Last week bobsguide attended the Fix Trading Community conference which was held at The Old Billingsgate Market in London. The trading conference hosted over 950 attendees for it’s 9th year, and saw industry experts discuss trends, topics and what the future of trading holds. Read on to see our five key takeaways from the show.
1. MIFID II could improve the relationships of regulators and businesses
It’s clear that transparency for regulations and businesses will need to a focal point for when the new MIFID II regulation comes into play on the 3rd of January, 2018. EU capital markets will be transformed under new rules and there will be a shift to a new trading landscape. Trading transparency could create new opportunities for collaboration between regulators and businesses, which could create better relations and add additional standards.
“MIFID II has shown us that there’s a huge amount of regulation that we need to achieve. There’s a huge amount of data crunching that we have to do.” said Matthew Coupe, Co-Chair Regional Committee & EMEA Regulatory Subcommittee, FIX Trading Community, and Director, Barclays Investment Bank.
“Its not just the banks role to reduce the cost of standards. If the industry can provide standards, it also reduces the cost of implementation of the industry as a whole. If the vendors have a standardised implementation, it assists them in not having to build a bespoke product.” Coupe added.
Industry and regulators can provide markets with a clearer of post-trade markets and give more time to data reporting services to work through all the challenges the industry currently faces.
2. Fixed Income
As MIFID II introduces very specific requirements regarding post-trade and handling of information, there will be a plethora of changes to be undertaken before the new regulation comes into play.
The topic of fixed income was a pivotal issue that was discussed by trading industry experts. Our takeaway on topic was that there’s going to be a much stronger need towards fixed income markets wanting to have electronic engagement within the system. Protocols of the way the market trades are also expected to evolve.
The main challenges around fixed income are around creating a new front-office tool to process the large volume of data that will be a host of the new MIFID II regulation. MIFID II will move some of the work flow from businesses onto electronic trading, but firms need to have a strategic re-engineering of their front office tools that can be integrated to the new system and not pose a regulatory risk.
3. Voice trading has a future
Hand in hand with fixed income comes voice trading. There is inevitable uncertainty on the future of voice trading, with new implantations from MIFID II limiting the operation. However, at a panel discussion on Voice Trading at the Fix Trading conference, industry experts discussed that while voice trading can be difficult to implement, it can also be an efficient method for larger trades.
A Greenwich Associates report found that the growth in electronic trading across fixed income has steadily grown since 2008. The report shows that there's slow but consistent growth, with 46% of investors trading with fixed income stating they trade somewhat of their volume electronically.
4. Implementing transparency and standard views
Transparency is a key issue that we heard several industry experts discuss at the FIX Trading conference. Transparency requirements will be in place for different types of organisations and types of trading.
Transparency will also provide security for the financial markets. Increasing transparency through expending pre and post-trade regimes will expand the possibility of transaction reporting and allow a provision for the EU capital markets.
Another key area of topic was clock synchronization. MIFID requires firms to clock synchronisation and harmonise everything together. It was clear from the event that this aspect is set to be a significant challenge. "It’s very technical and a core issue that firms need to get right.” commented Matthew Coupe.
“Transaction reporting is also a big issue. If you speak to any of the senior buy side teams today, they will be able to tell you that transaction reporting is a problem. Trying to address all these areas with standard views will help solve a lot of headaches. It also de-risks their firms.”
5. FIX Trading is helping to develop solutions and give clarity to MIFID II
It was clear from the conference that MIFID II will bring a lot of challenges, but hand in hand with the challenges come opportunities for businesses.
FIX Trading has evolved primarily from an equity background, and regulation requires a huge amount of standards in non-equities. The Fixed Income and particularly derivative markets shows that when you trading, there’s no codified way of trading to be able to formalise the process. FIX Trading is focusing on transparency, best execution, data record keeping, trade reporting and clock synchronization to develop practical solutions to requirements of MIFID II.