turned over the third highest amount of Australian equities of any broker in 2009 (see IRESS table).
“The sell piece you have to do, but not the buy piece. We’re in touch with the target manager, and sometimes agree it’s better to hand over some cash than make a trade at a bad price for the client,” Foodey says. Then there is UBS, where the best-known faces are Nick Carrigan and Andrew Dalgleish. The bank may have shuttered its European transitions business last year, but in 2009 the guys project-managed just about the biggest transition there was – the massive domestic equities manager consolidation at AustralianSuper. Carrigan says UBS’ most obvious point of differentiation is its parent’s number one market share in Australian equities and global equities trading.
He also points to the addition of a proprietary dark pool two months ago, to which clients are able to post liquidity at the same time as interacting with markets, in effect having an ‘each way bet’ on which avenue will provide best execution. Laying claim to the broker-dealer model for equities transactions, J.P.Morgan’s model is slightly different in that it maintains a reporting line into the Worldwide Securities Services custody business, and offers a multi-broker agency model for the over-the-counter world of fixed income transitions. “Equities trading is pretty much commoditised, but you’re not offered the same price for 1000 of a bond issue as you would be for a million,” explains head of the transition team, Jim Karelas.
“J.P.Morgan is very strong on fixed income trading but they have to compete with the rest of the street to get trades from us.” Karelas says there are “operational efficiencies” if funds which happen to have their custody with J.P.Morgan also use his team for their transitions, particularly in regard to reduced counterparty risk. Another transitions player sitting between two affiliated divisions, in this case an asset management and an asset servicing/custody business, is Mellon Transition Management, which fills some orders through its global agency brokerage business, G-Port, and gave its Australian business a kickstart last year with the poaching of John Venardos from the helm of RBC Dexia’s custody based transitions operation.
Visiting Australia last month, new recruit Tim Wilkinson said Mellon’s lack of investment bank DNA was an important distinction in the wake of what’s happened offshore, particularly London. “The vagaries of the investment banking business have had a profound effect on transition management,” he says. “Clients need to have a look at who’s left standing and where. Are the changes temporary or permanent? Because demand (for TM) has come back in a major way.” Mellon TM has two staff in Sydney, including director Keith Griffiths, 10 in London and 38 in San Francisco. It acts as an agent but can arrange principal trades via third parties when required. It accesses three pre-trade models and a panel of multiple brokers.