- OTC Trading Reforms are Coming, and Fast. Is Asia ready?
- Pre-trade clearing certainty has paved the way for “impartial access”, or trading in a many-to-many environment.
- Definitions of a “US person” affecting regulatory obligations, but difficulties remain over how firms delineate between their accounts, their fund sources, their trading arms, and which fall under what regulatory regimes
- New structures are driving massive changes in compliance and legal departments
- Too many SEFs (at least 24) that are arguably too niche-focused. Those that had liquidity previously continue to have it now. Will the 24 shrink as some go out of business and the SEF landscape “optimizes”? Time will tell.
- Mandatory clearing can lead to a 2-tiered market, those “on SEF” and “off SEF”; will this drive further fragmentation?
- Signing up for trading with an SEF is onerous; a buy-side is likely to only sign with a few at most.
- There will be reconciliation between global regulations, and between Asia and the US, but debate remains over who’s “setting the standard” – Dodd-Frank, MiFID II, EMIR are all coming, and all may have unintended consequences. Will regulation become more diverse before it gets better?
- Industry Collaboration
- Much uncertainty remains around implementation of regulation, and all the while the costs of compliance are rising. Asia is particularly difficult given the fragmented markets and regulatory regimes.
- Regional and global cooperation between regulators needs to be increased
- As an industry we can standardize compliance solutions and processes as much as possible, and become more creative with solutions to drive development
- Need to engage locally, regionally and globally to ensure standardization and cooperation at all levels of regulation and implementation. The e-trading industry should collaborate more to re-harness its creativity in financial innovation.
- Debunking the Bitcoin Myths
- The technology of crypto-currencies is proven and they are increasingly an alternative to payment systems
- Education needed on the topic to dispel myths
- New forms of currency will end up existing side by side with traditional currencies – the technology needs to be better understood and regulated
- Many views from the audience are that BTC will be banned, primarily due to the security concerns and volatility of the asset class. But bitcoin may just be one instrument in a payment technology that could have significant staying power.
- Trends and Evolving Best Practices at the Buy-Side
- Regulation – SFC algo regulations were the biggest challenge of the last year. There have been many effects, among them better leverage of technology across the buy-side, and shrunken broker lists in some cases. There is a risk of over-regulation, and questions remain over implementation. Lastly, there is concern on whether other markets in Asia will follow suit, and if so, similarly, or with something greatly different?
- Abroad, Europe continues with MiFID II, dark trading, volume caps/waivers, and the search for a practical solution to the consolidated tape. North America’s hot topic is transparency.
- Commissions – the FCA is making a big push in Europe on CSAs and unbundling; it’s one area thought to have a global impact. Can impact smaller buy-sides disproportionately. Part of the wider trend of putting dollar values on sell-side services.
- Extraterritoriality – a fund can be domiciled, managed, and traded out of 3 different regions. Breaking down into individual portfolios can create even further complexity. Which jurisdiction is each entity / activity regulated by?
- Liquidity – Changing skillsets across the buy-side and sell-side. Different types of trading – just executing no longer enough. Conversations between the PMs and traders, more so on fixed income desks, and compliance is a key concern, but the conversations are evolving.
- The Buy-Side Represents
- Asia Trader Forum continues to grow in both members and AUM.
- Great amount of collaboration on the e-trading consultation paper, and now shifting focus toward the dark pool consultation.
- ATF is increasingly traveling and meeting with local regulators and exchanges to open dialogues on behalf of the buy-side and industry.
- Risk: A New Perspective
- Risk management is a process, and can be managed in many ways. It should be monitored enterprise-wide, and stress testing is critical.
- Focus should be risk-adjusted return – not risk.
- Risk needs more integration between the PMs and traders – decisions need to both be top-down and bottom-up to ensure market risk, trading risk and operational risk all align and are managed. PMs should be directly involved in stress testing.
- Putting FIX to Work in Trading and Post-Trade
- Update to FIX 6.0 now announced in US, EMEA and Asia – technical committees continue to develop the protocol. Will result in closer alignment to ISO20022. Will also result in higher performance for FIX.
- FIX for allocations and confirmations is being driven forward, but more education and readiness across the Street is needed.
- The Big Shift
- Differences between high touch and low touch are blurring, “algos are commoditized”, sell-side firms can’t be all things to all people, especially without being paid for it.
- Blocks are increasingly going electronic, but the roles of the salestrader is still very important. The buy-side are prepared to pay for good service though, especially with regards to block trading.
- Operational risk is evolving – the whole organization needs to work together to minimize systemic risk.
- CSAs can be expensive and difficult – may need regulatory push to drive adoption
Quote from the conference’s expert panel of ‘Commentators’;
“The various panelists had many themes in common, that block trading and liquidity is important to their business, and that despite the alarm brought up in “Flash Boys”, about dark pools, they should still have a place in the stable of tools used by institutional traders. Many feel regulations are making it more difficult to conduct business.”
To download the presentations please follow the link: http://www.fix-events.com/HongKong/agenda.aspx and enter the passcode: GLOBALTRADING
