CHAMPIONING THE CAUSE.
Mark Hemsley, CEO, BATS Chi-X Europe explains the move into FX.
As the landscape for trading venues continues to evolve, how does BATS Chi-X Europe fit into the whole picture?
As Europe’s largest stock exchange, we’re in a strong position. When you consider the notional value traded across our order-books in January, and add that to the total reported to BXTR, our OTC trade-reporting service, more than a third of all equity trades done in Europe (whether they be on- or off- exchange) touch our systems. We consider ourselves champions of a single, united marketplace and we are focussed on breaking down barriers to competition to make the European market deeper and more liquid – so as to benefit all participants.
What were the drivers behind your recent decision to acquire Hotspot FX? What will the advantages be, both for BATS Chi-X and for your customer base?
Hotspot is a leader in the FX market and is well positioned for growth, making it a great addition to BATS’ growing global offering. The transaction moves BATS into the world’s largest and most global asset class, and for the first time, we will have a presence in Asia. Furthermore, there is structural change afoot in the foreign exchange market: regulatory scrutiny is forcing increased transparency and greater automation, while large dealers are converting an increasing percentage of their businesses to an agency model. At a macro level, FX volatility is picking up and coming off a cyclical trough.
Are there any challenges that are specific to the FX market? What lessons can be learnt from your experience operating in equities trading?
There is plenty of crossover: both FX and equity markets are highly liquid asset classes. While the FX market doesn’t have a closing bell, and functions across continents 24 hours a day, we have huge experience of running exchanges and technology across different time zones and jurisdictions. With the FX market becoming more automated, and moving to more transparency, our team’s experience of creating and operating transparent, multi-market electronic exchanges will come to the fore.
Do you expect multi-asset class trading eventually to become the norm?
Clearly there’s a regulatory drive towards that market structure in other asset classes – alongside the FX market, you’re also seeing it in bond trading. But we firmly believe that the right market structure depends very much on the asset, and on its liquidity. Our job as an exchange is simply to provide the apparatus and market structures to enable trades in those assets to execute in an orderly and fair environment.
What is the impact of new arrivals Luminex and Plato likely to be?
We’re following the progress of both. Once they’re up and running, we’ll be able to get a better sense of their offering. Right now, both seem to be at a project stage, and it’s probably too early to comment. As far as we’re concerned, our solutions will follow the final publication of MiFID II technical guidance: given how prone regulation can be to last minute changes, it makes sense to us to wait.
What do you think the trading venue landscape will look like in 3-5 years’ time? Who will be the winners and losers as things continue to evolve?
That scale will help to reduce costs for investors. With the advent of a European consolidated tape, a more federated, united marketplace would benefit all those that look to raise money – or make money – from European capital markets whether they be banks, brokers, or most importantly, companies and investors.
What opportunities and challenges now lie ahead for BATS Chi-X?
Our business model continues to operate in the way it always has done: identify market inefficiencies and then work to smooth them out. Europe has progressed a great deal since MiFID I – and our success as the largest exchange operating in Europe today is evidence of this – but there is still a long way to go.
The playing field still remains very tilted in favour of incumbents – particularly when you look at the picture for market data for example – or vertical structures – like clearing and settlement. So while equities trading may be a little simpler, there’s still a huge amount to be done.
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