ELS Report: Thriving in a New Market Order

Surviving and thriving amid a constantly evolving regulatory and technology landscape — and how those two factors shape the optimal structure of an equity trading desk now and into the future — were some of the big themes tackled on the main day one of the Equities Leaders Summit 2019 in Miami, one of the biggest gatherings of buy side heads of equity trading.

In setting the scene for the two-day conference hosted at the Eden Roc Miami Beach by Worldwide Business Research (WBR), which also produces the TradeTech event series in Europe, event Chairperson and Aite Group Capital markets Industry Analyst Spencer Mindlin told the more than 350 delegates that 2019 was a “very interesting year” for US equities markets structure.

He said that while the industry finally “got to take a step back and digest MiFID II” there was still “a lot to chew on,” including an unprecedented number of new equity exchanges currently in the process of coming to market, Financial Industry Regulatory Authority’s (FINRA) takeover the Consolidated Audit Trail (CAT) project, and the London Stock Exchange’s pending $27 billion deal to buy financial data provider Refinitiv.

Innovation and renewal in global trading

The question of how brokers can best prepare for long term survival with new market participants entering and the continued growth of systemic trading was addressed in a panel comprised of some of the industry’s relative newcomers.

Moderator Mindlin said that while markets are currently very efficient, there is also room for renewal and evolution, citing new entrants such as AI-powered trading venue IntelligentCross, trading technology vendor Dash Financial Technologies and HFT-turned-execution provider Potamus Trading.

Mehmet Kinak, Global Head of Systemic Trading at T. Rowe Price, said the US Securities and Exchange Commission (SEC) was also assisting with transformation.

“You wish that regulators would step in all the time, but historically it hasn’t always happened. I applaud the current SEC for putting us in a state of renewal … market structure should be constantly evolving,” he said.

Recalling a time when algorithms “felt like a black box,” Dash Managing Director of Portfolio Trading Jennifer Hubbs said her firm was working to address concerns over lack of transparency.

“We want to help people see a little deeper underneath the hood. This helps both us and our clients do our jobs better,” she said.

“The product we’ve built so far is phenomenal. As we continue to improve and plug the gaps, we expect future growth within the US and globally,” Hubbs added.

Roman Ginis, a former quantitative trader at Point72 business unit Cubist and now founder and CEO of IntelligentCross parent Imperative Execution, said the main impetus for starting IntelligentCross came out of a personal frustration with the difficultly in minimizing implicit trading costs, which noted represented the most substantial cost of trading.

“Historically, venues have not been part of the conversation around what makes an efficient market. In founding IntelligentCross, we wanted to make a meaningful impact on the industry by using innovation to improve execution quality,” he added.

As for a 2020 prediction, Ginis said: “I hope that trading costs — both implicit and explicit — go down.”

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