22 May 2018
These arcane trading jobs are proliferating thanks to MiFID II

Niki Beattie, a former MD at Merrill Lynch and founder of market structure partners, a consultancy firm specializing in the structure of capital markets, says the new MiFID II systematic internalisers are already being used in ways that weren’t envisaged. “There seems to be more desire than was expected to use the systematic internalisers to make big block trades,” she says. These larger trades mean longer holding positions, and therefore more need to use the central risk desk to manage the risks associated with them.

As central risk desks grow in importance, Beattie says they’re also gaining power. Previously, central risk professionals complained about their lack of control over the pricing of trades being sent to them for execution. Now, Beattie says central risk desks are gaining the upper hand: “The client-facing side of the market making process had too much power – they were able to demand that execution teams made a good price for a top client even where it didn’t make sense for the bank.” Now, Beattie says central risk desks are better able to push-back, and to be smart about the price offered for a trade from the outset.

“Before, banks were focused on providing the best price to clients. Now they’re more focused on managing their risk,” Beattie adds. …