Outlook 2018: Susan Estes, OpenDoor Trading
Susan Estes is a co-founder, CEO, and president of Treasuries-trading venue OpenDoor Trading.
The new year will be known as “The Year of … ?”
The Year of Progression. Progression away from request-for-quote trading in the bond market. Openlist trading on MarketAxess and FRM(arket) on the swap execution facilities will lead to a greater embrace of all-to-all trading.
What do you see as the next major watershed for the industry in 2018?
The Fed moving closer to a central clearing mandate in the US Treasury market. With central clearing, we will see new venues, protocols, and better risk management.
What do you view as the most important lesson of 2017?
This year underscored the difference between the sophisticated and unsophisticated players in the marketplace. The difference will continue to widen going forward, as those with large strategic investments in technology will continue to dominate.
Which hot topics/hype should be retired?
I think we are collectively exhausted with MiFID II.
What changes do you expect regarding regulations in 2018?
Regulation often has unintended consequences. Most global participants will manage compliance to the most restrictive common denominator. Europe’s restrictions will cause yet unforeseen problems for US markets. In terms of analytics, AI and big data will allow firms to analyze TCA better and offer more trading opportunities.
Why do you expect investments in fintech to rise, plateau, or trail off in 2018?
Investments will continue to rise. Technology has become an arms race in many ways. It took several years for equities, futures, and FX to go primarily electronic. Fixed income is early in the game. Investments in infrastructure, big data, and everything associated with parsing the data will continue to increase.
What do you expect to be the skill sets most in demand in 2018?
Trading development and programming skills, along with advanced analytical degrees will be in demand. In sales, there will be increased demand for crossover people who can understand and deploy technology but also offer high touch coverage when needed. As technology continues to become more accessible, flexible and available, it is critical to have people who can put proper processes in place to take advantage of technology resources available. Technology will no longer be the sole determinant of success, but rather just a ticket into the game.
Will Wall Street return to focusing on innovation to drive alpha in 2018?
Wall Street’s fascination with leveraging AI and data to create alpha has just begun. The next innovation war will be fought over data aggregation. AI is only as good as the data set it is able to leverage.
Which market structure changes should take place in 2018?
Standardization of new venue on-boarding guidelines for order and execution management system vendors that hold the keys to connectivity.
Electronification of the municipal bond market also presents a large opportunity.
The success of Northbound trading showed electronic execution is way forward for the bond market.
Algorithms have become more prevalent in the spot FX market.
Increased electronification has created useable and accessible real-time and historic trade data.
Buy-side firms can discover liquidity more efficiently and execute on Turquoise.