Goldman Sachs has named Ian M. Smith as a managing director and head of electronic trading for the firm across the Asia-Pacific region, according to an internal memo seen by FinanceAsia.
His appointment comes as the shift towards trading electronically is speeding up this year as volumes, led by Japan, have surged, high-frequency traders returned to Asia in force and as large institutional investors looked to cut trading costs and made more trading decisions in-house.
From 2010 to 2011 the share of Asian equity trading volume executed through self-directed electronic trading systems increased to 21% from 16%. Asian institutional investors say they expect to be executing nearly 30% of their trading electronically by 2015, according to consultancy Greenwich Associates.
As margins are squeezed banks are racing to become the hypermarket of electronic trading. Lloyd Blankfein, Goldman Sachs’ chief executive, said in 2012 that the Wall Street firm aims to be a low-cost bulk-service provider in electronic trading.
Commission rates on high-touch agency trades, which involve a human, averaged 20 basis points for Hong Kong equities, 22bp for both Korea and Taiwan, and 25bp for India for the year to September 2012. Meanwhile, rates for electronic trades in the region averaged 6bp to 7bp or 25% to 30% of high-touch rates, according to data provider Greenwich Associates.
Banks are responding by expanding their electronic trading platforms and in some cases cutting the number of cash equity brokers on the trading floor.
“We have been building out our electronic trading platform in Asia, tripling the number of clients on the algorithmic customisation platform”, said Canute Dalmasse, head of execution services for Goldman Sachs in Asia Pacific.
Goldman has also added access to three new markets in the past year: Malaysia, Thailand and Indonesia.
Smith joins Goldman Sachs from Citigroup, where he was head of execution trading in Asia Pacific.
Previously, he was at Credit Suisse. Smith holds a Master of International Economics from Anglia Business and Management School in Cambridge.
Smith replaces Shuya Kekke, who left Goldman earlier this year.
Humans will not be cut out of the deal completely: traders are needed to program and monitor the computers, and cut in when a better opportunity to trade differently presents itself. Also, the ability to find pockets of stocks for sale is more important in Asia because in many markets outside the blue chips, stocks can be very illiquid.
