Conference Dailys TRADETech Daily 2018 - Page 5

THETRADETECH DA I LY latest news THE OFFICIAL NEWSPAPER OF TRADETECH 2018 Regulation Top 5 most read stories 1 Buy-side bond traders reevaluating traditional RFQ model Asset managers trading corporate bond markets are evaluating a move away from the traditional request- for-quote (RFQ) model, opting instead for electronic execution to meet best execution requirements, according to a study from Liquidnet. 2 MiFID II tick size regime sees transaction costs increase THE FRENCH FINANCIAL REGULATOR HAS FOUND MIFID II’S TICK SIZE REGIME HAS WIDENED THE SPREAD ON CERTAIN TRANSACTIONS AND IMPACTED HFT MARKET MAKERS. T he cost of small transactions on some of the most liquid securities has slightly increased following the implementation of MiFID II’s tick size regime, according the French financial regulator. Autorité des Marchés Financiers (AMF) carried out the analysis of the initial impact of the re- gime on just over 500 shares on Euronext Paris, including CAA40 stocks. It found the effects of the tick size rules were positive overall with less messages to create noise in the market, increased traded volumes and an increase in quantity available at best limits. “It reveals a sharp increase in depth and a significant reduction in the number of messages sent to the market, at the cost, however, of a widening of the spread for the most liquid securities,” the analysis said. “The outcome for market participants is a slight additional cost that is offset by the ben- efits of noise reduction and the increase in the quantity available at the best limits. For small caps, implementing appropriate tick sizes…re- sulted in a more dynamic order book and, above all, a sharp increase in traded volumes.” European authorities introduced a harmonised tick size regime under MiFID II, although it proved to be controversial with certain market partic- ipants claiming it was put in place to control high-frequency trading (HFT) flow and activity. The AMF’s study suggests the positive effects of the regime only concerns orders of non-HFT participants, with a decrease in market share seen across HFT firms. HFT market makers’ share of the depth and traded volumes decreased for securities with an increased tick size, compared to securities where the tick size remained the same. The AMF said this suggests that increasing tick size allows more players to place orders at competitive prices in the order book, while HFT market makers fail to offset the competition of the other players at the best limits by gaining a better position in the queue. The regulator reiterated that the study presents average magnitudes by a group of securities and covers a period of low volatility. Head of FX operations at Barclays charged over front-running scheme The former head of FX trading oper- ations at Barclays, Robert Bogucki, has been charged for orchestrating a major front-running scheme. He allegedly manipulated £6 billion worth of FX options to depress the price of volatility prior to the execu- tion of large trades. 3 MiFID II wipes $300 million from equity research industry The European equity research mar- ket has plummeted by $300 million in the wake of MiFID II’s rules on unbundling payments for invest- ment research and execution fees. A Greenwich Associates study found research budgets were slashed 20% year-on-year. 4 Hudson River to acquire Sun Trad- ing as HFT continues to contract Hudson River Trading is to acquire market-making firm Sun Trading as high-frequency trading continues to shrink in the face of low market volatility and increasing costs. The deal is expected to be finalised in Q1 2018, subject to regulatory approval. 5 Interactive Brokers fined $4.5 million for algo trading system failures The Hong Kong-based arm of Interactive Brokers has been fined $4.5 million for failures relating to its algorithmic and electronic trading systems. Asian authorities found the business had breached a code of conduct for execution of market orders using the systems. Issue 1 5