Latest Blog Posts

Transparency Drives Trust – Comments on Concept Release on Equity Market Structure

Ray Tierney & Gary Stone, Bloomberg Tradebook

Jul 02, 2013

Yesterday, we submitted a comment letter to the SEC regarding the Concept Release on Equity Market Structure, based on feedback from a workshop we held with members of equity trading desks from 37 asset managers who represent over $10.6 trillion. The comment period for the concept release is still open. We relayed to the U.S. regulator that in this workshop, buyside representatives expressed their desire and need for additional transparency on the handling of their equity orders. The buyside representatives were clear in their belief that they have an overriding obligation and fiduciary responsibility to their shareholders to monitor market structure and understand how their orders interact in the marketplace. read more

Anti-price discovery tax

Christian Voigt, Fidessa

Jun 28, 2013

This week saw the publication of the European Parliament’s amendments to the EU Financial Transaction Tax (FTT). As reported in the press, lower rates (until 2017) for sovereign debt and pension funds have found their way into the proposal. Unfortunately, some very unpleasant surprises crept in as well. According to the Parliament, firms engaging in high frequency trading have to pay FTT not only on successful execution transactions, but also on order cancellations! Regulators might argue that this is necessary to protect markets from harmful speculation, but taxing order cancellation is tantamount to an anti-price discovery tax. read more

How Collateral Optimization Really Works

Ted Allen, SunGard

Jun 27, 2013

The thing about hot topics is that everyone has an opinion. Collateral optimization is one of those topics.   Where collateral optimization is concerned, it seems there is consensus on the one hand and a paucity of insight available on the other. There have been a number of articles and white papers where the key message has been that collateral optimization is terrifically important. Of course, we all know this is true. Learned commentators consistently opine that collateral optimization is essential to deal with the twin problems of scarcity of high-quality liquid assets and the overall increasing demands for collateral resulting from the various strands of regulations. read more

UCITS V – the debate rumbles on

Steven Strange

Jun 24, 2013

The European Parliament vote on amendments to the UCITS IV Directive has been delayed. UCITS V, as it will be known, covers three main themes: depositary functions, regulatory sanctions and remuneration requirements. It’s the latter that no one can agree on, with bonus payment caps proving particularly contentious. Sven Giegold, the European Parliament’s Rapporteur on UCITS, asked for the vote to be postponed to the first week of July because there are continuing political differences of opinion with regard to bonus caps and performance fees. read more

Is it that time already?

Christian Voigt, Fidessa

Jun 19, 2013

It’s a little over a year since the introduction of European Short Selling regulation and already it’s time for the European Commission to prepare its review. With its report due by the end of this month, the Commission has asked ESMA to provide some technical advice. Not surprising to practitioners, but maybe to politicians, ESMA observed mixed effects on liquidity and a slight decrease in price discovery related to short selling bans. In a separate paper, the Spanish regulator concluded that the ban on short selling “seems to be empirically associated with securities markets functioning worse”. read more

Trade recs: on the fast track or stuck in the sidings?

Neil Vernon

Jun 17, 2013

The average tier one investment bank today is dealing with a very complex trade processing infrastructure.  You’d expect the infrastructure to resemble a high speed rail line fully optimised to deliver trades from execution venue to settlement in the shortest possible time. The reality is that most banks are dealing with multiple branch lines, sidings and frequent level crossings which all serve to provide significant obstacles to the journey of the average trade.  It is not unusual for trades to go through 80 or more applications from execution to settlement and along the way be subject to reformatting, reshaping and netting whilst also being amended and cancelled through a variety of bespoke processes. read more

MiFID II takes a leap forward

Anne Plested, Fidessa

Jun 14, 2013

Hurrah! Looks like the Council of the EU has finally agreed a common approach on MiFID II/MiFIR after 18 months of negotiations. Subject to EU formalities next week, yesterday’s agreement comes just two weeks before Ireland hands the Council presidency on to Lithuania. The trilogue process – European Commission vs European Parliament vs Council versions – can now get going in earnest. The pressure will be on to reach agreement on a Level 1 text by early 2014 at the latest so as to avoid running into the European parliamentary elections which were recently brought forward from June to May next year. read more

The RRP Challenge: How far have you progressed?

Bernd Richter, Capco

Jun 13, 2013

Recovery and resolution planning (RRP) - yet more valuable resource diverted to compliance? Or can it be a source of deep structural understanding and competitive differentiation? To date, some 39 separate financial institutions have been the subject of EBA stipulations to comply and provide an RRP by the end of the year. With first deadlines looming, institutions must ask searching questions and overcome challenges in the following key areas: Certainty: Defining and creating the RRP Preparation: Getting ready for smooth and predictable implementation (should this ever prove necessary) Reality-alignment: Realising this is ‘more than documentation’ Future-proofing: Adopting an approach capable of being updated as circumstances change and, crucially, one that defines a structure optimised to avoid any actual implementation in the future Strategic and commercial awareness: Leveraging all the opportunities, making RRP preparation a source of real competitive advantage as well as compliance Financial institutions must now look at RRP implications and preparations. read more