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Object Trading to Provide Global Trading Infrastructure for TradingScreen Clients

Jun 30, 2015

Object Trading, the provider of a global, multi-asset trading infrastructure today announced that TradingScreen, the provider of liquidity, trading and investment technology via SaaS, has integrated with Object Trading’s global DMA service platform. The combination of two independent suppliers of award-winning trading solutions presents end clients with new opportunities for growth.

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Scila Announces Deal with Irish Stock Exchange (ISE) – To Provide State of the Art Surveillance Technology

Jun 30, 2015
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The Irish Stock Exchange (ISE), the Dublin-based exchange, has chosen to implement Scila Surveillance, provided by the leading independent Stockholm-based surveillance technology provider Scila. The ISE will deploy Scila Surveillance for the surveillance of their trading on its markets. Deutsche Börse will take over the hosting and support of the Scila surveillance infrastructure, which will be located in Frankfurt.

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Fidessa unveils new low-latency DMA platform

Jun 30, 2015

Fidessa group plc (LSE: FDSA) today announced the launch of its new low-latency DMA platform that provides brokers with high-performance, scalable and consistent access to global equity and derivatives markets. Built on Fidessa’s latest next-generation technology and delivered as a managed service, the platform helps firms reduce cost and improve efficiency by outsourcing the commoditized aspects of their market access infrastructure.

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Latest Blog Posts

Ranks of cross-border issues swell

Christian Voigt, Fidessa

Jul 01, 2015
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Payment for research and unbundling has been on the European regulatory agenda for some time. It has now escalated to a cross-border issue after concerns were raised with the US SEC by a senior US politician worried about the impact on US growth industries. The recent past gives us plenty of examples of cross-border issues from both sides of the Atlantic – the US person under Dodd-Frank, the proposed QMTF for European firms, the recognition of US CCPs under EMIR, or the question of whether the “exemption from the exemption” implies that all DMA users across the globe fall within the scope of MiFID II. This list is likely to grow once MiFID II details are finalised within the next couple of months, as local regulators tussle with the reality of global markets. However, as long as the political will to recognise equivalence between jurisdictions is lacking, and common sense is not allowed to prevail, rules will only get more complex. CFTC Commissioner Giancarlohit the nail on the head when commenting on the recently proposed rules for cross-border margins, cheerfully pointing towards the expected growth in the US economy due to “thousands of billable hours that will be expended by lawyers and other professionals, who will have to read, interpret and respond to this tangled regulatory construct “. Something of a boost to economic growth, but possibly not the kind we were hoping for.
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Catch that second: Temporal Shifts and System Stability

Mark Brennan, ITRS Group

Jun 30, 2015
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Tonight’s addition of a single second to system clocks will no doubt underwhelm the world, much as Y2K did – systems will probably not fail (although the last time a leap second was added – in 2012 – there were in fact system outages).  But this fascinating phenomenon, whereby “Coordinated Universal Time” (UTC) is tweaked so that it more closely matches mean solar time (so-called “UT1”) – based on the earth’s rotation – potentially disrupts the rational determinism of global computer systems. Indeed, one major operating systems vendor reminds us that “as 23:59:60 does not exist in Unix's implementation of UTC then the linux kernel inserts the leap second by stepping the system clock back by one second on the first clock update after 0:00 UTC”.  Of course systems stop and start all the time, software is patched, data is loaded, or archived, and time marches on.  But we depend on the persistence and consistency of the technology we use.  A shift in time, even by a second, flies in the face of the finite measurability of software behavior. Stability in financial technology has become a big focus of regulators.  In the US the SEC has mandated monitoring and stability at the exchange level in Reg SCI, and there are similar provisions in MiFID II.  Operational stability does not inspire the kind of heated debate that, say, derivatives regulation does; but it is now part and parcel of the culture and working technology environment of financial institutions, and also part of the assumptions (explicit and implicit) by regulators of how institutions should behave. Financial institutions are prepared for tonight’s leap second (many exchanges will close their late trading sessions in preparation), and when we awake tomorrow we will be none the wiser that time has shifted.  But this event reminds us that we can’t take system stability for granted, and that complex systems need oversight.  Disruptions can be sudden and abrupt, or more gradual:  without visibility into technology systems (whether simple system health or more complex business insight), institutions are not prepared for the dynamic shifts in the environment around them.
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Liquidity and Fixed Income Trading — Trends to Keep in Mind (Part 2)

Ivy Schmerken, FlexTrade

Jun 29, 2015
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Corporate Bonds Electronic bond trading is in the spotlight as traders and investors focus on a potential liquidity crunch in the U.S. corporate bond market, setting the stage for an influx of fixed income trading platforms to match buyers and sellers. As dealers have pulled back from risk-taking, market participants are looking to electronic platforms for alternative sources of liquidity. But why is this trend grabbing so much attention and headlines?   The reason is quite simple – uncertainty. While dealer liquidity in the corporate bond market has decreased in response to regulations, 76 percent from the peak of 2007 through March of 2014 (reported Bloomberg News), corporations have taken advantage of low rates to issue more bonds. Due to this boom in corporate bond issuance, institutions are now holding 90 percent of this investment grade and high-yield paper. If the Federal Reserve were to raise rates, asset managers could move in the same direction, triggering a massive sell-off. Mixed Signals Yet, none of this may happen since the bond market is sending mixed signals about liquidity. Corporate bond trading activity surged in the first quarter of 2015, according to the Securities Industry Financial Markets Association.  Investment Grade average daily trading volume increased 22.3 percent from 4Q’14, and was up 9.6 percent from the first quarter of ’14. High Yield average daily trading jumped 18.2 percent from the fourth quarter and showed a 25.4 percent increase from the same year-earlier period. But the gains in fixed income activity began to drop in March, reported  The Wall Street Journal in “Heard: Bank Trading Gains Take Spring Break.” “This continued into April when average daily trading volume in the U.S. corporate bond market declined almost 13 percent compared with the previous month,” reported The Wall Street Journal, which also contributed to a decline in the trading of Treasuries. All of these seemingly contradictory issues are creating some anxiety in the bond market, which is why the industry is backing many competing initiatives to boost electronic trading. Electronic Trading So far, electronic trading has not captured as much volume in fixed income as it has in more homogenous and liquid asset classes like equities and foreign exchange. Though pundits expect the migration to continue gradually,  corporate bond trading – which is mainly occurring over phone and email messages today­– is playing catch-up by comparison to other fixed income and currency-related asset classes. A  November 2013 U.S. Treasury Department report on secondary market trading estimated that 50 percent of the US Treasuries’ average daily volume  would be electronic in the dealer-to-client (D2C) market by 2015, versus estimates of 80 percent in FX, 90 percent in credit default indexes (CDX) and 15 percent in corporate bonds. Other sources estimate that 15-20 percent of IG and HY bonds are currently traded electronically. By and large the majority of D2C volume executed electronically is occurring on MarketAxess, which accounted for 15.6 percent of the volume in high grade and 5 percent of high yield in TRACE-eligible securities, according to information on the firm’s web site. But the tide could be turning. At present, there are as many as 30 systems offering different trading protocols to address this issue.  However, the question is: will the electronic-model gain enough traction to fill the liquidity gap? And will it increase fast enough to avert a crisis? Here are six factors impacting liquidity in the bond market that could have implications for the future of e-bond trading. 1. Lack of Transparency Some of the hurdles have been the lack of transparency – unlike equities or bond futures listed on exchanges, there is no bond ticker. Investors need to find the price of where a bond last traded.  “The problem is where is the bid, and where is the asked? We don’t know,” says an industry source. While FINRA launched TRACE in July of 2002 to disseminate consolidated information on secondary trading in the corporate bond market, bonds have primarily been a quote-driven dealer market in which brokers provide bids and offers to customers on a disclosed basis. 2. Limited Matching The bond market is a heterogeneous asset class, with tens of thousands of issues and different coupon rates. At its peak in 1977, the U.S. stock market had 8,800 companies – today it has 5,008. This is far less than the U.S. corporate bond market, which in 2013 had 37,000 publically traded, TRACE-eligible issues.  “The sheer number of issues greatly reduces the probability of multilateral trade matching,” according to McKinsey & Co. in a whitepaper entitled, “Can e-Trading Revitalize Corporate Bonds.” 3. RFQ Method Electronic trading has gained traction for the smaller deals ($1 million and under), but the prevailing method relies on dealer balance sheets. The dominant form of e-trading allows the buy-side to submit requests for quote (RFQs) to multiple dealers and to automate workflows of smaller trades. Critics say the RFQ method works for liquid bonds but can leak information and lead to high costs for larger trades or illiquid bonds. According toHoward Pein, CEO of Codestreet LLC, this “won’t move the needle” for their larger trades. 4. Technology and Liquidity Technology has the power to shake up the status quo.  The first generation of trading platforms came out to improve efficiency and workflows for the buy side. For instance, FlexTrade’s FlexTRADER EMS provides the buy-side with fixed income functionality that handles dealer price feed integration for all bond types.  There is also a new wave of startups looking at solving liquidity problems. New entrants such as Bondcube, Electronifie, TruMid, see an opportunity to address the liquidity gap by using different trading methods, such as anonymous matching, central limit order books (CLOBs), block negotiation, and auctions. Firms such as Liquidnet brings experiences from equities block-trading in dark pools, while  Market Axess is expanding its toolkit with OpenTrading, a new protocol allowing the buy side to trade with each other. Others contend that electronic trading in itself is not a panacea to the liquidity problem. “Electronification by itself doesn’t imply more liquidity,” said CodeStreet’s Pein. “It’s unlikely that all these new systems are going to gain traction on the basis of solving the liquidity issue.” Pein sees potential in using algorithms to find the other side of a trade by searching dealer inventories for undiscovered liquidity and connecting clients through a dark pool. Rather than change the market structure, Pein maintains that dealers should remain central to the liquidity discovery process. 5. Keeping the Status Quo Many traders are comfortable with the status quo. Buy side traders may have no incentive to change the way they trade if they are currently getting liquidity from their trusted dealers. Traders prefer to pick up the phone to negotiate the more complex block trades with trusted dealers who provide them with market color and prices. But if the market should turn, they may have no choice but to explore alternatives. As dealers pull away from risking their capital to warehouse inventory, firms need to unlock the liquidity from across the market. 6. Project Neptune To boost corporate bond trading in the U.S. and Europe, banks and investment managers are collaborating onProject Neptune, a technology effort using the FIX protocol to develop a standardized messaging system. According to Bloomberg News, the plan is to allow traders to advertise bonds without revealing buyers and sellers. Conclusion Despite all the media hype surrounding liquidity and all the new platforms offering solutions, e-trading in the bond market is still in its infancy. It will take time for asset managers and hedge funds to test drive the new systems.  While the industry can expect some growing pains, it remains to be seen how much volume shifts to e-bond trading.
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Interview

Stephane Meslet discusses how Misys is aiding the buy-side

Jun 01, 2015
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ATMonitor speaks with Stephane Meslet at TradeTech Paris 2015. Stephane discusses some of the main challenges currently facing the buy-side and how Misy's is aiding clients in implementing the right solutions.

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Avelacom's Aleksey Larichev talks to ATMonitor

May 11, 2015
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ATMonitor talks with Aleksey Larichev, Director of Business Development at Avelacom. Speaking from TradeTech Paris 2015, Aleksey discusses Avelacom's low latency solutions to markets across Europe, Asia and Russia.

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Linedata's Robin Strong discusses the regulatory issues in trading emerging markets

Apr 27, 2015
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With more buy-side firms looking at emerging markets, how can clients deal with the regulatory differences that they now must adhere to? ATMonitor talks with Linedata's Robin Strong at TradeTech Paris 2015.

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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

CSA & Research Usage Survey

Convergex – Westminster

May 14, 2015
CSA & Research Usage Survey

Investors report finding great value in commission sharing arrangements, with a large majority of respondents saying that CSAs provide more transparency (65%) than bundled proprietary research, and that CSAs help in achieving best execution (58%). Buyside respondents identified a variety of research types that they incorporate into their in-house process, led by independent research (90%), traditional sell-side research (85%) and industry data and access to analysts (65% each). All told, eight separate categories of research received a vote from at least forty-two (42%) of buyside survey respondents.

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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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