THETRADETECH DA I LY
highlights
THE OFFICIAL NEWSPAPER OF TRADETECH 2019
THETRADETECH DAILY
highlights
THE OFFICIAL NEWSPAPER OF TRADETECH 2019
TradeTech 2019:
THE HIGHLIGHTS
Did you miss any of this year’s panels or couldn’t decide which stream to sit in
on? Get stuck on the exhibition floor while waiting for a coffee? Not to worry, The
TRADETech Daily has you covered, with panel discussion and interview summaries,
as well as the results of the audience polls spread across the two-day event.
DAY ONE
MARKET STRUCTURE LEADERS PANEL: The
paradigm shift - how are changes in market
structure, liquidity and new products altering
the way you interact with your counterparts
across the value chain?
• The biggest impact of MiFID II has been
seen in systematic internalisers and unbun-
dling, according to the audience poll. Though
panellists believe it’s not one big standout
impact, it’s lots of little things.
• A lot of time and resources are spent on
liquidity sourcing, connecting to SIs, looking
at periodic auctions and how to navigate the
liquidity that they provide. Unfortunately, the
outcome is the channel shift has been fairly
muted based on the percentage of business
that has migrated.
• A lot of banks and brokers spend time,
effort and resources on TCA, but some are
seeing the converse in action, demand for
TCA from clients becoming less.
• There is a big alpha shortage, so ways of
improving those outcomes for everybody in a
fast-changing world is key and unbundling is
at the heart of the challenge.
KEYNOTE BUY-SIDE ADDRESS: Leading the
way through change – how has BlackRock
created a dynamic team structure and trading
strategy that encourages constant innovation
and adaptability to growth on a global scale?
• BlackRock has placed a firm emphasis
on developing flexible, technology-driven
trading personnel in order to stay ahead of
evolving market conditions, building a cul-
ture that ensures trading desk staff are armed
with a diverse set of skills that can be utilised
across its execution channels and technology
resources.
• An iterative, proactive approach to new
technology, improving workflow processes
throughout the trading order lifecycle and
consistent dialogue with other market partic-
ipants is absolutely essential to achieving this.
• Regulatory change is creating regional
liquidity pools that require a new approach to
trading workflows, which is where technolo-
gy developments around automation and data
can be utilised.
Q
What has had the biggest (positive or negative) impact on market structure since MIFID
II? (Multiple answers)
Sample size: 188
Periodic auctions
Dark cap limits
Systematic internalisers
Risk capital
Central risk books
Research unbundling
Other
0%
18
25
THETRADETECH DAILY
50
75
100
ALL STAR PANEL: How have market makers,
SIs and alternative liquidity sources advanced
in light of more robust pre-trade transparen-
cy, improved price efficiency, rigorous best
execution demands. Are the buy-side asking
their brokers the right questions to remain
compliant?
• Increased use of systematic internal-
isers (SIs) is a consequence of regulatory
intervention. One of the attractions is the
transparency element, allowing buy-side and
sell-side market participants to see and assess
transaction cost analysis (TCA) on fill rates
achieved if a broker routes to SIs.
• Some market participants are sceptical of
SIs due to the complexity introduced to the
market and the cost to the end investor of
dealing with that complexity.
• MiFID II has brought about more frag-
mentation, but that fragmentation means
competition is thriving with no single
dominant primary exchange; many secondary
trading platforms and other trading protocols
are competing for business.
ALL STAR PANEL – BUY-SIDE & SELL-SIDE IN-
SIGHT: Evaluating the difference between key
liquidity providers – how to build an effective
plan to determine who is best to use, when
and why?
• Electronic liquidity provider systematic
internalisers (ELP SIs) are becoming a more
important part of the market structure now
that MiFID II has had time to bed in and the
industry has adapted to these new partici-
pants.
• Brokers will play a key role in the growth
of ELP SIs going forward, although they too
are getting used to their place in the market.
• Although there is lingering confusion
around how ELP SIs operate and differenti-
ate from each other, the growing amount of
data coming through from these venues is
Q
Are the new ELP SIs
in the market adding
true liquidity differentiation
compared to past/more
established liquidity providers?
Yes 41%
No 59%
Sample size: 116
beginning to create greater transparency and
dialogue as to the mechanics of ELP SIs.
• However, audience polls found that this
sentiment may not be too widespread: 56%
of audience members said they are unsure
of how ELP SIs differ from each other, 51%
said the biggest challenge they faced was un-
derstanding who they were interacting with,
while 82% of audience members said they
did not receive sufficient information on the
mechanics of how SIs work.
ALL STAR PANEL: A brave new world for
capital markets - what does it take to thrive in
the ever-evolving global trading environment
where innovation, transformation and renewal
wins?
For the sell-side, the long-term differentia-
tor will be the ability to adapt in the new en-
vironment. Institutions need to be prepared
to make bold moves, but that can be more
difficult for larger sell-side firms which need
to build the right infrastructure to govern
new data sources born from regulation and
technology.
The barriers to entry for firms on the sell-
side is a huge challenge, in part due to the
regulatory burden. MiFID II has seen buy-
side firms re-evaluate their broker lists, so
the challenge is getting on the list and staying
there. Balance sheet and risk also play a mas-
sive role in this as demand from the buy-side
for access to large balance sheets for credit
risk or prime brokerage purposes remains
very high.
Predictions on future disruptive factors in
the industry include the democratisation and
universal access to data, the way in which
that data is utilised, outsourced dealing, and
potentially new products and services from
existing institutions.
KEYNOTE INTERVIEW: Creating a valuable
business that combines world class execution,
technology innovation and operational excel-
lence – what’s next in the ITG and Virtu story?
• HFT and market maker, Virtu Financial,
has completed its $1 billion acquisition of
agency broker ITG. Virtu’s CEO, Doug Cifu,
explained that the tie-up was driven by ITG’s
global reach, technology focus and similar
company culture. Virtu Financial will create
a combined entity with segregated business
lines and efficient safeguards and firewalls to
remove any potential conflict of interest. To
manage fears of information leakage, Virtu
will provide open and transparent commu-
nication with clients to ensure that their
information is safe.
• Cifu added that a MEMX-style consor-
tium could potentially launch in Europe.
Virtu Financial teamed up with several other
major financial institutions to establish a
US equities exchange in the fight against a
lack of competition in the national exchange
space. Cifu said that the mandate of MEMX
is not limited to the US, and there’s no reason
the consortium, or another similar type of
exchange, couldn’t be established in Europe.
KEYNOTE FIRE SIDE CHAT: Emerging markets
in the future
• There are tremendous opportunities for
active management in emerging markets de-
spite a major uptick in passive management
year-to-date coinciding with a downturn in
active management. Mark Mobius predicted
a change of fortunes, citing recent meetings
with investors in the US.
• Mobius urged active managers to ‘get
away from the index’ claiming the trend to
follow the index was one of the reasons he
left his famed role at Franklin Templeton
Investments.
• There are opportunities in India: the
amount of IPO activity will soon be the same
as China. Mobius also pointed to opportuni-
ties in Egypt, Romania, Kenya and Nigeria.
KEYNOTE BUY-SIDE FIRE SIDE CHAT: How can
you manage the successful growth of a global
organisation through technology and agile
processing methodologies in a world with
ever-changing regulatory requirements and
client demands?
• Managing growth of a global organisation,
particularly in the context of technology
infrastructure, is a daunting job and there is
a no one-size-fits-all approach that will work
for all firms. BNP Asset Management has
recently moved from using several technolo-
gy providers for EMS, portfolio management
and other process to a single provider, to
acquire a “common language and global back-
bone” across its global operations.
• While implementing a single provider
technology or system across global opera-
tions, firms still need to contend with differ-
ing global frameworks, for example, the var-
ious research unbundling regulations across
the world, and using different technology
systems may be the best approach for this.
• There may be push back from traders
and portfolio managers when implement-
Issue 2
TheTradeNews.com
19