Future

Increasing the productivity and efficiency of the trading desk has always been a key objective. This pandemic has highlighted and accelerated the need to do so by automation, whereby orders are automatically executed with little or no trader involvement, and defined by specific parameters. 

Automation by no means will replace the traders but will allow them to focus on more difficult trades and generating alpha. Electronic platforms such as MarketAxess, Liquidnet and FXall will continue to thrive as they enable traders to access liquidity pools and trade more efficiently with transparency. As face-to- face contact with brokers has become restricted, new forms of communication have evolved; teach-ins via video conference (via Zoom, Webex, others) are becoming the norm and numerous virtual conferences have emerged. 

On a personal note, one of the positives of working from home has been more time with family. While BNP Paribas Asset Management always strives to ensure employees nurture both their work and personal needs, there is no doubt that more flexible work arrangements make getting the balance easier. From my experience, people who are happy and balanced are more productive and positive in the office. 

One thing is for certain, change is constant and the industry must be flexible to adapt and evolve or be left behind. The work from home concept is no longer a concept but a reality – and it works.