Why you’ll never be ready for MiFID II

I attended Institutional Investor’s excellent Trader Forum in Barcelona last week. Basically it brings together the senior executives from the buy-side, the sell-side, venues and technology firms to debate and make sense of our industry. Naturally much of the conversation revolved around the new conditional dark pool venues, periodic auctions and Systematic Internalisers that... Read More

Anyone for MiFID 3?

I was chatting with the Reg folks here at Fidessa Towers yesterday and the spectre of MiFID 3 came up. Before you all jump off the window ledge there is no official notion of this yet, but when will the regulators feel that their work really is done? The direction of travel has been clear for a while – dismantle the current industry and replace it with something that is utilitarian,... Read More

Mexico blues

Back from a couple of weeks in Mexico where it seemed the whole world was going steadily insane (or maybe that was just the tequila). Anyways, it was reassuring to start the week with another “wow is that what they really meant?” moment whilst gorging on the never-ending box set known as MiFID 2. This time it’s about the obligations on brokers to report annually their... Read More

Bumpy road ahead?

Interesting story in the FT today about IEX and its application to become a fully-fledged exchange. At issue is IEX’s so-called ‘speed bump’ that will slow down the HFT ‘boy racers’ and so make markets safer again. Naysayers claim that the inclusion of a speed bump is contrary to the rule that investors should have “immediate” access to the... Read More

Apple shows the way for trading systems

Interesting to read that Apple is reportedly deciding when, not if, to cancel music downloads from iTunes.  The idea, of course, is to move everyone over to its Apple Music streaming service.  This got me thinking about the whole “access to” versus “ownership of” debate and how it applies to our industry.  As a committed audiophile, the Apple story filled me with horror... Read More

One million Fragulators can’t be wrong

I don’t often write about fragmentation these days, but I noticed this morning that our frag counter surpassed the 1 million mark. To be honest I was planning to write something later in the week, but thanks to a certain university in Italy that slurped its way through 15,000 fragulations at the weekend, I am a bit off the pace. I have to admit that when we first launched the... Read More

Has the futures industry just been Uberised?

A seemingly innocuous news item from my good friend John Detrixhe at Bloomberg got us all chatting here at Fidessa Towers this morning. The story was about how Eurex Clearing was going to allow large buy-sides direct membership of its derivatives clearing house. The rationale for this is entirely logical as today’s regulations treat client capital as a risk asset and therefore... Read More

Germany and the UK show the way

The pixels were barely dry on my last blog post on the regulatory impact of a potential Brexit on the City of London, when news broke that LSE Group was in talks with Deutsche Börse over a “merger of equals”. The LSE has done a great job under Xavier’s stewardship of positioning itself for the practical realities of the industry today, which are all predicated on the premise... Read More

Can’t see the wood for the regulatory trees?

When you are immersed in an industry it’s sometimes difficult to see how it’s really changing. Global financial markets are a good example of this as the populist headlines can easily miss the subtlety of what is really going on. The polemic against misbehaviour by some market participants is obviously deserved (estimates of the total in fines and related costs are approaching... Read More

Symphony strikes a chord

I have been following the Symphony story with interest and the recent news that Google’s parent company, Alphabet, is looking to invest certainly got my attention. Is this the sound of the mighty Google taking its first lumbering steps into the world of capital markets, or just another of the many investments that Google makes? More importantly, what does this do to help Symphony?... Read More

BATS auctions off the block problem

There has a been a lot of talk about how to trade blocks that are smaller than the LIS waiver but that are still too big to go to regular lit markets. The debate has been ratcheted up by the 4 and 8% dark pool caps that are part of the MiFID II spectre looming above us all. One approach, of course, is to chop your block into smaller pieces with an algo but this is becoming increasingly... Read More

Unbundling versus Best Ex

So, the September date looms for ESMA’s final clarification on unbundling. What seems evident is that payment for research with trading commissions is definitely going to be out. What seems less clear, though, is what can still be bundled into the definition of ‘execution’ and therefore still be paid for in commission dollars. Presumably, post-trade TCA services are... Read More

Blockchain – the saviour of global finance?

At a recent event I was asked to pick three technologies that could really upset the capital markets applecart. Blockchain, the distributed ledger technology that underpins Bitcoin, was one of those that I selected. The best way to think about Blockchain is that it solves for the trust problem when two parties wish to transact with each other. It achieves this by distributing the... Read More

Time to sort RFQs?

I was reading my colleague’s blog today on RFQs and it looks like this could be another aspect to the slow motion car wreck otherwise known as MiFID II. The problem this time is that the regulators have completely redefined the whole RFQ model. Imagine I ring you up and ask you to make me an offer for a watch I am thinking of selling. Because we have traded lots of watches... Read More

Too big to fail or too big to succeed?

Interesting to see that Martin Wheatley, head of the FCA, is siding with the largest asset managers in their push back against the Financial Stability Board. The basic idea is that because of their size, global regulators want to deem them “systemically important” and so encumber them with greater liquidity requirements and other controls. This seems like fairly contrarian logic... Read More

Having your regulatory cake and eating it

This morning I read with interest a colleague’s blog post on the delay to the publication of the ESMA technical standards from July back to September. Whilst I appreciate that these things are complicated, it seems hard to understand how this won’t delay the implementation date without potentially increasing the very risks the regulations are trying to prevent. Building software... Read More

Backdoor Unbundling

I was relaxing on my way home on the 7.02 from Waterloo last night when I came across Nick Goodway’s excellent article in the London Evening Standard on the impact of unbundling and research procurement. As everyone knows, ESMA wants to make sure that transparency rules the day when it comes to how investment managers use client money, especially when it comes to paying for... Read More

A breath of fresh AIR 2.0

I was lucky enough to be invited back this week to Franklin Templeton’s annual Alpha Innovation Required summit. Basically it allows new tech firms to pitch their wares to our industry and then fosters debate and discussion about the cutting edge of IT in finance. It’s also a heck of a lot of fun too. What is interesting is how we solve for the compulsion/repulsion syndrome... Read More

GMEX – going to eleven?

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... Read More

Why the Daleks and Vogons were right about financial markets

An interesting debate broke out here at Fidessa Towers this morning concerning the infamous Sci-Fi phrase “resistance is useless”. Should it be attributed to Dr Who’s nemesis, those metallic, warbly-voiced Daleks, or to the slug-like, green-skinned Vogons that appear in Douglas Adams’ The Hitchhiker’s Guide to the Galaxy? Anyhow, whilst folks furiously searched... Read More

FragPro all wrapped up for Christmas

Following on from my last blog on the subject, the guys at Fidessa Labs have now made the latest version of the Fragulator available. Despite its name FragPro is still free, and yet it contains a bunch of cool new features. These include the ability to view stocks or indices by order book or venue owner (e.g. LSE Group including Turquoise, or all Euronext venues), track dark pool... Read More

Last minute shopping in Europe

Imagine you are doing the last of your Christmas shopping – all that’s left to get is a large chunk of your favourite stock. Because you generally buy in bulk, you know to avoid the brightly lit but expensive retail stores, and instead shop at one of the big wholesalers. But, there’s a problem. Somebody has passed a law capping the amount that any one of those stores can... Read More

Back in Block

On the way in this morning, I was listening to my favourite AC/DC album and thinking about the challenges of block trading. The problem is well known – a combination of multi-market trading, algos and DMA have created a vicious cycle that continues to shrink order sizes. This is compounded by regulators who insist that lit is better than dark and that the best way to demonstrate... Read More

The gift that keeps on giving

Since Thomson Reuters announced the withdrawal of its market share reporter, the phones have been ringing red hot with enquiries asking if we could build a replacement using our existing free-to-view Frag website. This prompted a fierce debate here at Fidessa Towers as to whether we should commercialise this opportunity and, if so, what new features we would need to add and how... Read More

Is Turkey voting for Christmas?

The recent announcement from BATS Chi-X Europe that it intends to list Turkish stocks got the phones ringing here at Fidessa Towers. Both local Turkish brokers and pan-European houses wanted to know if, how, and when Turkish stocks might fragment like their European counterparts. A colleague mentioned to me that surely the local Istanbul exchange and its immediate members would... Read More

The Future of Best Execution

I was chatting with a few work colleagues last Friday about best execution and derivatives. They confidently asserted that without real fungibility (i.e. the ability to trade the same instrument on different venues), price comparison is not possible and so any notion of best-ex was pretty meaningless. By coincidence, I was later looking at the wording in the best-ex policy of... Read More

If it ain’t broke, break it

I was hoping to enjoy the last few weeks of summer in relative peace, but it seems that another regulatory storm is brewing. This time it’s over the unbundling of research and it all stems from ESMA’s interpretation that, under MiFID II, research is an “inducement to trade” and therefore cannot be paid for out of commissions. This threatens to completely derail the economics... Read More

Re-thinking post-trade

If you watched our last video you will have seen how firms are re-engineering processes rather than just trying and do the same things more cheaply. Post-trade represents an ideal area for this type of thinking as it is dominated by old proprietary technologies and unnecessary duplication. On top of this, the move to T+2 for European equities in October will reduce by a third the... Read More

An eye on the ‘new normal’

Our latest video looks at the key trends that characterise the ‘new normal’ in financial markets and how the most innovative firms are already adapting.  Read More

How was it for you?

I bumped into an old industry friend last week. We got talking about the state of the industry generally and agreed that everyone is having to take the whole concept of best execution a bit more seriously these days. Certainly in the UK the FCA has kicked off its “thematic review” and a number of fines are being doled out too. Best execution was the central plank in the original... Read More

Alpha Innovation Required

My thanks to Bill Stephenson and all at Franklin Templeton for asking me to participate in their inaugural innovation summit in Fort Lauderdale this week. The idea was to bring together a bunch of cool technology vendors and allow them to present and discuss how their particular offering helps the buy-side generate alpha. This is no trivial problem as the buy-side is having to look... Read More

Where there’s muck there’s brass

I don’t venture to the north of England often, but I do have a work colleague who hails from Yorkshire – the origin of the phrase “where there’s muck there’s brass”. Its basic meaning is that there is often good money to be made from doing the dirty jobs, and it seems like this is particularly true of global financial markets these days. The glamour and machismo of ... Read More

Social media and the return of high touch trading

The past decade has witnessed the wholesale electronification of global trading. The term “low touch” was coined to describe exactly this and the electronic routing of client orders to markets with the minimum of intervention from their broker. This meant that the value add of the sales trader was increasingly denuded and the key differentiators became simply cost and market... Read More

Welcome to the world of daytime fragulation!

As some of you have already seen, the clever chaps back at Fidessa Labs have created a live version of our award-winning Fragulator. This enables you to watch the ebb and flow of fragmentation for any European stock or index on a real-time basis (sorry, no other markets just yet). As you can see below, it was especially useful last Tuesday when Deutsche Börse had a hiccup and delayed... Read More

Best execution: fact or fiction?

In this episode of FragVision we take a look at how continuing fragmentation of the world’s capital markets is affecting the buy-side. Using the Fidessa Tradalyzer, we examine the challenges that buy-side participants face in post-trade best execution analysis, and look at some of the issues around the potential introduction of a European consolidated tape. Click here for the... Read More

The Great Game

I was the guest of DnB NOR in Oslo earlier this week where I participated in their Nordic Market Structure and Best Execution Summit. The event was well attended and included a number of significant buy-side firms. One of the themes that emerged was that liquidity demand seems to be consolidating into a smaller number of large investment firms whilst, conversely, liquidity supply... Read More

Fragmentation v Consolidation

Seems like equity and other capital marketplaces are going through the ying and yang of fragmentation and consolidation. Just as we hear about another merger, we read about another new venue going live or more regulation encouraging competition. This provides market participants with a problem, especially in terms of understanding the execution quality they are enjoying and in knowing... Read More

Spain – your gateway to Latin America?

It was Spain’s turn this week to host the latest in our series of global Fragmentation Forums. Around 50 of Spain’s top financial executives gathered at the Miguel Ángel hotel in Madrid to discuss and debate the future of Spain’s equity markets. Spain is a unique outlier in the global fragmentation ‘experiment’. Despite being part of Europe and subject to the... Read More