For the second year running, sourcing liquidity was universally stated as the single greatest daily trading challenge, with regulatory changes coming in second, closely followed by best execution requirements and workflows, according to JP Morgan’s Equities Execution Survey.
In its second year, the survey, which canvassed 200 global electronic equities traders, collated their views on trends for the year ahead, including what will have the biggest impact in markets and trading, their working location and how their execution style changed in a year like no other.
The survey also revealed that almost half or 47% predicted that the global pandemic will have the greatest impact on markets in 2021.
In terms of market structure, regulatory reform, the rise of retail and market fragmentation topped the list. Central Securities Depository Regulation, market data costs and the MiFID II were also mentioned as main concerns.
Drilling down into the liquidity responses, 38.5% of respondents felt their access had increased over the past 12 months, 41% thought it had stayed the same and 20.5% believed it had decreased.
It found that the widening gap between turnover and market liquidity was forcing clients to take various measures including turning to block trades with almost 30% increasing their use of high touch blocks over the year.
They were also looking to high-powered algorithms although overall as in line with its 2020 survey predictions, the percentage of clients using algo wheels held steady from 2019, at 42%.
Central risk books were also in the frame with just 11% of respondents stating they had not interacted with a CRB in 2020, with 42% opting to deal directly. Breaking it down regionally, the figure was only 4.5% of Europe Middle East and Africa based traders had not interacted, and 10% and 12% respectively for their Asia Pacific and Americas counterparts.
In terms of analytics, traders are taking a wider view with 35.6% analysing high touch and portfolio trading flows compared to just low touch.
As to technology, artificial intelligence and machine learning are anticipated to remain the most influential trading over the next one to three years.
Similar to the FICC survey, mobile trading is highly ranked due the current trading environment in the pandemic.
Looking at content received, the traders ranked recent enhancements to electronic trading strategies as the most important type of content from electronic trading desks, followed by real-time stock colour and market trends. Market structure/microstructure insights and commentary came in third.
The survey also looked at the impact of the pandemic induced remote working environment with 84.2% of respondents working from home between March and June 2020. However, 42% said their execution style didn’t change while 28% increased their use of high touch. Around 22% deployed more portfolio trading and 7.8% did the same for algos.
©Markets Media Europe 2021
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