Weekend Edition: View from the floor
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How does NAB’s trading division add value while minimising risk for its diverse clients?
In Australia and in places around the world, NAB trades for a range of clients in a variety of asset classes, and the aim obviously is to ensure that value is added to money or investments whilst minimising risk. So how do you do that? Well let's talk to the person responsible for trading at NAB and see if he'll give away any of his secrets. The morning call from NAB with Phil Dobby. The weekend edition. Now the information we give on the morning call each day is a useful start point for the people whose job it is to execute trades, whose job it is to buy and sell. But you know what? We never talk to the people who are actually doing the trading, and some of those are within NAB itself, of course. NAB has dealing rooms in Melbourne and Sydney and London and New York and in Asia.
Tim McKackey is NAB's head of Of trading in Sydney. And you know what, after m more than nine years of the morning call, we thought it was about time we spoke to him. So uh Tim, give us a quick summary of uh what your the trading room does basically. I mean you're buying and selling obviously for clients. Uh so tell me about what sorts of clients? Are they large corporates, are they super funds, or are they mid sized businesses? Uh who who's this for?
Well Phil, thanks for having me on the show. It's a great privilege to be here and it's yeah, it's taken nearly a decade to get invited, but you know, I finally made it, so feels like success
feels um for me. So We wanted you we wanted you to really want it, Tim. We you know, we were gonna get you in the first week, but we thought, No, no, no.
So yeah, that what is the how does the NAB markets business operate? It's a good it's a good question because we do have a very large uh and wide and varied customer set. If you think about NAB in Australia and across the world, you know, we're effectively a commercial bank and obviously a retail bank as well. And we're so we have, you know, clients ranging from, you know, small corporates, large corporates, Listed corporates to the world's biggest hedge funds, the real money managers, the sovereign wealth funds.
So, you know, if you're going into a branch or you're facilitating an FX transaction to, you know, either whether it's uh import export business or if you're just facilitating payment of of say a holiday in US dollars, then that the execution of that risk happens through the NAB market session th that my my team are the ones that make the prices that go to the clients. And I guess You know, a lot of people think about it like I guess their um idea of what a stockbroker may be, where they get paid a fee for doing a particular transaction. But in um the way that the markets business operates at NAB is we act as principals. So if you do a transaction with us, whether it be a commodity trade, an FX trade, a bond trade, we are the principal.
How does NAB manage and hedge risk on its balance sheet after executing trades?
So it goes on to the NAB balance sheet and then we're We're responsible for managing that risk and then um hedging that risk. And that is the w the the we make the we make um revenue. from the buying and selling of things. So it is it sounds very complicated, but I think I I can explain it in a simple way. It's like the grocery store, you know, people go and they buy their buy their bananas or their oranges at whatever, fifty cents and they try to sell it at fifty five cents or at sixty cents or at sixty five. And it works in a similar way, I mean with a little bit of nuance when it comes to um other assets like foreign exchange and
Well, I like the way you've already taught the price out there. You went from fifty to fifty five to sixty, uh, eighteen eight in you, clearly. So uh but the clients you're talking about, so you mentioned a whole variety of those. So if you're looking at so you know, you mentioned hedge funds, maybe big super funds, why are you doing trading for them? Isn't it the sort of thing that you'd say, well, you know, they could do that themselves if they're of a certain size?
Yeah, well we're a facilitator. I mean we put things we put we take the risk on the balance sheet, but we're there to provide a service to, like I said, the variety of different clients that NAV has and you know, the Australian Superfunds, for example, they have uh, you know, a huge amount of money inflowing every quarter and a large proportion of that money goes into offshore markets.
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Chapters
8 chapters
1
How does NAB’s trading division add value while minimising risk for its diverse clients?
0:01–2:59
2
How does NAB manage and hedge risk on its balance sheet after executing trades?
2:59–5:42
3
How does NAB manage risk when holding different bond maturities in its portfolio?
5:42–8:44
4
Why does NAB use interest‑rate futures to hedge anticipated rate changes?
8:44–11:33
5
How does NAB’s macro outlook shape its trading risk and portfolio decisions?
11:33–15:10
6
How do interest‑rate futures provide a liquid hedge for NAB’s rate‑risk exposure?
15:10–18:18
7
How did the extreme volatility on Liberation Day impact NAB’s trading and risk management?
18:18–20:42
8
When and why does NAB switch off its trading algorithms during turbulent market conditions?
20:42–24:29