ABN to go electronic on equity trading
Mon 23 August, 2004 11:46
By Alistair MacDonald
LONDON (Reuters) - Up to half of all equity trades at ABN AMRO AAH.AS will be carried out electronically by the end of next year without trader involvement, said Frank McKirgan, the bank's head of global cash equities trading.
McKirgan told Reuters he aimed to put the Netherlands' biggest bank in the leading group of global equity trading, a business wrestling with falling margins, increased automation, regulatory pressure and rising capital demands.
Only around 15 percent of ABN's trades are currently generated automatically, and hitting its 50 percent target would put ABN ahead of the industry. Citigroup C.N for instance estimates it will be another three years before 50 percent of overall trades are electronic.
"Our expectation is that in a year to 18 months we will be doing 50 percent of our trades automatically, without any trader being involved," said McKirgan in an interview.
Institutional equities trade will be worth an estimated $41 billion this year and it is the banks who adapt their trading platforms who will win the largest share, analysts say.
McKirgan, 43, admitted ABN was late to start and began retooling the business only two years ago.
The department is working with financial IT firm Apama to develop trading models, working on trading algorithms for example which mean that, as one example, banks can match the volume weighted average price of a particular stock when trading it, but without the intervention of a trader.
"The first phase was getting us up to where the industry standard is, phase two is about getting us into the leading group," said McKirgan, who sees this happening in the next two years and is asking ABN for a fresh round of investment.
According to Citigroup, the top revenue earners in equity trading globally are Goldman Sachs GS.N , UBS UBSN.VX , Morgan Stanley MWD.N and Deutsche Bank DBKGn.DE .
A lot has already been automated over the last five years, but McKirgan sees continued change.
"A lot of the work to orders that has been done by traders pressing a key will be largely automated," he said.
This doesn't necessarily mean job losses, said McKirgan, as increases in trading volumes and market share may mean the same number of traders is required to keep orders flowing.
McKirgan, who joined ABN from Banker's Trust BT.N in 1996, believes that investment banks have a lot to do.
"Sometimes financial services organisations forget they are a commercial enterprise. Manufacturing companies have been looking at ways to automate the process for decades." |
