In which areas of market structure do you see the most cohesion between asset classes?For me, it’s in demand for data, that’s near the top of everyone’s list and fits into a number of categories:
- Access to data
- Data standards
- Leveraging data into transactional workflows for automation etc.
- Leveraging data in transactional analysis pre-and post
Equities has always been heavily engaged in leveraging infrastructures that are data intensive, and that shows no sign of changing, particularly in Europe when we start looking at solutions for exchange outages, and the further discussions we have globally around understanding more granular liquidity tagging in the market. However, across fixed income instruments, nearly every meeting I am engaged in is talking about data integration, and looking at ways to present and leverage data in the transactional workflow.
Where do you think this could be developed further?
The delivery of the consolidated tape for the UK and the EU for equities and bonds. For equities (with pre- and post-trade tape being delivered) – this would help in solving multiple problems that challenge the market; from helping to deliver a reference data point across all EU venues to enable continuous trading when there is a market outage, to making data more easily available to international investors and promoting awareness of the market and getting them to invest in them.
For bonds, this would be the real start for transparency for bonds in the EU and the UK, given the challenges firms have faced in terms of aggregating and obtaining the data.
How close are the UK and Europe to implementing a consolidated tape?
There is support across the industry for a consolidated tape but there are still some hurdles to overcome. If we can achieve it in Europe and the UK, this will be an exceptionally positive thing for equities and the cash bond market. It will enable data to be democratised to all market participants. However, I think it is important to note that getting a tape mandated for equites and cash bonds in the regulation is only the first step, after that there are another three more pieces of work that we’d need to do in the industry:
- Continually look to improve data standards. Data and the markets don’t stand still and continually evolve, we need to ensure that the data that we produce accurately reflects the liquidity in the market, and the data standards evolve with these changes.
- Make sure we achieve a good balance in transparency, and ensure that what we have is effective and useful, but also make sure there isn’t too much which would impact liquidity provision and potentially create artificial volatility in the market. This is not a simple thing to do.
- Ensure someone steps up to be a consolidate tape provider and the data is made available at rate that ensures the data is democratised.
Fixed income markets are nearly all facilitated through the provision of risk and there are a number of very valid reasons for this. There are many ways this can be intermediated, however, I think it is important to recognise that during times of extreme volatility, trading in fixed income markets can be very difficult for all participants to navigate. We have been in discussions with clients over the last few weeks is around ensuring they leverage the right protocol according the market conditions. Obviously this is fed through an effective dialogue with your counterparties.
Which areas of current proposed regulatory change are impacting clients most heavily and how are you advising them?There are some really important debates happening across the whole transaction lifecycle that could impact clients. At a high level, I’d say the key areas of debate are:
- Changes to the regulation of technology and trading venue perimeter guidance
- Post trade transparency and the positive and negative impacts that might have
- Changes to post trade processes – such as increasing scope of clearing obligations into repo and bond markets
- Changes to Settlement Time frames and technology
In all our market structure discussions with clients, and in the industry as a whole, there is one critical point that we start with and that is: how will these changes impact the end investor? From there, the approach is to look through the transactional work flow to examine the key areas of impact on a systematic basis, and then work up. The devil is always in the detail!