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Outside Partnerships Bolster Trade Execution Infrastructures

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Partnership is the most important ingredient for optimising the performance of trading infrastructure and reducing its complexity, say operations executives who spoke at the Intelligent Trading Summit in London on 2nd February. Regulatory compliance issues are gaining on cost and value as the biggest consideration, however, according to the executives.

Partnership efforts address the need for collaboration between business, technology, support, infrastructure, quant and sales professionals, according to Richard Bell, UK head of exchange and market access IT at BNP Paribas. “Then you can get a really effective platform that’s not just about making it really fast,” he says. “The partnership model makes it a competitive platform.”

In-house efforts cannot adequately address trading infrastructure challenges, according to Robert Johnson, head of front office solutions, MUFG Securities EMEA. “There are things we can look at to make it less painful, such as open standards,” he says. “We got somewhere with FIX [the trade messaging protocol]. There are lots of other options we can design into our systems.”

Still, outsourcing decisions should be made selectively, according to Benjamin Stephens, head of business development at Instinet Europe. “We do very little outsourcing. We have some feed handlers for market data, but we have to normalize it ourselves anyway,” he says. “We run our own FPGA development teams because we couldn’t find vendors who would do it at a cost that made sense. … We run our own network because we couldn’t find vendors who could actually run a network going several places.

“You can only outsource if you’re outsourcing to someone who knows what they’re doing,” Stephens adds.

Regardless of the cost savings or value benefits that can be derived from partnership or collaboration on improving trading operations, which serve as drivers to implement such efforts, regulatory compliance demands are becoming more important as drivers, explains Johnson of MUFG Securities.

“It’s MiFID II this year, and FRTB this year and next,” he says. “The key for regulation is that it’s an appropriate size solution for the regulation being addressed.”

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