January 26, 2010

RBC has been busy. Very busy. Over the past year, the firm has built a new 71,000-square-foot trading floor, hired approximately 70 people in trading and technology, established a new management team for its trading operations, and instituted a new strategy focusing on its core clients — the top U.S. institutional asset managers.

RBC Capital Markets

The new trading floor, located at 3 World Financial Center, brings together two former RBC trading floors in New York City — one previously located in Midtown and the other at One Liberty Plaza. With the new, 700-seat trading floor, RBC has increased the number of staff on the floor by 40 percent.

The new floor seats 275 in fixed income and 244 in equities, which includes 11 options traders and a 45-person electronic trading group. Overall RBC has 300 staffers in global equities. Other seats on the floor include management and support functions, such as compliance and technology.

By far the biggest advantage to the new floor has been the improved communication among various groups that it has enabled, says Robert Grubert, managing director, head of U.S. equity sales and trading. RBC built the floor with the intention of increasing collaboration among product areas and has achieved that goal.

Robert J. Grubert, Managing Director, Head of U.S. Equity Sales and Trading
Robert J. Grubert, Managing Director, Head of U.S. Equity Sales and Trading

"You can [now] walk down the rows and go from options to equities to emerging markets to high-yield to investment grade to FX and really understand any of the possible dislocations in equities and what that underlying move may result from in other areas," Grubert says. "You can source that content across the floor, package it up and give it to the client.”

Grubert points out that the benefits weren’t apparent overnight. Over the past two years RBC traders have been undergoing rigorous training so equity professionals would understand the basics of the fixed-income markets and the options markets, he explains. “We teach our traders about the relationships of other products on the equity market and equity companies,” says Grubert, who notes that Jennifer Winstel, managing director, head of U.S. equity sales, spearheaded the weekly training program.

At the heart of the new floor’s success is a new “desk sector” strategy made possible by the large, open layout. Grubert acknowledges that the desk sector strategy is not new on the Street; but the idea was new for RBC. But now, he claims, the firm excels at the strategy. The idea is that there are various sector experts who can walk the floor, talk to various product traders, and source any of the different moves and content to the client. RBC has sector strategists in industrials, healthcare, technology, financials, event, consumer and other areas.

Grubert adds that the firm’s macrostrategist walks the floor as well. He uncovers the market-moving events and conveys that information to clients. “It’s that dislocation in equities resulting from moves in other markets,” Grubert emphasizes, explaining that the whole strategy has made him and others work differently.

Grubert says the desk sector strategy has become a part of everything he does, and technology plays a large role. “When you start interacting differently -- you interact differently with your credit partners, with capital markets -- you co-list meetings, you have credit strategists coming in to talk during the equity morning meetings. Just overall your strategy is different. You keep all the groups in mind. You set your game plan, and the technology provides for continuity.”

More Expansion

Despite the completion of the new trading floor, RBC’s building isn’t done. The firm also has leased two new floors in the building. One will be turned into an “incremental” trading floor where more support, sales and trading staff will be moved. “We want to make sure we have the right people sitting with the right people to enhance that sector strategy,” says Deborah Freer, managing director, COO – USA. The other floor will be dedicated to proprietary trading, she notes.

Robert J. Grubert, Deborah Freer, and Jonathan Hunter
(Left to Right) Robert J. Grubert, Managing Director, Head of U.S. Equity Sales and Trading; Deborah Freer, Managing Director, Chief Operating Officer – USA; and Jonathan Hunter, Managing Director, Global Co-Head of Fixed Income and Currencies

Grubert notes that the firm didn’t change its front-end technology. “We continue to use Fidessa as our trading system,” he says.

Overall traders use a mix of proprietary and vendor systems. RBC did build an ATS aggregator, which it uses to source liquidity from various ATSs and dark pools. As for algos, “We have the Street standard package, but as part of our innovation, we are building a new line that we’ll roll out later this year,” adds Bradley Katsuyama, managing director, global head of electronic sales and trading.

Jennifer Winstel, Deborah Freer; (Front Row) Bradley Katsuyama, Jeff Fields
Jennifer Winstel, Managing Director, Head of U.S. Equity Products; Robert Grubert, Managing Director, Equity Markets; Deborah Freer, Managing Director, Chief Operating Officer, USA; (Front Row) Bradley Katsuyama, Managing Director, Global Head of Electronic Sales and Trading; Jeff Fields, Managing Director, Head of Alternative Equity Products.

“The technology has strengthened our model,” Grubert adds. “Technology is a complement to the content.”

Freer agrees. “We have a lot more bandwidth, terminals, etc. -- things we didn’t have space for,” she says. “Now we have a true state-of-the-art trading floor.”

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