Viewpoint | Jon Knight
buyside, best execution relates to an obligation to minimise market impact and information leakage, as well as cost. Liquidnet’s buyside members trade through our network because they know that doing so provides them with best execution and reduces the potential for information leakage and market impact. Every day, our members trust us with their most valuable information: their trading intentions. Because of this trust, we have a responsibility to do everything we can to protect their orders and information, and Liquidnet’s Market Surveillance team are key to making sure that we fulfil this responsibility.
How does market surveillance work in Liquidnet globally in terms of protecting the interests of your members? We operate a global surveillance team, which reflects the fact that our members are dispersed world-wide and trade markets around the globe. Today we connect over 700 of the world’s leading asset managers to large-scale trading opportunities – block trading – in 41 markets across five continents, including 29 markets in Europe, and offer a different type of trading proposition1
. Liquidnet has MTF (Multi-lateral
Trading Facility) status and as such, we have the same requirements as regulated markets. We have strict membership requirements that
are intended to safeguard the integrity of our network. Essentially, these requirements provide members with the assurance that when they trade with us, they are accessing a natural pool of liquidity and connecting with other like-minded long-term investors.
Under FCA (Financial Conduct Authority,
previously the FSA) rules we are required to monitor our market for breaches of our rules, disorderly trading conditions and most importantly market abuse. This requirement is in addition to the standard market abuse monitoring requirements that all investment firms have. Essentially we monitor all trading activity on our markets in real time and on a T+1 basis in an attempt to detect a variety of manipulative and information-based behaviours that are, or indicate, market abuse or conduct issues.
Best Execution | Spring 2013
Within our Liquidity Watch surveillance system we use a feature called Auto Policing, which analyses our members’ behaviour in real time and helps to ensure their information is protected at all times – particularly frustrating behaviour can result in a member being temporarily suspended from being able to trade a stock automatically by the system. Indeed, if one member does not follow the appropriate protocols, we have an obligation to our other members to prohibit them from interacting within the network.
Is harmonisation across different jurisdictions an issue for your organisation and how is it addressed?
Harmonisation of market surveillance practice is a natural progression. We have a single surveillance system here at Liquidnet that applies best practice in whichever jurisdiction it is required, globally. This means that we provide the same high level of surveillance across all of the markets and juristiction we operate.
Who, other than the regulators, are pressing for change?
When it comes to market abuse, it is clear that everyone is pushing for a continued commitment to develop more enhanced methods and processes for market surveillance. It is an area of the financial markets where everyone is trying to work together. Regulators look to market participants and trading venues to help them understand the issues and develop appropriate responses, and the markets need regulators to make sure that standards and rules are applied across markets, and enforced where necessary. A firm’s surveillance function exists to prevent and identify market abuse, and to be successful, surveillance teams across the industry have to work together to achieve this goal. In my view, a collaborative and holistic approach to market surveillance is needed, and I am positive about the progress that has been made as a result of ongoing dialogue between regulators, participants and trading platforms like Liquidnet. ■
1. The average trade execution on Liquidnet today is c.€800,000 (
c.US$1m) versus other MTFs/non-displayed venues at between €5,000-€25,000 and €3,000-€5,000 on European lit markets.
37
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100