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How Texas TRS’s Trading Desk Executes More Than $380 Billion Every Year

The seven-person in-house trading unit is more sophisticated than ever before.

In January, longtime Teacher Retirement System of Texas trader Jaime Llano stepped into a new role: global head of trading.  

His predecessor, Bernie Bozzelli, had retired after 27 years, leaving Llano to continue Bozzelli’s legacy of running the team — which trades $380 billion annually — like a well-oiled machine.    

“In the last several years, the trading floor moved from this very plain-vanilla trading floor to something more sophisticated,” Llano said by phone in late June.    

Llano’s team is comprised of seven people who execute trading for U.S., European, and Asian equities in addition to foreign exchange, futures, over-the-counter options, and credit derivative indexes.  

The trading team views its mandate much like any trading execution provider would. The difference? The group has just one client: TRS’s portfolio management team.  

“They spend so much time working the alpha of a specific basket or name,” Llano said of the portfolio management team. “Once we finish, I want to be able to go back and show them the results on where else we can improve from a timing perspective” — such as how to best time trades to take advantage of price or average daily volume changes.  

The trading desk is continually refining itself, adding features like Bloomberg’s fingerprint technology and constantly considering new brokers to ensure best execution.  

The group manages a tiered global network of 48 brokerage firms, which are categorized based on the type of relationship each has with TRS. At any one time, TRS is trialing between two and ten firms that could be added to its mix of brokers.  

“There’s no written rule on the amount of brokers, but what we’ve tried to do in the recent past, is if we add one, let’s delete one,” Llano said. 

Since 2019, TRS has ranked in the first quartile of trading desks compared to its peer universe tracked by Virtu, TRS meeting books show. In 2021, TRS outperformed peers by eight basis points. 

In recent months, the small team has been shaken up. In addition to Bozzelli’s departure, longtime senior trading analyst Pat Barker, who had been with TRS for 32 years, stepped down. Llano has since brought in two new employees from other TRS teams to bolster his group. 

The market downturn is giving TRS an opportunity to work more closely with its brokers. Times of high volatility can expose problems with trading algorithms, and when that happens, TRS provides feedback to brokerages, hoping to help improve the technology.     

“You are more nimble, you are more flexible, you can be smarter because you only have one client instead of having an outsourced trading room,” Llano said of the team. “We think that by having one dedicated client, it’s better for everybody.” 

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