“We are expecting the biggest change in market microstructure since Reg NMS should the Gensler proposals become rules.”
Joe Wald is Managing Director and Global Head of Electronic Trading at BMO Capital Markets.
What are your expectations for 2024?
We are expecting the biggest change in market microstructure since Reg NMS should the Gensler proposals become rules. I am optimistic that should the proposals become rules, we as an industry will rise to the occasion and continue to provide the most liquid capital market for all investors.
What trends are getting underway that people may not know about but will be important?
There is a convergence of off and on exchange value propositions. The exchange value proposition has been accessing lit quotes and speed, while ATS’s has been accessing midpoint liquidity with minimal impact. While these value propositions are still important for both, we are starting to see a cross-pollination in their innovations. Exchanges are introducing more ways to interact with hidden liquidity and ATS’s are filing for protective status for their lit order books. I expect we will see continued innovations from both to attract liquidity.
What are your customers’ pain points and how have they changed from 1 year ago?
For our customers it always comes down to the quality of their executions. With the innovation that I spoke of above, market participants will have to remain diligent in the search for better quality liquidity. Markets are continuing to fragment globally, speed is no longer the only game in town, and partners that can provide a consistent, methodical, systematic way of trading that improves the quality of their executions are in position to address this pain point.
What trends are you seeing that are impacting market structure? Any market outages/alternatives to the close?
The venue innovations that help to facilitate trading during the continuous market I believe will continue. While the close will remain a significant liquidity event, initiatives like periodic auctions, the potential of retail auctions, in addition to new on and off exchange order-types will continue to leverage the market structure to attract liquidity during the continuous market.
What are some recent SEC market structure changes and other regulatory updates I should be aware of?
The obvious ones we are watching are the Gensler proposals introduced in December 2023. Since then, we are also keeping a close eye on the tiering proposal and assessing the overall impact of US market structure changes on Canadian and European market structure.
