Despite an exodus of traders, the balance of regulatory and decision-making power remains firmly in the UK capital.
"there is a general underlying theme in Europe that we are underperforming as a liquidity hub."
This article first published on Best Execution, a Markets Media Group publication.
Formerly the head of platform sales at Citi, Matt Cousens grew tired of being a (relatively) small cog in a big machine – so last year, he made the serious decision to leave his Citi role for pastures new. Now the head of EMEA equities at algorithmic trading specialist BestEx Research, he talks to Best Execution about the challenges and complexities of his new role, the huge opportunities for growth, and why algorithms are (genuinely) so exciting.
What were the reasons that led you to change roles?
That’s a difficult question. I’ve had 22 years in this industry and for the most part I’ve really enjoyed it and I’ve had the opportunity to work with some phenomenal people along the way. I started my career in a start-up, back in 2001, and I spent the first five or six years of my career trying to build up that business, so I’ve always had that start-up mindset. Since then I’ve also worked with three major banks, which were very different experiences. But towards the latter end of that particular part of my journey, I started to understand the importance of culture: the fit between you and the place you’re at. And that’s where I started to struggle a little bit. I was falling out of love with my job – I’ve spent decades building up really deep, strong relationships across this industry, on both sides of the street, but I started to feel an element of just being a cog in a big wheel. I wasn’t sure how much impact I was making, and I struggled with that. I also felt a little like I was pushing an agenda rather than doing what I actually love: which is listening to clients, thinking about what their problems are, and trying to solve them. If you’re being asked to push a product or an agenda that isn’t necessarily aligned with those solutions, then after a while it becomes harder to motivate yourself.
There came a point where I realised that my relationships were based on trust and credibility, and culturally I just wasn’t comfortable. I think that in big organisations, it can sometimes be hard to do the right thing because it means putting yourself in the firing line, and a lot of people aren’t prepared to do that. I’ve experienced big firms that can be very collaborative, very collegiate and very entrepreneurial, and come up with great solutions. But in other firms that content just doesn’t exist and it’s all about staying in lanes. I don’t believe in staying in lanes. I believe in getting out of lanes and challenging people and doing what’s necessary to build a better environment and a better product and so for me, I just needed a different cultural fit. You’ve got to be honest with yourself, look in the mirror and say, do I want to keep doing this? And I didn’t.
Why did you move to BestEx Research, and why is it so different?
I didn’t have a next step lined up before I left my last job, and I wanted to make sure I made the right choice. Within a week of starting at BestEx, I knew that I had. It’s so different, and that mindset is so important – that small firm mentality. The sense that my experience is valued and that my knowledge can make a real difference. Values really matter.
I’ve spent a long time in this industry: I’ve seen things done well and I’ve seen things done badly. In big firms there can be a lot of box ticking, and an element of producing things that are ‘just good enough’, not optimal. There’s a reason for that – budgets and cost are a big part of it, but another issue can be a lack of vision. Now, I feel like I’m with a firm that has a real vision about what the future of this industry looks like, and I want to be a part of that. The importance of technology is of course stating the obvious, but there’s no getting away from the fact that there are an awful lot of firms out there based on legacy tech platforms that are struggling in a competitive capacity because the pace of technological change has been so fast. Now, there are specialist technology firms out there able to produce better models that are outperforming these legacy models. And to be a part of a business that has real vision, great ideas, and then phenomenal technology to underpin it, is a very exciting place to be. Layer the cultural fit on top, and you’re in a place where you actually wake up in the morning and want to go to work.
What’s your role at BestEx and what is your focus?
My official title is head of EMEA equities, which is a great title but really, for now I’m just the boss of one! My role is to expand the firm’s international aspirations – it says EMEA but really we want to go global, and in particular from a cash equities perspective, we have a strong US focus right now. I want to expand our client footprint in Europe for the products we already offer, which is cash equities and global futures. This year we’re also going to be launching our FX product, so I want to look at the international aspect for that, and we’ll also potentially look at Asia as well.
The reason I love working here so much is our ability to genuinely meet a client’s needs and produce a product that delivers a real solution for them. Everyone says they’re doing that, but not everyone can actually do it. In my experience, many big firms can be subconsciously conflicted in their delivery of products, whilst a lot of legacy platforms are opaque and inflexible – so when a client comes looking for a solution, it can be hard to customise existing structures. Whereas from our perspective, we can turn around pretty much any level of customisation in 24 hours.
Which of your products have been best received by the market, and why?
We come at things from a solutions perspective, rather than from a product-driven agenda, which is what is so refreshing. We want to offer solutions that genuinely work for clients – and we don’t get paid in any way other than through commission, so we’ve got no incentive to do anything other than build a product that works, so that people come back and use it more, because that’s the only way we get paid.
We launched an EMS product recently that allows us to deliver what we call a strategy studio, where you can configure and customise your algos entirely based on your own needs. We recognise that all clients are different and have different requirements and different alphas. They have different reasons behind those alphas, different time horizons, different nuances around their flow and the types of orders they trade and so on. So that inbuilt flexibility is fundamental to providing a solution for any type of scenario. We tell our clients the solutions we can help them with, but we also give them the ability to take their own knowledge of their own order flow and layer that into how they want to customise an algo. For the buy-side, that’s a hugely powerful tool, and the combination of their knowledge and our knowledge also allows us to genuinely bring an extraordinary package together for the sell-side, for banks or for other brokers that want to produce a product.
We can allow them to utilise our technology to build out-of-the-box algorithms that are highly customised, and differentiated for all the different clients that they have underneath them, without spending tens of millions in the process. The build-versus-buy conversation has evolved a lot since I first joined this industry, and I think now we’re at an inflection point. Fintech firms can now provide very high quality products that scale very quickly and can still offer market-leading performance – and that’s a very attractive concept. We can give you the basis for an entire suite of algorithms which will give you eight core algorithms – but under the hood, you have a toolkit where you can change maybe 150 different parameters by just clicking a button.
We’ve got about 25 clients already, and we’re growing fast but at the same time, we don’t want to carpet bomb the world or spread ourselves too thin. We’re about quality, not quantity.
Looking ahead, what new tools or products are you currently working on?
Longer-term, we’ll be looking towards international expansion, but that will take a little while. In 2023 there’s a big focus on our FX product, arriving later this year: which will see us entering into a whole new asset class. We also have some new products going live within the cash equity space, which we’re building out, along with our new implementation shortfall algorithms.
We’ve built an entire adaptive framework for implementation shortfall, which allows us to look at each client in isolation and provide unique solutions for their specific flow. A lot of brokers will tell you they can do that, but they can’t – they have a fixed toolkit that they tweak instead.
This year we’re also going to be looking at a new area, which is the differentiation approach to risk profile and alpha decay for managers that care less about execution risk and more about market impact. We expect that to be a big launch.
Can you tell me anything more about what you’re doing? What does the buy-side want when it comes to algorithms?
I think we’re seeing a few different trends from the buy side. We’re moving to even higher levels of automation and with that probably comes more algo wheels or similar. I also think that the types of orders that clients are willing to use algos for is increasing in scope. For some firms, it has been the case that they generally use algos for smaller orders, whereas for the larger orders they’d rather go to a human being. I think that the range of orders that are eligible for our next order flow is increasing all the time, and I think that we haven’t yet seen the peak of the percentage of order flow that will go via electronic or algorithmic channels – and we’ll start to see more and more wheels being deployed as part of that.
I also think we’re seeing algos expand across asset classes. There has been a big focus on equities while algorithms for futures have just not been up to scratch so far. But more and more firms are starting to give that attention and certainly within FX, there is a lot of efficiency to be gained – and the amount of money floating around in the FX world is huge.
And I think that the demands on technology just keep getting higher, so firms with newer platforms and the newest technology are entirely placed to win.
What are your top themes for 2023?
I think that there is a general underlying theme in Europe that we are underperforming as a liquidity hub. This is starting to get some more attention from regulators and policymakers, who recognise that we have to do more to address the growing gap between Europe and the US and potentially Asia. That’s a conversation that is ongoing, and I’m glad to see the UK come out post-Brexit to try and position itself in a more competitive capacity. On the other side of the channel, I think Europe is starting to realise they need to do more.
The other theme is the continuously innovative environment. We’ve moved past MiFID II, we’ve moved past Brexit. Firms are now focusing on how they can innovate and deliver new technology solutions. Not everyone has the appetite, but the innovation process will continue.
Where do you see yourself in five years’ time?
Hopefully running a very successful international element to the BestEx business. That’s my aim, that’s why I joined this firm. I’m here for the long-term, and it’s something that I feel quite passionately about.
Matthew Cousens is head of EMEA equities at BestEx Research. Matt is responsible for delivery of equities execution algorithms to European customers and contributes to the strategic globalisation of BestEx Research algorithms. He joined BestEx Research with more than 22 years of experience in equities trading with a focus on electronic and algorithmic trading, the infrastructure of equities markets, and the impact of technology and regulation. Before joining our team, he was named head of EMEA platform sales at Citi, where he was responsible for distribution and sales across the firm’s cash equities platform. Prior to Citi, he served as co-head of electronic trading and head of EMEA equities execution sales at Barclays. Earlier, he spent 12 years in Advanced Execution Services (AES) at Credit Suisse, becoming the co-head of AES sales for EMEA after running wholesale distribution of the platform and developing the distribution strategy specific to quantitative clients. Matt holds a BS in Economics and Geography from University College London.
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