Latest Blog Posts

Big Data at the SEC

Apr 17, 2014

Figure 1 Quote Lifetimes for Q4 2013 One thing everyone agrees on when it comes to the U.S. Equity market structure is that it’s incredibly complex. The SEC, under the Commissioner Mary Jo White’s leadership, has had an admirable approach to tackling the complexity of the market and driving constructive debate surrounding its issues. Tradebook’s mantra of “transparency drives trust” is consistent with that of the SEC; this approach allows the industry to glean insight about market behavior. read more

Any port in a storm?

Apr 16, 2014

With the European Parliament’s formal adoption of MiFID II in yesterday’s plenary session, the next fundamental industry overhaul is on the horizon. Away from all the noise around HFT, I’ve been looking at the new trading obligation for investment firms that requires them to undertake all trades in shares on a regulated market or MTF, or as a systematic internaliser (SI). Any firm dealing on its own account to execute client orders will be required to register and trade as an SI, subject to certain threshold criteria yet to be defined by ESMA, and brokers crossing client orders will be obliged to trade on-venue, rather than report those trades as OTC. read more

Are Comms Rooms Fit for Purpose?

Apr 07, 2014

Discussions at this year’s Trade Tech conference are set to debate a wide range of subjects important to capital markets.  In addition to the inevitable debates around high frequency trading (HFT) or transaction cost analysis (TCA), we can anticipate discussion about reference data, socially-powered algorithms and multi-asset execution and order management systems.  A common thread will be sheer volume of data that each of these practices either uses or produces.  References to terabytes of data are being replaced with petabytes and even exabytes (1 million terabytes). read more

Algo identifiers galore

Apr 04, 2014

With the German algo ID mandatory from 1st April, I was prompted to scan the latest MiFID II texts in this regard. Member states must require exchanges to be able to identify the different algorithms used for generating orders (Art. 51.6) which, on a high level, sounds just like the German HFT Act. To make things even more complex, MiFIR requires investment firms to identify in their transaction reports the “computer algorithms [.…] responsible for the investment decision” (Art. 23. read more

Maybe markets are unfair, but are they rigged?

Apr 02, 2014

The publication of Michael Lewis’s new book Flash Boys has reignited the whole HFT/dark pool debate (actually, maybe it’s never really gone away). The point people seem to continually miss in this debate is the distinction between “unfair” and “rigged”. To me the term rigged implies some malevolent conspiracy between certain members of an ecosystem aimed at taking advantage of an identified target. In this instance, the ‘patsy’ in question is supposed to be the retail punter and the ‘conspirators’ are the electronic trading firms that exploit the little guys’ inability to act as quickly as they can. read more

SEC probes price tiering in the bond market

Apr 02, 2014

This Bloomberg News story has been making the rounds and garnering a lot of feedback. Here is my take. First, it is important to note that under the 1992 Government Securities Act, the SEC regulated the “physical” bond trading of U.S. munis and corporates on the alternative trading systems (ATSs) where Treasuries are traded. The news reports suggest that the SEC has an issue with price tiering – where some customers may receive preferential prices for same number of bonds. This appears to be similar to the concern that the SEC had with market makers in the OTC equity market (NASDAQ stock market) prior to 1996 Order Handling Rules. read more

What role for OTFs?

Mar 27, 2014

Last week the CFTC published another no-action letter with respect to trading swaps on a European MTF. At the heart of the discussion is the question of whether European MTFs can be considered as equivalent to US SEFs. Given that a number of banks within the scope of Dodd-Frank also need to trade swaps within Europe, this is an important issue. In Europe, the discussion around swaps trading currently focuses on MTFs, with no mention (yet) of Organised Trading Facilities. OTFs are introduced with MiFID II to capture all different types of trading and to fulfil the G20 commitment to move OTC derivatives, where possible, to electronic trading venues. read more

Widespread adoption of cloud-based financial technology on the horizon?

Mar 27, 2014

A recent survey from Oracle, Accenture, and others predicts the imminent and widespread adoption of cloud solutions by financial services firms!? Well, better late than never… As usual, large organizations like those conducting the survey are the last to jump on the “trend” bandwagon while small organizations have already gone “all in” on the cloud. The truth of the matter is that the cloud is already a mature and widely adopted technology delivery platform within the financial industry. read more