Welcome to the Summer Risk & Regulation Report. And what a summer it has been! Every day, or so it seems, there is another manipulation scandal in the headlines. The usual story of manipulation in the cash equity, commodity and derivatives markets has been swept from the front pages by stories of manipulation of key benchmarks and the foreign exchange markets. As the chief executive of the Royal Bank of Scotland said recently, an investigation into alleged manipulation of foreign exchange markets could pose a bigger problem for banks than the Libor interest rate rigging scandal. Even the august Bank of England has been dragged into the controversy over allegations of price fixing in the US$5.3-trillion-a-day foreign exchange markets after it emerged that a group of traders had told the BoE that they were exchanging information about their clients’ positions. With the UK Financial Conduct Authority now investigating another regulator, the Bank of England, the question to be asked is “Quis custodiet ipsos custodes” (“Who watches the watchmen”)? Another question which could well be asked is, do the “watchmen” have the resources for market surveillance in the 21st century? Click on the link to download the report.
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.
Market surveillance is a topic that sparks some heated debate. Some behaviours, such as the trading strategies adopted by HFT firms, are being targeted by regulators despite a lack of empirical evidence that they are doing anything wrong. This paper summarises the discussion on this and other topics at the autumn 2013 Mondo Visione Surveillance seminar.
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.
In November 2013 at the Mondo Visione Exchange Forum, senior executives from many of the world’s most important financial exchanges came together with senior executives from a wide array of global banking, trading, and investing firms, index providers, regulators, system suppliers to discuss the rapidly changing business and technological environment in which exchanges and other trading venues function.
This paper is based on the discussion and analysis that took place at this exclusive event that brought together leading exchange professionals, their customers, and suppliers from around the globe to share insights and experiences.
Despite a sharp increase in attention to high-frequency trading (HFT) sparked by the publication of ‘Flash Boys’, regulators may still be struggling to collect and analyse data from markets to spot sophisticated market abuse across market centres with fast moving data.
Among the takeaways from the Q1 2014 Mondo Visione Surveillance Seminar was a consensus that irrespective of the market, whether auction or algorithmic trading, FX, equity or derivative, the technology is there to be deployed for risk and compliance monitoring in the challenging low-latency world of HFT, with large volumes of fast moving data.
To download a write-up of the seminar, please complete the form below.