Latest Blog Posts

Algorithmes de type franḉais

Anne Plested, Fidessa

Oct 16, 2014
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Just as we’re all getting used to the idea of having to flag algos on an EU-wide basis under MiFID II by 2017, the French regulator recently published further guidance under the French banking bill that came into force in July last year. Amongst other things the French bill targets algorithmic trading/HFT and this recent notice calls for French entities to notify the regulator if they are using automated processes to send orders to exchanges. The provision of more meaningful data for the regulator is one of the promises of MiFID II, but questions are already being asked about algo identification and jurisdiction. read more

Four Factors Driving Enlightenment & Big Data Adoption in Regulatory Compliance

Ahson Pai, SunGard

Oct 14, 2014
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Just as Buddhist monks endure frigid Himalayan conditions in the pursuit of enlightenment, the financial services industry has weathered multiple financial and regulatory storms yet still awaits enlightenment. The emergence of recent disruptive technologies may help; however, navigating the various complexities internal to banks’ global operations and regulatory nuances are of critical importance on the path to enlightenment. Certain disruptive technologies – such as complex event processing (CEP) engines, machine learning and predictive analytics using emerging big data technologies such as Hadoop, in-memory or NoSQL – illustrate a trend in how firms are approaching technology selection to meet regulatory compliance requirements. read more

Hedging swaps with futures: a thing of the past?

Mark Brennan, Fidessa

Oct 09, 2014
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As the industry continues to speculate on the trajectory of the swaps market, what’s in store for the final package trade exemption expiring on November 15, 2014, when packages consisting of swaps against futures (so-called ‘invoice spreads’) must be traded on a SEF? The problem with invoice spreads is that the futures component (typically treasury note futures) is ‘owned’ by, and must be executed on, the CME while the swap component (e.g. a 5-year fixed/floating interest rate swap) must be executed on a SEF. read more

OPTIMAL ETF TRADING: TRADEBOOK ETF RFQ (PART 4)

Kiran Pingali, Bloomberg Tradebook

Oct 08, 2014
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ETFs exhibit considerably different characteristics to common stocks in terms of exchange displayed liquidity, volume, volatility and market impact. What do all these differences add up to? Execution Brokers should use a combination of ETF-specific algorithms to tap secondary-market liquidity, and an electronic solution RFQ based solution to tap primary-market liquidity from market-makers and authorized participants as illustrated by Figure 1.   Figure 1: Tapping secondary-market liquidity and primary-market liquidity ( from market-makers and Authorized participants). read more

The next compliance challenge: fostering a culture of good conduct

Robert Powell, Etrali Trading Solutions

Oct 08, 2014
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Few industries have faced sterner criticism over culture and conduct than financial services. Unfortunately, the growing regulatory burden means this challenge is more complex than ever. The Libor scandal, for instance, highlighted the nuanced difference between regulatory non-compliance and poor conduct; between breaking rules and breaking the spirit of the rules. But a change could be on the cards. Financial services will always involve an element of risk management, but the industry is becoming increasingly aware of how their staff should conduct themselves and how they can reinforce this through company culture. read more

Whatever happened to the surveillance beast?

Christian Voigt, Fidessa

Oct 03, 2014
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When Level 1 of the Market Abuse Directive (MAD) II was discussed two years ago there was talk of ESMA potentially establishing a massive centralised database for cross-market monitoring, aka the surveillance beast. Interestingly, this idea didn’t make it into the final MAR text. Instead it calls on each regulator to have in place the necessary tools for effective cross-market order book surveillance and to co-operate with each other. Also, the European Commission has to submit a report by June 2019 on the possibility of establishing a Union framework for cross-market order book surveillance. read more

European market structure, HFT, and routing practices & metrics

Gary Stone and Kapil Phadnis

Oct 02, 2014
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Earlier this month, we attended Institutional Investor’s International Trader Forum Berlin and led a discussion around the FCA, HFTs and actionable best execution metrics specific to the European market. Order-routing practices are on the radar of regulators, buy-side institutions and brokers. The specific concern is that broker order-routing practices may not be in the best interests of institutional clients. There is a shift from looking solely at traditional TCA to a new breed of metrics focused on order handling. read more

Clear danger ahead

Steve Grob, Fidessa

Sep 26, 2014
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As the regulators push us towards centralised clearing for OTC derivatives they may actually be making the world distinctly less safe. At face value it makes obvious sense; if one party defaults the CCP steps in. As always, though, the problem lies in the detail but this time not too far below the surface. The first problem concerns the efficient use of margin. As CCPs start to uncouple from their parent exchanges and compete more directly with each other it’s only natural for them to start trying to differentiate more. read more