In the dynamic world of financial markets, trading desks play an integral role in ensuring that financial assets are managed and traded efficiently. At Russell Investments, a global investment management firm and broker-dealer with $331bn AUM, and over $2 Trillion executed across all asset classes per year, the trading desk operates around the clock, focusing on maintaining fluid access to highly liquid markets and ensuring seamless execution for a range of financial assets. As the desk operates in developed, emerging, and frontier markets, it is structured to address the unique needs of equity, fixed income, currencies, and derivatives, all while minimizing risk and optimizing execution costs.
Last week, on the sidelines of the Equity Leaders Summit in Miami, Traders Magazine spoke with Jason Lenzo Managing Director, Head of Trading at Russell Investments to shed light on the trading strategies, market trends, and regulatory landscape that shape the firm’s approach to equity execution.
“We run 24 hours a day,” Lenzo explained, emphasizing the desk’s continuous operation to cover the global nature of financial markets. This means that no matter the time zone, their team is constantly managing orders across various markets. “Some of those orders are in the most liquid markets out there, some are in very illiquid instruments and markets ” he said.
One of the key priorities at Russell Investments’ trading desk is reducing the costs of trading while managing risk effectively. Lenzo highlighted the firm’s approach to structuring teams, each specializing in a specific asset class. “We have equity-specific focus, fixed income-specific focus, currency-specific focus, and a derivatives team,” he elaborated. This focus enables the desk to be nimble in responding to changes in market conditions while leveraging technology to enhance trading efficiency. By streamlining processes in this way, Russell Investments aims to optimize market access and improve execution outcomes for its clients.
Equity Execution Trends
Focusing on equity execution, Lenzo noted that one of the most significant trends in developed markets is the increasing role of electronic trading, and specifically in emerging markets. The rise of technology has played a pivotal role in transforming how trades are executed. “In developed markets, particularly in the U.S., we’re seeing more and more liquidity being accessed off-exchange,” he stated, referring to trading that occurs on platforms outside of traditional exchanges, such as dark pools or crossing networks. The growth of off-exchange venues is changing the way traders access liquidity. “One of the big things we want to make sure that we’re accessing is off-exchange liquidity,” he emphasized. Lenzo explained that with the growing prominence of these off-exchange venues, executing trades outside of traditional exchange systems has become a crucial part of equity trading strategies. This shift has led to an increased reliance on technology, as traders must navigate a more complex landscape to access the best execution outcomes.
As technology continues to advance, the role of algorithms in executing trades has become increasingly important. “These algorithms are everything from making smart order routing decisions or placement decisions to how we’re interacting with lit markets, dark markets, or crossing networks,” he revealed. The sophistication of trading algorithms allows traders to navigate the complex landscape of modern markets by making informed, automated decisions on how to best execute trades. The use of algorithms ensures that trades are completed efficiently, especially in high-volume markets, where speed and precision are key.
However, even as technology plays a more prominent role, Lenzo stressed that human judgment remains indispensable. “I think people probably underestimate the value of a relationship,” he remarked. While automated systems and algorithms handle many aspects of the trading process, Lenzo underscored the importance of understanding the motivations and incentives of trading partners in the market. In highly liquid markets, this human element can be critical in building trust, maintaining partnerships, and executing trades under optimal conditions, he said, adding that even as markets become more technology-driven, relationships continue to play a vital role in ensuring smooth and successful executions.
The growing reliance on electronic trading has also led to significant changes in liquidity management. The fragmentation of liquidity across multiple exchanges and trading venues in developed markets has made it more challenging to aggregate liquidity efficiently. “Having key technology, having that connectivity, so you can kind of look at a single limit order book across all trading venues, is a critical use of technology,” Lenzo explained. With more alternative trading venues emerging, such as dark pools and electronic crossing networks, technology has become essential in efficiently navigating the complexities of liquidity fragmentation. Lenzo noted that staying ahead of this technological curve is key to maintaining competitive advantage in equity execution.
Regulations
Regulatory considerations are another important aspect of equity execution in developed markets. As Lenzo explained, there is a growing involvement of regulators in shaping trading practices, particularly in the U.S. and Europe. However, a unified regulatory framework for equity execution remains elusive. “We haven’t yet seen a global regulatory alignment,” he pointed out, highlighting the fragmented nature of regulations in developed markets. While regulators in the U.S. and Europe have made strides toward harmonizing some aspects of market structure, differences remain, especially when it comes to equity execution rules and guidelines.
For instance, in Europe, MiFID (Markets in Financial Instruments Directive) regulations have had a significant impact on how equity markets are structured, focusing on transparency, market access, and competition. Lenzo noted that these regulations have led to shifts in the way liquidity is accessed, as they have made it easier for new trading venues to emerge. “MiFID regulations have definitely changed the landscape in terms of how we access liquidity,” he said. The ongoing evolution of MiFID and other regulatory frameworks will continue to influence how equity executions are managed in developed markets.
Lenzo also pointed to potential regulatory changes in both Europe and the U.S. that could further affect equity execution. “If Europe does move to a T1 regime for developed markets, that’s going to cause a lot of work for people to get ready for,” he noted. A T1 regime, which involves a move toward a real-time settlement system, could dramatically change how trades are executed and cleared, potentially adding layers of complexity for traders and asset managers. Such regulatory changes will require traders to remain flexible, adapting to new rules while continuing to deliver efficient execution.
Future of Equity Execution
Looking ahead, Lenzo anticipates a continued shift toward multi-asset platforms in developed markets. These platforms would integrate various asset classes—such as equities, derivatives, and currencies—into a single system, making it easier for traders to manage portfolios and execute trades across different markets. “The ability to integrate one equity trade with a currency or hedge it with a derivative… I think that will drive a lot of innovation,” Lenzo stated. The move toward multi-asset platforms will likely create new opportunities for enhancing trading strategies and improving execution in the evolving landscape of developed markets.
The future of equity execution in developed markets is poised for continued transformation, driven by advancements in technology, evolving regulatory frameworks, and changing market dynamics, Lenzo said. As Russell Investments navigates this complex environment, its use of sophisticated algorithms, deep relationships, and cutting-edge technology will remain key to maintaining optimal execution outcomes, he added.
