Regulation, optimal execution, intelligent trading solutions, high performance technologies and emerging capabilities including machine learning, sentiment analysis and predictive analytics were at the top of the agenda at A-Team Group’s Intelligent Trading Summit in New York City.
Setting the scene for the summit, keynotes from Kevin O’Hara, senior advisor to the National Stock Exchange, and Joseph Saluzzi, partner and cofounder at Themis Trading, presented the history of electronic trading markets over the past few decades and looked forward at how regulatory change is expected to affect trading strategies.
Picking up on the regulatory theme, a panel session noted not only the challenges of existing US regulations, such as Reg NMS and Alternative Trading Systems, but also upcoming rules and regulations that are expected to add to the burden. Among the toughest regulatory challenges identified by the panel is the SEC’s Consolidated Audit Trail, which is likely to come into play for institutional brokers at the end of 2018 or early 2019, and is expected to carry a high cost as firms may need to run duplicate reporting.
In the shorter term, the SEC’s Tick Pilot, which aims to assess the impact of wider tick sizes on liquidity and market quality for small cap stocks, is due to come into force on 3rd October 2016. An initial Access Fee Pilot is also expected to be implemented by the SEC this year.
BCBS 239 is still on the agenda, with panel member Dermot Harriss, senior vice president at OneMarketData, suggesting that banks achieving compliance will be in a good position to meet the data demands of BCBS 352, which covers minimum capital requirements for market risk. Nancy Andrews Turbé, principal director, risk and finance at Accenture, noted that while MiFID II is a European rather than US regulation, it is expected to have an impact in the US, with some firms choosing to opt out of business in Europe as a result of its implementation.
Considering the extent of regulation facing US trading firms, the panel suggested the need to take an holistic approach and consider possibilities of convergence across regulations. The buy or build argument came down on the side of buy what you can and build what you must.
Considering the possibilities of applying intelligence to execution management, a panel session noted that while speed remains essential to high frequency traders, it is not necessarily a key requirement across the rest of the market. Discussing other means to optimise execution, Sean Gibson, a broker at Lek Securities, noted that many firms look to execute over a period of time and said their interest is in improving execution quality by ensuring anonymity, steering clear of information leakage and avoiding leaving a footprint in the market. Other panel members agreed that giving up your hand to the street can compromise positions.
Building intelligence on the nuances of different venues into trading platforms can also improve execution management, along with liquidity seeking algos developed on the basis of this intelligence.
Looking forward, Andrew Keane, investor services, futures, clearing and collateral, and global head of listed derivatives algo trading at Citi, described a proof of concept project that uses Microsoft’s HoLoLens virtual reality headset to allow traders to see issues such as market inefficiencies and spikes in buying, and tell the story of what is happening in the market.
Picking up on the possibility of gaining a better view of the market, a panel discussion moderated by Adrian Sharp, senior industry consultant, capital markets at Teradata, discussed the potential of machine learning, sentiment analysis and predictive analytics. It suggested that machine learning will build a better picture of what is happening in the market, while sentiment analysis could be used at the end of the trading day to see what might happen when the bell rings in the morning.
On analytics, Sharp noted that trading firms are developing advanced predictive analytics, but are finding it difficult to deploy them in operations. Yadu Kalia, worldwide business architect, financial services at IBM, agreed, saying this is where the future lies and predicting that a machine with the ability to reason like a human will emerge, albeit not in the next five years but most probably within our lifetime.
To find out more about:
- Trading regulations
- Intelligent execution management
- High performance trading solutions
- Emerging technologies