Latest Blog Posts

U.S. Options Buy-side Behavioral Responses to Shifting Liquidity

Gary Stone and John Gardner, Bloomberg Tradebook

Feb 24, 2015
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Regulations are having a negative effect on the liquidity of U.S. equity and index options. As banks and traditional market makers deleverage and decrease capital commitment to facilitate trades, it is becoming more and more challenging for the buy side to find the other side. According to Andy Nybo of the Tabb Group in his January 2015 report, “US Options Trading 2014/2015: The Buy-side’s Insatiable Thirst for Liquidity,” 42% of the buy-side traders he surveyed said that the lack of liquidity impacted their trading in 2014. read more

Two Weeks Into the Market Structure Experiment… Results are Mixed

Gary Stone, Bloomberg Tradebook

Feb 19, 2015
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On Monday, February 2, Nasdaq, on its “classic” or NSDQ exchange, unilaterally lowered access fees on 14 stocks in a test of US market structure. The 14 stocks are comprised of 7 Nasdaq-listed and 7 NYSE-listed securities. As stated in our 1/30 blog, the change is as follows: • Take Fees reduced from 30 mils to 5 mils; • Rebate reduced to: 4 mils if you add displayed liquidity; 2 mils if you add mid-point liquidity; and 0 mils if you add liquidity using a non-display order type This is an interesting experiment. read more

GMEX – going to eleven?

Steve Grob, Fidessa

Feb 19, 2015

The announcement that new derivatives exchange GMEX has received investment from SocGen reopened the debate here as to the future of rates trading and who the likely winners are going to be. Reliable data is hard to come by on exactly what is happening to OTC volumes and where they are going. Such evidence as does exist seems to show a steady increase in SEF volumes, although this is masked by several anomalies, including volume which is still transacted manually but reported to look like electronic volume. read more

On a quest for answers in Paris

Christian Voigt, Fidessa

Feb 18, 2015

Travelling to Paris today for tomorrow’s open hearing on MiFID II, the two issues I’ll be mulling over on the Eurostar will be record keeping for trading venues and transaction reporting. Both could potentially trigger significant changes in front and middle office workflows for many trading firms. At the core of my concerns lies the requirement for trading venues to store their members’ own clients’ identifications (RTS 34), used by the member for transaction reporting (RTS 32). read more

Who is Winning the Algo Race?

Robert Kay

Feb 13, 2015
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As the deadline for completion of this year’s algo survey nears, competition remains fierce to see who will end up with the largest number of responses. While achieving high scores from the most important clients counts for much in the survey results, an old-fashioned desire to simply show more clients remains evident among many providers. Of course the number of banks that have a realistic chance of making the number on slot is limited. However that does not diminish enthusiasm among other providers to show as well as possible. read more

Spread Revisited: How Size Adjusted Spread Mertics Can Deliver FX Trading Insights

Yossi Brandes, ITG

Feb 11, 2015

How informative are spreads for market participants who engage in FX trading? Can proper spread monitoring and analysis further enhance the investment and trading process? If so, how exactly? Can this relatively "old", sometimes overlooked metric, provide insights into important factors like the likelihood of execution and the cost of liquidity in this OTC market? Can spread analysis support real trading decisions (for example, trading now vs. later)? We find that a relatively simple but enhanced spread metric, size adjusted spread, can help answer these questions. read more

One step forward, one step back

Christian Voigt, Fidessa

Feb 06, 2015

Market making, at its core, is a simple exchange where the market maker gives immediate liquidity and takes the bid/ask spread in return. This is set to become much more complicated in MiFID II as ESMA is mandated to introduce market making obligations. Under ESMA’s latest draft investment firms using algorithmic trading for market making for at least 30% of the available trading hours will be required to enter a market making arrangement with the venue which includes a quoting obligation for 50% of the trading hours. read more

The continuing rise of Bloomberg EMS

Robert Kay

Feb 04, 2015
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A key factor in the growth of electronic trading has been the development of multi-broker execution management systems.  The early origins of these systems were proprietary offerings developed by brokers, initially for hedge fund clients. However that model passed into obscurity some years ago, as hedge funds broadened their prime broker relationships and long only fund managers adopted algorithms and electronic trading more generally. As in previous years the 2015 Survey of Algorithmic Trading asks respondents to indicate whether they use an EMS and if they are willing, to name those they use. read more