Equities trading focus | Lynn Strongin Dodds
trading venues would need to provide equal access to the four interoperating clearers and open up access to their trade feeds.” This topic does not fall under the remit of
the European Market Infrastructure Regulation (EMIR) although there is scope under MiFID II proposals which advises exchange-owned clearinghouses to be more accommodating. If passed, this would not only have a significant impact on Deutsche Börse, home to Eurex and Clearstream, but it could also possibly threaten US-based IntercontinentalExchange (ICE) and CME Group who are putting down roots in London. Although it is difficult to predict whether these recommendations will make the final cut, there is no doubt that they are one of the most hotly debated topics in Brussels. In the meantime, market participants are
grappling with the current state of play. “It is a difficult time in the equity space,” says Beau Alexander, head of product management for SunGard’s Valdi Solution. “Banks and brokerage firms have a laundry list of things to do. It is not only about complying with the new regulations and the added cost that involves but also continuing to source liquidity at the best price for clients. The big question is how do they achieve this at a time when margins are shrinking? Those that are able to manage their equity trading though can use it as a springboard into other asset classes.” Not surprisingly, mid-tier brokers are having the
most difficulty as they not only lack the resources and economies of scale of their bulge-bracket peers but also the niche expertise of their smaller brethren. As one market participant put it, “There is an argument that can be made that there are two types of firms – the full service British Airways model and the no frills EasyJet. It is the organisations in the middle that are being ultra squeezed.” However, even the large players have been
forced to restructure their equity trading operations to better meet the changing needs of their buyside clients. They are not only demanding the latest cutting edge electronic tools but also help navigating the trickier more illiquid landscape. This
Best Execution | Summer 2013
“Historically, it was the mid-tier firms who would significantly outsource their back and middle office operations. That is changing and we are now seeing the bigger banks doing so.” Julien Kesparian, BNP Paribas Securities Services
has led many to reorganise their equity trading franchises and combine their high and low touch services with an execution consulting offering. “In the past, there used to be a high touch desk for difficult orders with a separate low touch offering,” says Brennan Carley, global head of transactions and platforms at Thomson Reuters. “Brokers have increasingly combined the two but cost pressures are also having an impact on the coverage desks which now have less people.” Chris Hollands, head of EMEA sales at IT vendor TradingScreen, adds, “The sellside has
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Jan-Feb 2013 Rosenblatt Securities. 2 LiquidityMatrix May 2012.
Copyright © 2013 Credit Suisse Group AG and/or its affiliates. All rights reserved. 1
Rosenblatt Survey May 2012, TABB Group 29
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