60% of the world’s order executions are on mainframes

I was just reading through my notes as Chair of the #TradeTech conference last week, and found a bunch of interesting notes and quotes. 

Rather than assembling them into a sensible blog post, I’m just going to write them up ad hoc and you can make your own mind up about the meaning, context and implications.

However, for FSClub members interested in these areas, we have a Club meeting on 2nd November with Dr. Kay Swinburne MEP on: "Dark Pools and HFT: Good or Bad".  See the end of the blog for details.

 

Chairing the #tradetech architecture conference today - get the impression markets are still struggling with same issues as 2010

One big issue is clearing and settlement, another is risk, a third is regulators not knowing what the hell they're doing

Average equities trade on exchange is now under €1,000 - how do you do x-asset mix of high value and low

In cross-asset classes, the lack of meaningful reference data to track mixed instruments is a big issue

How do you get back office and front office aligned when the back office is always a step behind

Could ask same of regs: how do you get regulations and FSIs, aligned when regulators are always a step behind

With SWIFT, you can settle within 15 seconds so T+0 is feasible - the issue is the FSIs internal inability to exploit this tech

Wow - the Large Hadron Collider produces 15 Petabytes (15 million Gigabytes) of data annually http://bit.ly/cGr8Bi - most in a millisecond

“CERN is collecting millions of data points in milliseconds … markets need to do the same.” Peter Legizinski, former CIO, Allianz Investment Bank

An equity trade across 8 exchanges in different global cities, including price discovery and execution, would take about 2 seconds

Latency harmonisation is meaningless as exchanges always find a way to make some more equal than others

Another issue raised by Iran Hutchinson: "60% of the world's order executions are on mainframes"

Someone just asked me what the difference is between HRT and HFT at #tradetech lol ... must be the hormones

Prediction from Clem Marsh, BATS Europe: if the EU transaction tax is implemented, all HFT trading disappears in EU & firms move

Just look at Sweden’s experience: "90%-99% of traders in bonds, equities and derivatives moved out of Stockholm to London", Anders Borg, Sweden's Finance Minister

But is this true if transaction tax is only applied to filled orders?

“Over-regulation should be avoided because it slows down financial innovation & undermines economic growth” Jacques de Larosière

“I fear we have lost the momentum that was created at the start of the financial crisis”, Diego Valiante, CEPS

“We are using regulation as a substitute for supervision …. and regulation cannot substitute supervision”, Diego Valiante, CEPS

“Pre-crisis markets were shaped by customers; post-crisis by regulators. We have to ask if that is right.” Anthony Belchambers

“Somebody’s got to bring back proportionality to this and take away the regulator’s punchbowl.” Anthony Belchambers, FOA

“There’s no point in locking up capital in a capital-intensive business.” Anthony Belchambers, FOA

"MiFID1 was close to a farce with dates moving all the time. We can’t allow that to happen again.” Anthony Belchambers

UBS say that one City FSI lost millions when someone flicked the wrong switch and added 20ms per transaction, so latency does matter

"Volatility is built into the markets and is advantageous for some whilst disadvantageous for others" Marcus Hooper, Pipeline Financial

“Long-only asset managers trading has slowed for several years as it’s too difficult to find alpha that way.” Marcus Hooper

"If you become clever at moving between algorithms, people will not be able to follow your algorithmic behaviours." Marcus Hooper, Pipeline Financial

"If you can't manage and measure transaction costs, you might as well not bother." Marcus Hooper

"The question is whether you can make orders out of thin air, as that's what we do." Marcus Hooper

"MiFID2 should create a level playing field but will just encourage regulatory arbitrage as happened with MIiFID1." Marcus Hooper

"The things that need to be regulated are not well understood by the regulators, let alone the politicians." Marcus Hooper

 

Dr Kay Swinburne, MEP, UK Conservative Spokesman - Economic and Monetary Affairs will speak at the Financial Services Club on the theme of: “Dark Pools and HFT: Good or Bad?” on 2^nd November.

Kay Swinburne has been instrumental in moulding the principles of the revisions to the next generation of investment markets regulations, thanks to her report ¬ “The regulation of trading in financial instruments: dark pools etc” ¬ from summer 2010. The revised version of the paper was adopted by the European Parliament’s Committee on Economic and Monetary Affairs (ECON) on 9th November 2010, and means that all broker dark pools are reclassified as multilateral trading facilities (MTFs) or systematic internalisers (SIs), and that dark executions should be subject to size restrictions.

Looking at MiFID II and beyond, are such changes to dark pools and regulations restricting High Frequency Trading a good or a bad thing? To find out, we’ve asked Kay to tell us her current thinking.

Kay was elected as the Conservative MEP for Wales in June 2009. This saw the Conservative Party top the elections for the first time in Wales in modern history. A successful career in investment banking has equipped her with in-depth knowledge of the global financial markets. This, combined with her experience advising businesses in Europe and the US, has led to her appointment on the Economics and Monetary Affairs Committee in the European Parliament.

At present, Kay is deeply concerned about how quickly the European Union is responding to financial service regulation without having properly looked at the impacts of what it is doing. She believes that the EU should work within a global framework as the crisis that we are facing is global; therefore it needs to work with the United States and so a global co-ordinated strategy needs to be implemented that is in line with the agenda of the G20.

If you wish to attend you should register.