A former floor trader and interbank foreign exchange trader, Kit Lowe is a mainstay in the Sydney trading community. He began his career on the money market desk at Natwest Sydney in the late 1980s, trading the bank’s asset and liability book. There he gained insights on the financial market plumbing, which still hold him in good stead today. Later he ran the bank’s forward FX book before moving to the trading floor as an interest rate trader. More recently, he was a portfolio manager at 70 Capital, and he is now a proprietary trader at Genesis Trading in Sydney. Kit has been using Trading Technologies platforms for nearly 15 years, so it was nice to get his view on the evolution of electronic trading tools. Kit has a nice following on Twitter, so you can catch him there at @kit_lowe.
How did you get your start in trading and learn how to trade?
Kit: I started on a graduate training program in a bank dealing room where I rotated through a number of desks before settling initially in a funding role. We did a lot of convertible interest arbitrage in those days. Later I ran our spot and forward FX business. We did a lot of GBP/DEM trading around the time central banks and hedge funds started battling it out. Spot GBP and spot DEM were quite liquid, but GBP/DEM wasn’t. I guess a lot of my interest about relative value (RV) trading was piqued in this time, as we had to arb between both markets to create cross rates. My trading now is 50% RV and 50% outright mainly in rates, equities and FX.
How has this global pandemic affected your business and impacted your trading? Did you change location, i.e., go from an outside office to trade from home?
Kit: I trade rates, FX and equities, so the pandemic has affected liquidity in all of them. This has resulted in a reduction in my volume size at any given price point. In RV, a lot of the relationships broke down in March particularly illustrated by an 8-sigma move in the off-the-run U.S. Treasuries vs. the on-the-run Treasuries. In Australia, RV trades between Australian and U.S. 10-year rates and between Australian 3-year and 10-year rates had moves over one week, which normally take two years to move!
Due to lockdown restrictions, I moved from our dealing room to trading from a home office. Since a number of my trades are via server-based algorithms, there has been no impact on my trade execution. The cloud technology TT employs allowed my workspace and trade logic to move seamlessly from from the dealing room to my home office.
You have made the migration from X_TRADER®️ to TT®️. What can you tell about the transition, and why did you move to TT from X_TRADER?
Kit: I moved from X_TRADER to the TT platform a few years ago. There are a few subtle differences, but nothing too different. We all moved as a group at Genesis. While we were a bit resistant to change at the time, the general consensus is that a lot more development is going into TT over X_TRADER.
TT: Is there anything in particular about TT that has benefited your trading?
Risk controls built into the TT Order Types, like TT OCO, are very useful when used in conjunction with the TT Stop order type. I also use the TT Stop order type to stop me out and keep me from averaging a bad position. I use the TT Retry order type to launch some RV (spread) trades. The Alert function on the mobile app is very useful when I am away from the screens.
TT: Quantitative Easing (QE) has been a big driving force in the markets, and Australia has been one of the more recent countries to use this financial control tool. How does the Australian approach differ from the rest of the world?
Kit: Australia has benefited from watching the rest of the world’s Central Banks’ attempts at QE post Global Financial Crisis (GFC). The Reserve Bank of Australia (RBA) has attempted YCC (Yield Curve Control) at the 3-year part of the government bond curve by targeting a rate of 0.25%, which is also equal to the Official Cash Rate (OCR) of 0.25%.They have not committed to buying “X” amount of bonds per month like most Central Banks do, but in theory can buy unlimited amounts. This has allowed them to taper their securities purchases from $5B per day to $500m per day without causing too many ructions. A lot of signals I look at, like Repo-BBSW (Bank Bill Swap Rate) and BBSW-OIS (Overnight Index Swap), have tightened in recent weeks due to the RBA’s Open Market Operations (OMOs) and QE. Credit spreads and cross currency basis have also tightened as the RBA and the Fed opened up a USD swap line and the Fed opened a FIMA (Foreign and International Monetary Authority) repo facility for foreign CBs.