As we look back on this year, topics such as institutional adoption of digital asset trading, European trading in response to geopolitical risk, and the SEC’s plans to revamp U.S. stock trading rules dominated the headlines. In 2022, we covered those topics and much more including the growing sophistication of AlgoWheel, and the evolution of the buy-side fixed income EMS.
At the Security Traders Association (STA) 89th Annual National Market Structure Conference held in Washington DC in October, brokerage executives reacted to the concept of auctions as well as other ideas on SEC Chair Gary Gensler’s agenda to revamp equity market structure. But the industry’s top wholesalers and brokerage executives speaking at STA emphasized that the stock market is functioning well for retail investors and cautioned against making a litany of changes that could lead to worse results.
In the past, European traders increased their allocation to algorithmic/direct market access (DMA) while reducing high-touch trading. This year, the biggest increase was seen in program trading by about 34%.
One of the biggest possible reforms would be a requirement for retail brokers to route individual orders to buy or sell stocks into a transparent “auction process” for matching customer orders, rather than sending them to wholesale market makers for execution on off-exchange platforms.
Panelists agreed on the need to capture and monitor tradeable streams as a precondition for calculating liquidity analytics, emphasizing this helps them understanding which LPs are performing better than others.
It’s not clear whether the stablecoin crisis will cause institutions to scale back their plans for trading and investing in cryptocurrencies or digital securities.
Eyeing this demand for private equity, major broker-dealers, wholesale market makers and global exchanges are striking deals and forming new platforms to bring automation to private securities trading.
With the increased demand for risk data in the front office, FlexTrade’s unified order and execution management system (OEMS) has integrated openly with different risk factor models. Through FlexONE’s open architecture and flexible application programming interfaces (APIs), the OEMS can integrate and consume risk data from the risk models and then run calculations in real time against current exposures shown in the OMS.
The discussion looked at the shifting risk trends that institutional investors are facing and how they are bringing in new alternative data feeds alongside traditional risk models to make more informed decisions.
From selecting FX algorithms, to evaluating liquidity providers, to identifying hidden costs, there is an emphasis on what the data is telling people, said multiple speakers at the virtual event. In addition, recent changes to the FX Global Code of Conduct, could provide additional market transparency for the buy side related to algorithmic trading and TCA.
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