Morgan Stanley has boosted its low-touch trading capabilities with the hire of Zach Tuckwell as head of electronic and programme trading distribution in Hong Kong. Starting in January, he will be responsible for Asia, including Australia and Japan.
Tuckwell replaces Scott Field-Marsham, who was appointed Asia chief operating officer for equities earlier in the year, a post vacated by Scott Gaynor, who has joined the firm's regional management team. Field-Marsham and Tuckwell report to David Russell, Asia head of equity in Hong Kong.
A 20-year market veteran, Tuckwell was previously head of programme trading, direct market access (DMA) and algorithmic trading sales for Asia ex-Japan at Deutsche Bank in Hong Kong. His duties have been taken on by Mark Davis, Hong Kong-based head of the Asia equity flow business at Deutsche. The German bank would not comment on the departure nor on whether it plans to name a direct replacement.
Before joining Deutsche Bank in September last year, Tuckwell worked for Dresdner Kleinwort in London as head of global portfolio trading, DMA and algorithmic trading. Prior to that, he was head of European portfolio trading at Merrill Lynch in London and also served as head of Asia-Pacific portfolio trading and head of equity derivatives trading at the same bank in Hong Kong.
The new hire follows Morgan Stanley's appointment early this month of Steve Davis in Sydney to run electronic and programme trading and transition management in Australia. He had previously managed the same business there for Credit Suisse. "Steve is one of the best known and most well connected [executives] in the Australian low-touch space," says David Russell.
Davis doesn't replace anyone, but was brought in to manage the business in Australia, which previously reported directly into Hong Kong. "We felt we now needed someone of his stature to be managing it locally," Russell tells AsianInvestor.
He says it is becoming increasingly important to have people with multi-product capabilities, such as Tuckwell, who have a broad understanding of electronic trading of both cash and derivatives products. Morgan Stanley is trading more and more listed derivatives electronically, he says, adding: "Our electronic business also covers currency, swaps, futures, not just pure equity."
Morgan Stanley already has a strong franchise with both hedge fund and long-only accounts, says Russell, but he feels there is an opportunity to build on the latter "to a much greater extent" as they expand their electronic usage.
He highlights the importance of the e-trading business to Morgan Stanley. Roughly 50% of non-Japan Asia cash equity and 80% of Japanese cash equity is executed by low-touch -- DMA, algo and programme -- means, he says.
As for the Asian markets with the most potential, Russell says the biggest are the most liquid; Japan and Hong Kong, followed by Australia. India, while a nascent electronic market, is also becoming increasingly important for the firm.
As more clients turn to lower-touch options, the sector is becoming even more important, adds Russell, and as a result, the bank plans to make more hires next year. He also notes that Morgan Stanley has "completely renovated" its low-touch platform in the past two years, thereby reducing latency by two-thirds.
Another area of growing significance is transition management, also under Tuckwell's remit, which it really began building in Asia at the start of the year. "We've been investing in that business while others have been scaling back," says Russell. Given the turmoil in the markets, there is a lot of asset re-allocation happening in Asia among pension funds and asset management companies, he adds.
Meanwhile, concerns remain among institutional investors and regulators about the impact that high-frequency traders, such as hedge funds and bank prop desks, can have on prices in broker-backed electronic trading venues, or 'dark pools'. The powerful technology gives these trades an advantage over other users of such platforms, which can push prices up for other firms.
Regulators such as the US Securities and Exchange Commission and exchanges including the Singapore Exchange -- along with trading platform providers such as Liquidnet -- have raised such issues.
Russell says: "All types of venues have their place, and our aim is to offer the best venue for clients. We are happy to work with regulators or exchanges to create the best market structure for our clients, as we have in Europe and the US. We will undoubtedly do that in Asia as well, although it's a different, more fragmented market here, of course.
"We are very careful to make sure that our clients aren't disadvantaged by people abusing the system," he adds, "so we take every measure possible to make sure to avoid gaming of institutional flows. At the end of the day, we're focused on making sure our system is fair for all participants."
Ultimately, Russell expects the population of high-frequency traders to grow, as exchanges and trading venues become more and more efficient and cut order-execution times to milliseconds. "And that only adds greater liquidity and volume on the exchanges," he says.
