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Fidessa appoints Jay Biancamano to lead Equities in the Americas

Feb 25, 2015

Fidessa group plc (LSE: FDSA) today announced a key appointment for its sell-side business, Jay Biancamano is now Head of Equities Product Marketing for the Americas. Based in New York and reporting to James Blackburn, Global Head of Equities Product Marketing, Biancamano will focus on driving the strategic direction of Fidessa's sell-side equities products to provide new and innovative services to its clients which deliver them real business value.

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Broadridge Expands its Operations and IT Professional Services Practice

Feb 25, 2015

Erik DiGiacomo Hired to Grow Company’s Practice Supporting Operational Transformation by Banks, Broker-Dealers, Hedge Funds. Broadridge Financial Solutions, Inc. (NYSE: BR) is expanding its professional services practice within the company’s Global Technology and Operations business unit to help financial institutions navigate regulatory and operational challenges and execute large business transformation initiatives. The company has hired industry veteran Erik DiGiacomo to lead the practice.

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Volante Technologies hires two new senior executives and expands development team

Feb 25, 2015

Reinforcing product management and marketing operations with new offices in North America and India to support a growing global customer base. Volante Technologies Inc., a global leader in the provision of financial data messaging integration, validation and processing tools, today announced the appointments of Nadish Lad as Head of Payments Product and Peter McKenna as Global Marketing Director.

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Latest Blog Posts

U.S. Options Buy-side Behavioral Responses to Shifting Liquidity

Gary Stone and John Gardner, Bloomberg Tradebook

Feb 24, 2015
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Regulations are having a negative effect on the liquidity of U.S. equity and index options. As banks and traditional market makers deleverage and decrease capital commitment to facilitate trades, it is becoming more and more challenging for the buy side to find the other side. According to Andy Nybo of the Tabb Group in his January 2015 report, “US Options Trading 2014/2015: The Buy-side’s Insatiable Thirst for Liquidity,” 42% of the buy-side traders he surveyed said that the lack of liquidity impacted their trading in 2014. Like a surfer on a wave, during 2014, Bloomberg Tradebook saw dramatic shifts in buy-side trader behavior as they tried to adjust to the changing liquidity landscape. Traders were clearly taking greater control over their orders, trying new technologies and execution implementation strategies to get the liquidity they need. Bloomberg Tradebook’s algorithm usage statistics tell this story.   In 2014, Tradebook saw more institutions empower their traders. With traditional service and support levels and capital commitment declining, Execution Consultants guided more traders in taking greater control of their executions and working them electronically. Tradebook’s experience was consistent with the Tabb Group’s observations. Again, according to Nybo, “Asset Managers executed 31% of their total volume through electronic tools, up from 15% in 2013.” Hedge fund share of volume traded electronically in 2013 / 2014 stayed constant at 62-63%. In response to growing frustration over the appearance that liquidity faded when they sought to sweep the market, traders increasingly picked their spots—making others act on their liquidity rather than aggressively trying to chase the market. Additionally, passive algorithms are good at extracting liquidity in illiquid options. In 2014, 43% of orders were passive, a 49% increase from the 29% of orders that were passive in 2013. Trader patience, not surprisingly, was also reflected in the shift of the algorithms used. In 2014, algorithm usage remained strong—at Tradebook, about 44% of trader’s single (leg) option orders and more than 62% of complex multi (leg) option orders used an execution algorithm. (Figure 1) The use of pegging to the bid/ask, dynamic delta or volatility doubled during 2014, while the use of more aggressive Discretion algorithms with intelligent Trigger and Fire Quantity dropped about 25%. The use of automated benchmark algorithms plummeted. TWAP, for example, dropped from 15% of orders in 2013 to around 4% in 2014. Figure 1 The U.S. options market has 12 (soon to be 13) exchanges. Liquidity is extremely well-distributed or fragmented (Figure 2), with no options exchange clearly dominating the  market. Traders’ response to  being traded around—having their order represented on one option exchange only to have trading occur on a different one—has been to leverage tactical algorithms that “work” orders. For example, Bloomberg Tradebook’s B-SmartSM was the most used algorithm in 2014 by U.S. option traders—with almost 23% of all orders leveraging the algorithm’s intelligent liquidity heat-mapping and dynamic order posting/positioning capabilities to seek more optimal placement of orders on the most active exchanges. B-Smart intelligently layers orders and posts liquidity simultaneously on multiple (most active) exchanges. Additionally, when one exchange becomes active in filling an order, B-Smart will pull the child orders represented on less active exchanges and (re)post the liquidity on the more active ones. Figure 2 For more information on Tradebook’s US options platform click here
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Two Weeks Into the Market Structure Experiment… Results are Mixed

Gary Stone, Bloomberg Tradebook

Feb 19, 2015
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On Monday, February 2, Nasdaq, on its “classic” or NSDQ exchange, unilaterally lowered access fees on 14 stocks in a test of US market structure. The 14 stocks are comprised of 7 Nasdaq-listed and 7 NYSE-listed securities. As stated in our 1/30 blog, the change is as follows: • Take Fees reduced from 30 mils to 5 mils; • Rebate reduced to: 4 mils if you add displayed liquidity; 2 mils if you add mid-point liquidity; and 0 mils if you add liquidity using a non-display order type This is an interesting experiment. From our point of view, the questions this pilot is addressing are: (1) Does an exchange unilaterally lowering rebates negatively affect market share? (i.e., Is the prisoner’s dilemma real? ) (2) Does lowering take fees drive volumes (in these stocks) back onto the lit markets? Two weeks into the program the results are mixed and it is way too early to draw conclusions. Nevertheless, it is fun to watch. This is what the data says.   Bloomberg Tradebook, using data from the Bloomberg Professional® service during the period of January 5-29, 2015, reviewed total market share and continuous-trading market share. We created two data sets because we wanted to remove the effects of auctions. The program did not change auction pricing. Furthermore, since the listing exchange’s opening and closing auctions set the official open and closing price, there is a monopoly on everything associated with the auction event (volume, market data, etc.) so it had to be removed to judge the true impact of the access fee experiment. As stated above, the “pre-change” data set measures volume and market share from January 5-29, 2015. We considered using the prior 6 months but decided that recent history would be a more accurate benchmark for change. Let us know if you disagree – it’s easy to expand the data set to include more data for the “pre-change” benchmark. The “post-change” data set measures volumes and market share change starting from February 2, 2015, the effective date of the pricing change. The end date for the data displayed below is February 12, 2015. Nasdaq market share is declining. In fact, as we move farther away from the start date, market share declines appear to be accelerating – even though it is only 14 stocks, are participants doing the work, coding the changes and slowing coming on-line? What is very interesting is that off-exchange market share is also largely declining (Figure 1). Figure 1. NYSE’s Arca, across the board, appears to be the primary beneficiary with BATS and Edge X also getting some benefit depending upon the stock. Figure 2. Again, it is early to conclude anything from this limited data. Trends do take a while to develop. Participants take time to recalibrate their systems. However, Nasdaq should be commended for doing this experiment. Nasdaq is taking a chance with a potential impact to revenues. It is important to note that revenues are not impacted by Nasdaq simply changing the structure / level of their access fees. The spread between the maker and the taker fee is what matters. On the exchange, for every buyer there is a seller so Nasdaq is probably (our conjecture) retaining its effective spread. When market share gets clobbered, Nasdaq will experience revenue decline. The data thus far indicates that Nasdaq is losing money on this experiment. We hope that this pilot goes on for a few more months. There are two issues we are concerned about. Bloomberg Tradebook contended both in our December 2014 Tick Pilot comment letter and at Representative Garrett’s May 2013 Market Structure Roundtable  that the rise of off-exchange trading may be a by-product of exchanges being too expensive at a 30mil take fee. Why haven’t exchanges lowered the access fee – or tried a pilot like Nasdaq? We believe that the SEC created a prisoner’s dilemma in 2004 with Regulation NMS. The market would be better off if they lowered the taker fee – but no one will unilaterally do so for fear of losing market share. If the sample proves large enough to be meaningful, and  Nasdaq shows that the prisioner’s dilemma is real, then after a few months, we hope that the rest of the exchanges will (or the SEC will require the exchanges to) match Nasdaq’s pricing to see if liquidity migrates to lit venues (e.g., off-exchange market share declines). Some have argued that, in its current form, Nasdaq’s experiment could be used as a test for a Trade-At rule. We completely disagree.  Nasdaq’s test is not a test to see if a Trade-At rule needed. Even if liquidity in these stocks migrates back on the lit venues, it is not a valid test. Rather, in its current form, the pilot is only a test of what happens to market share and whether or not there is a “prisoner’s dilemma.” In other words the SEC has created a situation with the access fee caps and they need to intervene – adjust the rebate cap – in order to solve it. Only an expansion of Nasdaq’s experiment – applying it to all exchanges – would be able to prove if a complicated Trade-At rule is necessary. In our opinion, lowering the access fee cap should be a first step (a simple first step) before instituting Trade-At.
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GMEX – going to eleven?

Steve Grob, Fidessa

Feb 19, 2015
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The announcement that new derivatives exchange GMEX has received investment from SocGen reopened the debate here as to the future of rates trading and who the likely winners are going to be. Reliable data is hard to come by on exactly what is happening to OTC volumes and where they are going. Such evidence as does exist seems to show a steady increase in SEF volumes, although this is masked by several anomalies, including volume which is still transacted manually but reported to look like electronic volume. Venues like ERIS, which offer swap futures also report steadily rising volumes too. Some things are becoming clearer, however. When a buy-side is looking to hedge a particular period on a rate curve, it will be able to select from a range of different but economically similar instruments. At one end of the spectrum are regular futures, which are cheapest and easy to understand, but lack precision in terms of start and end dates. At the other end will be custom OTC contracts which, conversely, are the most expensive but can be matched precisely to a client’s exact requirement. The question that remains, then, is what happens in the middle? With its launch of swap futures, the LSE is showing how it thinks it can offer the optimum blend by allowing users to offset margin within its existing pool of OTC open interest held at SwapClear. But, to paraphrase Spinal Tap’s Nigel Tufnel, GMEX aims to “go to eleven” by offering the convenience of a future and yet the precision of a swap. The challenge, of course, will be whether compliance folks in the buy-side understand – let alone approve – the concept. It may just be less hassle for them to go to the regular futures market instead. Education of the buy-side, therefore, will be a critical success factor for new venues. This was the case in Europe, with the rise of the MTFs in the cash equities world. Without natural liquidity, HFT folks like Virtu will be left twiddling their thumbs. The crucial lesson, then, is that to be successful, any new venue needs a mixture of participants in the same way that ecosystems in nature support and require a mix of participants too.
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Interview

Market Surveillance, it’s a Matter of Risk Management

Feb 23, 2015
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Technology is making a sweeping transformation in trading styles from the accelerating use of algorithms. The increased automation overlaid on a complex market structure provides fertile ground to a broad spectrum of market manipulation and abusive behaviors. This has set the stage for increasing regulatory oversight where the burden of proof rests with market participants to demonstrate control over their trading activity. Surveillance consequently becomes a matter of risk management.

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FIX Trading Community London Regional Event panel discussion: MiFID II

Dec 09, 2014
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The FIX Trading Community held their London Regional Meeting at the BT Centre on December 2nd, with over 100 members from the buy- and sell-side, as well as vendor communities, to discuss latest thoughts on the MiFID II consultation process and the impact of regulation.

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Discussing Risk Data Strategy: An Interview with Philip Chamberlain

Sep 04, 2014
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Risk data is an area that has been largely overlooked for many years. Today the situation is different and the area is facing increasing regulatory scrutiny, as Systemically Important Financial Institutions (SIFIs) rush to comply with the Basel 239 Principles for Effective Risk Data Aggregation and Risk Reporting. An enterprise’s success depends on its ability to analyze risk data efficiently and effectively, in ways that uncover both risks and opportunities. Being able to extract and escalate critical risk information is nearly impossible without a robust risk management framework supported by a strong technology infrastructure.

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Survey

The 2015 Algorithmic Trading Survey

Trading Survey THE TRADE invites you to participate in The Algorithmic Survey for 2015, now in its 8th year running. If you are trading electronically, we would appreciate your input on the use of algorithmic trading services. To express our thanks, all participants are eligible for a free one-month online subscription to thetradenews.com. Please rate your algos by completing the online questionnaire available here..

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Research

Liquidity Barometer: Asia Pacific Q3 2014

ITG

Jan 14, 2015
Liquidity Barometer: Asia Pacific Q3 2014

In Asia’s equity markets, liquidity experienced an upward trend during the third quarter of 2014 according to ITG’s Asia Pacific ‘Liquidity Indicator’. The indicator had fallen for three consecutive months in the second quarter, declining from 1088 at the end of March to 1038 at the end of June. It perked up in the third quarter, rising to 1070 in August and September.

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Video showcase

Corvil working with RSJ

Corvil Watch Michal Sanak, CIO, RSJ Algorithmic Trading discuss working with Corvil. read more

Corvil working with Tradition

Corvil Watch Yann L'Huillier, CIO, Tradition and Alex Krovina, CTO, Tradition discuss working with Corvil. read more

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