Summer Trading Network Roundup
Participants at Markets Media’s Summer Trading Network sketched a broad panorama of capital markets, ranging from OTC derivatives to high-frequency trading, connectivity and Big Data.
Only about one-third of the derivatives market is traded electronically today, Chris Amen, head of the U.S. institutional rates business at Tradeweb, said Thursday at the conference in New York.
“When comparing the liquidity providers and the buy side, dealers are still catching up in terms of providing not just swaps that are MAT’d, but pricing across the totality of electronically traded fixed income products,” Amen said. “As participants trade more of their business electronically and on SEF, we will see clients adopting other order types like (central limit order book). This is in line with the trend that trading will eventually move in the direction of where FX markets are today.”
Although Tradeweb’s historical focus has been building electronic interest rates markets for institutional clients, over the past decade it’s expanded into the interdealer broker markets through its Dealerweb platform and the retail market through Tradeweb Direct. It is expanding its presence in corporate bond trading in the U.S. as well.
“We’ve been in the interest rate derivatives markets since 2005, so we didn’t have to build a SEF from scratch,” Amen said. “However, the regulatory catalyst for SEF trading has had a profound effect on the marketplace. Our institutional client base has invested significantly to be able to trade derivatives electronically in the new regulatory regime, and we’ve been working closely with them to support that transition.”
In equities markets, the advent of automated trading has given rise to a slew of market structure issues such as high-frequency trading, dark pools, and fragmentation, which has provided a soapbox of sorts for those who are pursuing their own agendas in the name of market reform, said Peter Nabicht, senior adviser to the Modern Markets Initiative, an advocacy group for high-speed trading.
“We work with the press, regulators, and government officials to provide a middle of the road view about market structure,” he said. “We try to counter the cottage industry of HFT detractors. We don’t think the market is perfect, but we believe we can participate in the solution.”
For telecom providers, capital markets represent an important constituent and consumer of networking, connectivity, and managed services, according to Andrew Kusminsky, chief operating officer at Perseus Telecom, a provider of high speed connectivity and infrastructure that connect to 70 “all asset class” markets including Asia and South Africa.
“Five years ago, our mission was to provide simple connectivity, which has evolved rapidly to offering more sophisticated solutions targeting all areas of the latency (high speed) triangle from ultra-low latency to low-latency to latency important,” said Kusminsky.
Perseus services four industries: financial markets, multimedia, e-commerce, and internet gaming. “The main bulk of our core base is the financial markets to include customers at leading investment banks, hedge funds and proprietary trading firms,” said Kusminsky.
Based on this demand, Persesus offers wireless connectivity with market data, managed services and has procured the exclusive rights to access the atomic clock for verification and synchronization for High Precision Time. “High Precision Time is deployed globally including Japan by a leading investment bank,” Kusminsky said
Big Data is making itself felt in a big way, especially in the form of Twitter sentiment. iSentium, a company that searches for information pertaining to the stock market and turns it into time series, is launching on Bloomberg a “Google for Sentiment” where all tweets about a company can be viewed as a histogram, said iSentium CEO Gautham Sastri.
“The amount of content today is of galactic proportion,” he said. “The rate that people transmit information about themselves is exploding. The most valuable signals are the ones covered with the maximum amount of noise. Events don’t generate alpha, it’s the background of buzz that needs to be mined.”
Agency broker moves beyond execution to offer a broader suite of services.
Algorithms have become more prevalent in the spot FX market.
QB’s Algo Suite for futures market trade execution is also being co-located to HKEX.
Breaking data silos is key to deploying automation beyond 'nuisance' orders.
They can be used on quantum hardware expected to be available in 5 to 10 years.