Time for a little PR on trading

Fabien Buliard

The image of the financial services industry needs a little polishing

As the equity trading industry gathered last month at TradeTech in Paris to discuss the latest developments in terms of liquidity pools, new trading venues, smart order routing and low latency, it is interesting to note comments made about financial markets by European political and business leaders in recent weeks.

The departing chairman of insurance giant Axa, Claude Bébéar, recently lamented the short-term view of equity investors and a regulatory system that did not reward shareholders commitment in the long run. Meanwhile, French president Nicolas Sarkozy called for a “moralisation” of the financial system, lambasting “speculators” making profits “in a few hours” at the detriment of entrepreneurs.

Judging by his statements, it seems Sarkozy isn’t a big fan of algo trading. Anyhow, I don’t believe “morals” were a topic on TradeTech’s conference agenda.

Should the industry worry about the perception of the general public and politicians, whose understanding of its activities is limited at best? With the sub-prime crisis and the SocGen scandal, rarely has the image of the financial services industry in general, and equity trading in particular, been so negative.

In the last few months, Sarkozy has called repeatedly for more transparency and fresh regulation, and talked of working with G8 counterparts to impose new “rules”. A few months ago, German chancellor Angela Merkel sought Sarkozy’s support to regulate hedge funds.

Such statements could be seen as surprising, coming from supposedly conservative leaders, but they illustrate the disconnect between an increasingly sophisticated trading world and European politicians who seem to consider – across the board – that the financial system is “out of control” and needs to be reined in.

Indeed, a backlash against modern forms of trading could potentially be a regulatory one, from increased taxes on short-term holdings to restrictions on the creation of new derivatives, to name just a few possibilities.

It might be a good idea, therefore, for the industry to address this negative perception and explain the beneficial aspects of new trading techniques and financial instruments, notably in maintaining liquidity and price transparency or in the financing of what critics like to call the “real” economy.

Corporate banking relationships in need of counselling?

In her 10 April entry on Banking Technology’s online Blog Spot, Heather McKenzie underlined the need of corporates for adequate banking relationships. It reminded me of a column published at the end of 2007 by the French association of corporate treasurers AFTE which poked fun at the apparent chaos the arrival of MiFID had caused in their banks.

Indeed, French corporates were rather surprised when they started receiving somewhat inconsistent letters from their investment services providers about the MiFID client category in which they had been put toward the end of last year.

For instance, some companies were put in several different categories by their various banks, with the same firm seen as a professional client by one institution and as an eligible counterparty by another.

Some corporates were even assigned client categories that do not exist under MiFID, such as “qualified client, informed client, or retail client”.

What is more, treasurers received letters not addressed to their name, but to their function, “as if banks didn’t know the names of their clients.” Asked about the letters, the corporates’ account managers often had no idea what their client was talking about. Not exactly a “multi-channel” experience.

The treasurers’ association expressed its astonishment at the improvised manner in which banks seemed to have approached their MiFID paperwork obligations, despite ample forewarning.

So, beyond transactional innovation, maybe what corporate banking really needs is indeed better customer relationship management technology. CRM was one of the buzzwords of the beginning of this decade in the retail banking world. Perhaps is it time for it to try crossing over to the corporate side.

Kerviel’s new job

IT professionals will be happy to learn they can now count star (or is it “rogue”?) trader Jerôme Kerviel as one of their colleagues.

The French media revealed last month that Kerviel had been hired by IT consulting firm LCA. The company’s owner, Jean-Raymond Lemaire, told Agence France Presse that Kerviel has been working as a consultant since the beginning of April. The trader had stayed at Lemaire’s home after the trading scandal first came out earlier this year.

Asked about the trader’s new job, the French bank’s lawyer, Jean Veil, said he was delighted that Kerviel had found work. “It will help him to pay back Société Générale,” he said.