Director, senior fixed income and FI ETF trader at BlackRock, Laura-Jane Purnell, sits down with Wesley Bray to discuss her journey to the trading desk, the key drivers in the modernisation of bond markets and how to navigate shifting liquidity supply and demand dynamics.
By Wesley Bray
Tell us about your journey to becoming a fixed income trader at BlackRock
My passion for finance and commerce began at an early age. However, I lacked role models who worked in finance, so I knew very little about the sector. It wasn’t until university, where I studied economics, that potential career paths became apparent. We were frequently approached by the top four accountancy firms who spoke about amazing opportunities, but I quickly realised this wasn’t the path for me. A friend suggested I consider investment banking and following a trading and sales summer placement at ABN AMRO in the City, I was instantly captivated – I had found my fit.
Fast forward to the end of my studies, I applied for a position at a European investment bank. My career began in 2007, which nicely coincided with the start of the global financial crisis – certainly an interesting time to be a recent graduate and a very steep learning curve. I spent eight years on the sell-side in various fixed income trading roles, before jumping to the buy-side, and to BlackRock, where I am today.
I began my buy-side journey on the ETF capital markets team, a product and market infrastructure I had no experience of, which was incredibly exciting and daunting at the same time. My rational was twofold. One, whilst growth had generally stagnated following the global financial crisis, ETFs were experiencing an enormous rate of advancement and I could see they were transforming bond markets. Two, I was keen to learn more about the investments process and experience the BlackRock culture I heard so much about, especially the focus on female development and advancement. Today, I am a senior fixed income trader in our global trading team, combining my extensive sell-side and ETF product knowledge, and market passion to deliver best execution for our global clients.
How has the role of the trader shifted over the years and what new skills are required to be a successful trader?
I think the role of the trader – both on the buy- and sell-side – has shifted significantly since I started my career. In the past, traders tended to specialise in a narrow sector of an asset class. Today, traders are a lot more agile for two reasons. Regulation post the global financial crisis altered bank operating models and reduced balance sheet capacity. Secondly, major advances in technology and data science have greatly influenced not only the role of trading, but the entire investment decision making process, with increasing reliance on electronic trading. I’ve witnessed a rapidly evolving landscape, which means that today’s trader must also proactively evolve to keep pace and stay ahead of the market curve. Adaptability is key.
Today’s trader needs a strong comprehension of how the market works, as well as the ability to effectively navigate and aggregate fragmented liquidity – especially with the number of new alternative liquidity providers and platforms, and during increasing bouts of volatility. Being versed in technology advancements, the ability to use algos and analytics, and combining this with an understanding of sensitivity of pricing is important. We’re seeing a lot of young professionals joining trading teams with extensive coding and computer science skills and are comfortable with new algorithmic technologies and AI. It’s interesting to see the combination of traditional and non-traditional skillsets proliferating trading floors and creating the trader of the future.
What key changes are driving the modernisation of bond markets?
Bond markets have been evolving at a rapid pace for a while. What has got us here are similar dynamics I spoke to in relation to a change in trader role and will continue to drive modernisation forward.
As mentioned, regulation has redefined bank balance sheets and we’ve consequently witnessed a change in the composition of the traditional broker-dealer community. When I first started my career, banks were viewed as being the main liquidity providers. Over the years I’ve seen an expanded set of counterparties emerge, with the rise in alternative liquidity providers, utilising algorithmic technology and providing pricing via electronic platforms.
Continued advancements in technology is allowing us to move to a multi-asset class trading environment, where data and technology are at the forefront. The ever-changing macro and regulatory environment are also accelerating modernisation. We’re at the end of the great moderation, with higher volatility, persistent inflation, and elevated interest rates. Against this backdrop, we are moving from a depth to a breadth market, creating a need for new technology, capabilities, and ways of thinking about fixed income risk.
How is automation and the use of algos shifting the landscape in fixed income?
I think the biggest shift resulting from automation has been the deployment of index and basket instruments. We’re seeing a significantly increased use of bond portfolio trading and fixed income ETFs, where sophisticated pricing tools are not only enabling us to trade these products with greater frequency, but are the differentiator. This trend is also reflected by the e-trading desk composition at banks, where bond algos, portfolio trading, fixed income ETFs and credit index products are now regularly combined.
Portfolio trading has been especially impactful for credit markets where liquidity can be challenging. Sell-side dealers can facilitate numerous individual bonds trading simultaneously, enabling us to access risk in an aggregated way rather than on a line-by-line basis, reducing transaction costs for our clients.
Fixed income ETFs are also fast becoming an integral trading tool in fixed income portfolios, with their ability to combine bond trading with equity infrastructure, providing additional liquidity and intraday transparency to the bond market. On the desk, I trade across the broad spectrum of fixed income ETFs, from rates to EM exposures, and I’ve witnessed a substantial increase in usage. We estimate that UCITS EUR-denominated credit ETF volumes rose 25% in H1 2022 versus H1 2021 industry wide, while underlying IG and HY bonds volumes were flat during the same period.
How can technology, automation and pricing tools act as a differentiator?
At BlackRock, we operate a centralised trading desk model with a global footprint. This allows us to trade in regions or time zones that offer the best liquidity, which translates into competitive pricing for our clients. We also have a systematic trading desk which executes low touch flow electronically, utilising increasingly sophisticated technology. This trend is mirrored on the sell-side, where banks have developed their own algos for low-touch bond trading, creating instant risk transfer. This electronification of trading flow allows our high touch desk, which I sit on, to focus on alpha generating activities.
In this context, technology and automation has made our decision making smarter. We can execute multiple trades simultaneously using smarter tools, freeing up time for our high touch desk to handle larger and more complex transactions. This has resulted in greater efficiency on the desk, greater sophistication of trading and importantly, it has improved both our pre- and post-trade analysis.
How does BlackRock navigate shifting liquidity supply and demand dynamics?
As the liquidity landscape continues to evolve, we are constantly assessing our global trading platform infrastructure and execution capabilities. Currently our workflow is optimised for scale, delivering performance through efficiencies and risk control. As we look to the future, we envision an increasingly networked trading platform and ecosystem. One which is fluid with respect to information flow, delivers real-time liquidity, and creates alpha opportunities to benefit our clients. In this networked environment, buy- and sell-side interact seamlessly, with sell-side dealers remaining fundamental to our trading activity.
What tools are required to make this all-to-all network environment?
As mentioned, we are continuously looking for opportunities to enhance trading efficiency. As we navigate a more networked environment, the continued evolution of Aladdin, which is our centralised global platform for our trading and investment management process, remains key. Aladdin enables us to manage trade orders efficiently through a centralised dashboard, it creates direct market access via integration with execution platforms and sell-side dealers, trading analytics, and multi-portfolio functionality such as crossing which allows us to internalise some of our trading flow and minimise market footprint and transaction costs for our clients.
How do you navigate being a working mother? What more needs to be done to encourage a suitable work/life balance for parents in general?
Returning to work as a first-time mother last year was certainly challenging, and I believe resilience, a positive mindset, and a supportive environment, were all key to my personal journey. Prior to returning, I proactively leant on my employee networks, which helped guide important childcare decisions, alleviated concerns and provided comfort, and importantly an ongoing supportive environment once back at work. There’s no silver bullet or single strategy, but I believe flexibility is key. It’s something I didn’t necessarily appreciate before having children, but at BlackRock, we have a flexible working environment for all employees, which provides not only the option to work from home one day a week, but also flexible time off. This has been invaluable for me when balancing work and childcare commitments, and I believe critical for firms to think about, especially with respect to female talent retention.