It can be hard to make accurate predictions about future technology. However we can accurately assesswhat has gone before us. As trading technology matured throughout the late 1990s and early 2000s, if we consider the primary drivers in trading systems they have been brute force dynamics. The application of raw power, ever-greater memory and processing speed has often meant we can do more of the same and often faster. However things are changing. A totally new landscape of intelligent systems is appearing, with artificial intelligence and deep data mining capabilities offering an entirely new perspective on the markets and their participants. This report from the 2015 Mondo Visione Exchange Forum explores the changing technological landscape that is reshaping markets.
This is the first of four papers looking at the Markets in Financial Instruments Directive and new regulation(MiFID II/MIFIR). This paper sets the scene looking at what the initial MiFID Directive was about and how the recast directive (MiFID II/MiFIR) will likely turn out to be the most impactful financial regulation the EU has seen for over a decade.
The following papers will in turn look at:
- Transaction reporting – the full scope of application of Article 26 MiFIR
- The concept of transparency – pre-trade and post-trade publication requirements under MiFIR
- The regulatory reporting hub – how to cover multiple regulatory reporting requirements through one platform
Senasen is a new communication network for the investment industry, where companies & asset managerscan explain their value proposition,share information and be followed by investors.
Seismologists are still searching for ways to successfully predict earthquakes. So far, they have only been able to introduce warning systems that provide alerts while an earthquake is already in progress. Shifts in financial markets adhere to different rules. Changes in volatility are often preceded by ‘rumblings’ or are caused by predictable events. Being able to ‘read’ the signs and predict market movements, also the smaller day-to-day movements can create opportunity for both the buy- and sell-side.
Volatility is key to both alpha generation and trading performance measurement and is a crucial input for trading algorithms and risk methodologies. The capacity to forecast size and direction of volatility is therefore enormously valuable for traders of any strategy.
The newest Deutsche Börse analytic, the ‘Intraday Volatility Forecast’, is designed to provide that capacity. It aims to forecast the volatility for the DAX, EURO STOXX 50 and Euro-Bund futures; Eurex’ most important products. The Volatility Forecast creates a forward-looking insight into the peaks and troughs of market movements and provides the user with a major informational advantage over other traders.
On Wednesday 23 September 2015, Mondo Visione held its annual Market Surveillance Seminar at Ironmongers’ Hall, with an audience of market practitioners, regulators, technologists and consultants. Banks have paid some US$10 billion in fines over recent months to settle claims brought against them for manipulating benchmark indices such as the London Interbank Offered Rate and the daily foreign exchange fix. These scandals have caused regulators to review their approach to overseeing the wholesale markets on which such benchmarks are based. As they focus on how to raise standards of behaviour among traders at banks, it is likely that tougher sanctions will be imposed and markets will be given more detailed guidance on what are acceptable trading practices. Fines alone are clearly not enough. Perhaps holding individuals accountable for their actions, and making firms take greater responsibility for improving standards of trading practices will make a difference. These and other issues were addressed by the two panels at the Mondo Visione Annual Market Surveillance Seminar.
If an exchange’s order book were a cash register in a shop, it would show transactions at the counter, but not customers who came into the store wanting to buy something but then left without doing so. At least this is the case when it comes to ‘immediate or cancel’ orders (IOCs). Those lost opportunities for transactions – not filled immediate or cancel orders – are not recorded in the order book, yet represent real potential liquidity. Deutsche Börse Market Data + Services has launched a new product within its real-time analytics product family that allows traders to gauge those potential transactions in the options market and trade accordingly, resulting in fewer ‘empty shopping baskets’. Deutsche Börse’s new analytics product, the ‘Eurex IOC Liquidity Indicator for Options’ supports options traders at all levels, providing real-time analytics for the options market that go beyond the normally visible spectrum of information in the order book.
To operate efficiently in the fast moving interconnected marketplace of today, market participants are asking for technological solutions which are flexible, innovative and cost effective allowing them to evolve within the global markets eco-system as regulations and technology develop.
TARGET2-Securities (T2S) is a new post-trade, delivery-versus-payment settlement system for Europe developed by the European Central Bank (ECB). Settlement using T2S will be less expensive and more flexible than national settlement systems. The ECB’s T2S program includes new settlement logic, new communications protocols, new regulatory requirements and the centralised system service in which European-wide settlements will occur. Allied Testing is a quality assurance (QA) and testing company with special focus on financial systems and capital markets. We have testing staff with the required knowledge and understanding of T2S who will use our T2S-specific libraries and in-house tools to test readiness and compliance for T2S settlement. Working with Allied Testing will reduce the time spent on testing, the cost of the testing, and ensure that systems work as required.
Exchanges are venues where investors wishing to buy a financial instrument find investors wishing to sell. The exchange brings together a buyer or seller to effect a trade. Central, to an exchange is the trading system on which trades are executed.
The Market Quality Dashboard is designed to allow market participants to quantify the economic impact of market design changes on market quality. Market quality is defined by reference to the near universal mandate of regulators, which seeks to ensure that markets are fair and efficient. It therefore follows that, if one intends to change the design of a market place, and get this signed-off by regulators, those changes are evaluated in terms of how they impact fairness and efficiency.