Over the last 18 months Bank of America Merrill Lynch has steadily taken market share from its rivals, in the process embodying how the relative positions of European and US banking groups are shifting. Ironically though, a key element of BAML’s rise has been its efforts to become as European as the European banks that have traditionally played such a large role in global derivatives.
“This has been a culmination of many years of effort focussed on the development of our platform, our people and our client coverage,” says Bernard Mensah, president of UK & CEEMEA at BAML and co-head of global FICC trading, in London. “Multi-year plans are challenging to execute because you have to adapt according to changing market conditions, differing budgets and new technologies that come along. But we have achieved this through being tactically flexible while sticking firmly to our overall strategy.”
A key area of focus has been the build out of its two European Union hubs, in Paris and in Dublin. Paris has centred on broker dealer work, Dublin on banking. Before Brexit, BAML was more focussed than other banks on having a single London hub and had a smaller footprint than its rivals. But the 2016 referendum changed all that. The bank has now taken the opportunity to go hard into EU markets.
The results have been excellent. “Our European expansion has significantly paid off, in terms of both our credibility with clients and our ability to systematically mine a deeper pool of talent,” says Mensah.
The highest profile relocation has been Sanaz Zaimi, head of global FICC sales in London. In February she moved to Paris to become CEO of BofASE (the new broker dealer entity for Europe) and country executive for France while also retaining her FICC sales role.
Vanessa Holtz and Othman Kabbaj have also moved to Paris, to be the heads of EU FICC trading and sales respectively. Holtz also retained her roles of head of global G10 FX vanilla options trading and co-head of EMEA G10 FX trading, and Kabbaj retained additional responsibilities from his previous role in EMEA FICC sales.
In equities, Christian Treuer and Arnaud Lannic became heads of EU sales and trading respectively, while also keeping their roles of head of EMEA equities clients solutions distribution, and head of EMEA equities client solutions trading.
This build-up of talent on the ground has given BAML a new traction with European clients. Along with continued investment in its platform and its focus on innovation, it has become the number one derivatives bank in a number of underlying products and geographies.
A multi-hub approach has enabled it to scale the hurdles that regulatory change and uncertainty have thrown up. “The derivatives business is, by its very nature, global,” says Mensah. “You need to be able to service clients seamlessly anywhere in the world. To be able to do that, you need the right structures in place.”
The success of this overall strategy can be seen in its rise in the Greenwich most helpful trader rankings on interest rate derivatives, where it is now ranked number one across euro, sterling and dollar interest rate derivatives. The bank offers the full suite of product across government securities, agencies, futures, repos, swaps, options and structured transactions, operating in 20 locations globally.
Already dominant in the US rates markets, the last year has seen it focus on building up EMEA, while finding a profitable path through the thickets of new regulations and shifts in market structure.
“We have rebuilt and re-strengthened our rates offering over the last few years by partnering with our clients, expanding our product suite and platform, and leading through times of change,” says Snigdha Singh, head of EMEA flow derivatives and Gilts trading in London.
This pattern of investment, expansion and client wins has been repeated in its FX derivatives business. The FX options trading business in particular has captured market share. In Euromoney’s 2018 FX survey, the bank came top in both overall FX options and in options e-trading.
With currency volatility on the rise, banks need to have the best technological and algorithmic strategies to create tools that give best execution. BAML links these strategies to deep pools of liquidity, which together create a powerful infrastructure for clients to trade and manage FX risk.
BAML has been strong in equity derivatives as well. While all banks that operate in this area highlight their ability to innovate and their focus on solutions, much of the end result will be determined by their ability to originate in the primary markets. And in this regard, BAML’s strength on the ground in the US and across Europe has paid off.
The bank has an ‘originate-to-distribute’ model that is fuelling the growth of its equity derivatives business and that it claims is now is now part of the bank’s DNA. It therefore shares risk originated in primary markets with its global client network.
Moreover, its investable indices franchise has brought new strategies to market and secured landmark mandates with prominent institutional investors around the world.
“We attribute our success to the efficient combination of a unique global network of clients, a strong trading expertise and a distinctive culture of product innovation,” says Hichem Souli, head of global equity derivatives sales and structuring, and co-head of global markets investable indices at BAML.
It has been an impressive, global performance by BAML across all aspects of the derivatives markets.
