Latest Blog Posts

Five Steps To Transparency

Clare Witts, ITG

Sep 02, 2015
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Commission Management is increasingly important in Asia, not because of local regulation but because it makes good business sense Although the use of dealing commissions to buy research and other services is under controversial scrutiny in Europe, most Asia Pacific markets still operate in a fully bundled way. This takes the form of brokerage rates that combine research with execution, and regulation, if it exists, that still refers to soft dollars – a term that has fallen out of favour in the US and Europe. read more

Behind Stock Price Movement, Part III: Explanatory Power of the Model

Sanghyun Park & Kapil Phadnis, Bloomberg Tradebook

Aug 28, 2015
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We built a model that explains stock price movements in terms of four factors: quote imbalance, lit and dark trade imbalances, and market return.  But, how good is this model?  To quantify the explanatory power of the model, we use the statistic known as R2, which measures how much of the variance is explained by the model.  For example, R2= 0.6 means that the model explains 60% of the price movement. Among the 42 US stocks that we studied, our model generally produces high R2 values, although we do see quite low values for a few stocks. read more

All together now…

Anne Plested, Fidessa

Aug 28, 2015
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A common approach will be key to minimising the fallout of MiFID II implementation, particularly around the extra data required for record keeping and transaction reporting and for algo identification. I’m hopeful that the ‘final’ Technical Standards due next month will have at least dropped requirements to include static data. Do we really need multiple systems storing and passing around redundant static instrument, client and trader data? ESMA only defines content and format at the point of report submission, recognising in December’s draft RTS 34 that “prescribing a specific format in which the records should be maintained might result in operational difficulties for trading venues. read more

Nasdaq’s TRF Disruption Didn’t Just Hobble Dark Pools… It Did Much More Than That

Gary Stone & Ray Tierney, Bloomberg Tradebook

Aug 27, 2015
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Recent press reports that the outage at the Nasdaq TRF on August 4th “hobbled” the dark pools is a simplistic meme that doesn’t address the wider impact the outage had on the equity market. The NASDAQ TRF does not just serve the dark pools, it serves all off-exchange OTC equity activity including wholesalers interacting with retail order flow and regional broker-dealers. Many of these regional broker-dealers use the Bloomberg Trading Solutions’ Sell Side Order Management System (SSEOMS) to manually cross stock “upstairs” from their market making inventory or sales-trading activities. read more

Get serious about this blockchain thing

Chris Skinner

Aug 27, 2015
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Having noted that most bankers are now saying bitcoin bad, blockchain good, here’s a nice set of quotes I’ve been gathering of what banks are actually saying: “At its core, Bitcoin is a decentralized protocol that enables exchange of value among parties around the world, giving it the potential to alter the financial services landscape,” Jay Reinemann, BBVA Ventures executive director;  The Bitcoin blockchain “is an opportunity for Wall Street to streamline some operations that are pretty antiquated”, Duncan Niederauer, former CEO of NYSE Euronext “Money at its core is simply a ledger for keeping track of debts and Bitcoin is truly the best iteration of a universal ledger we’ve ever seen. read more

The Dragon chasing its own tail

Steve Grob, Fidessa

Aug 26, 2015
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Few can have missed the carnage roiling Chinese stock markets recently. What’s interesting though is the emerging hubris from Western media that this is due to the intersection of communism and capitalism. The problem, they say, is that the purpose of markets is to allow free and open price discovery. However, they argue, a command economy like China can afford to tamper with this process and compel participants (like its state pension fund) to intervene in markets. The net effect is that when these interventions halt the slide, the millions of domestic retail investors borrow more money and buy in again in the vain hope of recovering their losses. read more

Lightening the load

Christian Voigt, Fidessa

Aug 26, 2015
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Technology is meant to make life easier. Be it a smart phone, TV or fridge, or even a smart water kettle, they all promise a simpler life. Whether they deliver on that is another matter entirely and the idea that more technology always equals better is debatable, particularly considering that my new bathroom scales tweet my weight every time I step on them. Like the ongoing trend of trading automation, the need for smart solutions also applies to market surveillance, much of which is already automated. read more

Behind Stock Price Movement: Supply & Demand in Market Microstructure and Market Influence

Sanghyun Park & Kapil Phadnis, Bloomberg Tradebook

Aug 17, 2015
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How can we measure the supply-demand imbalance in the stock market and how much does that affect the movement of the stock prices? In a recent Journal of Trading paper, we studied short-term stock price movements in the U.S. equity market.  The movement of a security price is mainly driven by the imbalance between supply of and demand in the marketplace.  We investigated four different factors that might impact the price movement. Quote imbalance in the central limit order book. read more