If it wasn’t already clear, JP Morgan’s latest senior appointment in its markets business sends a clear message to the bank’s traders across all asset classes: the future is electronic.
The bank has installed David Hudson, its chief financial officer of global markets, in the newly-created role of global head of markets execution, according a memo sent to staff on May 5.
On the face of it, Hudson appears to have filled the void left by Frank Troise, who led JP Morgan’s execution services division until October 2015. The 150-strong global unit was established in 2014 to help the bank’s clients trade a range of asset classes – including equities, foreign exchange, futures, rates and credit – electronically.
According to the memo, Hudson will “build on the successes” of the execution services unit and “work closely with the sales, trading and research businesses”. He will take responsibility for the bank’s electronic distribution channels, including execution services.
But a broader remit than that of his predecessor will also see him assessing “emerging trends, technologies, electronic platforms, and potential partnerships – inside and outside the bank”.
And unlike Troise, Hudson will have a direct reporting line to Daniel Pinto, the chief executive of JP Morgan’s corporate and investment bank, and, tellingly, will also sit on the CIB’s management committee.
Giving Hudson a seat at the top table is a clear indication of how JP Morgan sees the trading landscape evolving.
Pinto has been vocal about adapting to market structure changes as new regulations and disruptive technologies hit trading revenues at the world’s largest investment banks. Trading businesses represent huge revenue centres but many emerged from the financial crisis bloated and banks, including the likes of Credit Suisse, Barclays and Morgan Stanley, have been paring back in a bid to become more cost-effective.
For the global, full-service investment banks that do remain, including JP Morgan, the focus is on spreading costs over as many areas as possible to remain profitable. One way to do that is to leverage technologies developed in equities, FX and futures trading across other asset classes such as rates and credit – in doing so moving them to a more electronic, agency model.
Being truly electronic across all asset classes is easier said than done, however. Many products are still not suited to newer methods of trading and it is difficult to achieve in organisations where fiefdoms persist and business lines remain siloed.
JP Morgan perhaps knows this better than most. Troise helped turn the bank from a traditional voice-broking equities house into a top-tier electronic firm, but the shift was not without challenges, according to people familar with the matter.
Before his departure, he had begun to bring electronic trading methods to other asset classes.
These efforts will now be accelerated by Hudson, who, crucially, has held senior positions on both JP Morgan’s fixed income and equities desks and will know how to navigate the bank’s upper echelons from his experience as markets CFO.
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