MUFG Brings Its Trading to Electronic Age, Except for JGBs

Alice Atkins
3-min read
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(Bloomberg) -- Mitsubishi UFJ Financial Group Inc. is on a big drive to update its trading capabilities while preserving old style voice methods for dealers in Japanese government bonds, according to Stu Taylor, the head of electronic trading at Japan’s largest bank.

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“We’ve been late to the e-trading party,” Taylor, who spearheaded the expansion of the electronic trading team at MUFG to more than 50 people around the world, said in an interview. “Japan has been a very relationship-based market and continues to be, but against a world of data, compliance and efficiency, that has toppled slowly.”

MUFG is catching up to rivals, vying to become more competitive across fixed income and equities where electronic trading has taken hold. MUFG has long focused on its solutions business covering large-scale corporate financing and lending activities, with the securities trading unit bolted on to support any hedging requirements.

Still, Taylor is opting to leave one crucial part of the bank’s securities trading business out of his strategy. The Japanese government bond market remains predominately driven by a few large asset managers and being able to have voice interaction when executing trades gives the bank an edge, he added.

“That’s where a good old-fashioned phone call comes into play,” he said. “We can give prices but we can also find out why they are putting on certain trades and we then know how to position for that flow and externalize that for Europe and the US markets.”

Conversations typically take place in Japanese and there are fewer market makers for this sector. The JGB trading community, known as the “JGB village,” is almost impenetrable for outsiders but its focus has ramped up recently following the Bank of Japan’s move to hike rates.

“It’s a lot harder for other firms to break into,” Taylor said. “My strategy is not to turn everything electronic; it’s the right products to compete effectively where we need to.”

India Hiring

Taylor was hired in November 2020. He joined from BGC Group Inc. where he was global head of the electronic buyside division for fixed income. Earlier in his career he co-founded financial technology firm Algomi.

Half of the staffers he’s brought in at MUFG are for two new technology centers in India, which opened in Bangalore and Delhi earlier this year. While the initial aim has been to get traders onto a single global tech system and store more detailed records of activity, the next stage is focused on automating prices through algorithms.

The firm has invested heavily in India for the strategy due to the high level of quantitative and technical skills there, Taylor added. A third-party partnership with ION Markets has brought MUFG’s global traders onto one technology system and the creation of bespoke software now stores about a billion price records a day. Prior to this, traders were still largely working from offline Excel spreadsheets which didn’t scale, he said.

MUFG also joined forces with Morgan Stanley this year to collaborate on foreign exchange trading and Japanese equity sales for institutional clients, along with corporate access, research and some execution services.

--With assistance from Takashi Nakamichi.

(Updates to add background on Taylor’s career.)

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