OPINION: The Challenge of Change

Terry Flanagan

This column first appeared in the magazine of the STA’s 84th Annual Market Structure Conference, which was held Sep. 13-15 in Washington, D.C.

AT FIRST GLANCE, it’s nothing too ambitious. Just two nouns, really, and fairly straightforward. Yes, change is challenging. I, and most other people, confront this challenge every morning when it’s time to change from being in bed to being out of bed.

But upon thinking about it a little bit more, I’m struck that there’s so much more to it. What change is challenging? How is change challenging? How are challenges overcome, so that change can happen?

Those are just a few of the questions raised by the nomenclature.

And indeed, the content of the event spans market areas that are undergoing change and/or are ripe for change.

Take the options market, for example. Some broad themes such as flat volumes and low volatility have been in place for several years now, but there is lots of change going on under the surface, including consolidation, technological innovation, and even a new (yet throwback) trading floor.

The Consolidated Audit Trail represents a big change, in that market participants need to raise their games on trade reporting. But meeting this challenge should ultimately be rewarded, as the U.S. equity and options markets will  be better-regulated and safer, and firms will have a trove of valuable data to use to improve their own business.

And as for MiFID II, well, regulatory change doesn’t get much bigger than this sweeping European rule set, which is slated to take effect in January. Under MiFID II, the sell side needs to separate research from execution, a radical departure from the long-established bundling model; the buy side needs to take more ownership of its trading; and both sides need to be ready for more transparency and a bigger ask on reporting.

Other content tracks to the STA event program can also be seen as change-oriented. Robert Cook, a-year-and-change into the Finra CEO job, has shown “the boldness to effect change” at the independent regulator; in capital formation, exchanges are seeking to modernize the process via technology, venture markets and other initiatives; and women in finance are changing the industry, one woman at a time, through entrepreneurship, innovation, and thinking differently.

Add it all up and yes, there’s a lot of change happening in securities markets right now. The industry is taking on the challenge of making it happen.

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