Boarding The Train To China - 2015Q2

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GlobalTradinGQ2 • 2015 • Issue #54FIXGlobal.com

boarding The Train To china

chris Seaboltasia Head of Trading, Fidelity

management & Research

alSo INSIDE : BNY MelloN, Jupiter Asset MANAgeMeNt, lA CAisse , FrANkliN teMpletoN, HigHlANd CApitAl , AlliANCeBerNsteiN

Emma QuinnAllianceBernstein

Carlos OliveiraBrandes Investment Partners

Greg LeeBarclays

Dear Readers,Among the ideas that we look to emphasise at FIX Trading Community events and other communication venues in the industry is the expansion of related topic discussion beyond the technical elements and applications of the FIX protocol itself. FIX today is obviously implemented as a de facto accepted global standard and utilised as a critical component of pre- and post-trade electronic trading and processing, regulatory reporting and other related functions. But what is most interesting is how the same community that championed the protocol has evolved into an effective forum for broader but intertwined strategic and business level activities and dialogue. Initiatives involving trading, but also including regulatory compliance and reporting, operational solutions, data management, cybersecurity and even such topics as cryptocurrency are actively examined and reviewed by the community.

By illustration the content of the GlobalTrading Journal has very well exemplified the blending of both the continued technical adoption of the FIX protocol along with the coverage of subject matter related to FIX and electronic trading, but more specifically focused on the interests of the business and less technical professionals within our ranks. Representative of that point, in the current edition of GlobalTrading we offer article contributions covering areas of business interest including unbundling in Europe, fixed income market initiatives, Turkey and emerging markets and further developments on the next generation of post trade processing.

Please enjoy this edition of the journal. We very much appreciate your interest, support and contributions to Global Trading and FIX Trading Community. We look forward to your feedback, thoughts and suggestions..

Best Regards,

Bill HebertAlpha Omega Financial Systems, Inc.Co-Chair, Global Member Services Committee, FIX Trading Community

GlobalTrading’s Editorial Think Tank

Bea OrdonezConvergex

Bill HebertAlpha Omega Financial Systems, Inc.Co-Chair, FIX Trading Community Global Membership Services Committee

GlobalTrading PublisherEdward Mangles

General ManagerRebecca Trant

Managing EditorPeter Waters

Sales and MarketingYulia KuksinaRavi Gangwani

Design & LayoutGoldie Lee

Publishers’ NoteGlobalTrading is proudly published by HM Publishing in support of the FIX Protocol and the FIX Trading Community. GlobalTrading is the official quarterly publication of the the FIX Trading Community, however, the content does not necessarily represent the opinions of the FIX Trading Community.

The opinions expressed in this publication are not necessarily those of the publishers or of the institutions of the contributing author. Although care has been taken to ensure the accuracy of the information contained within the publication, neither the publishers, authors nor their employers can be held liable for any inaccuracies, errors or omissions; nor held liable for any actions taken on the basis of the views expressed, or information provided within this publication. No part of this publication covered by the publisher’s copyright may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, be they graphic, electronic or mechanical, including photocopying, without the written permission of the publisher. Any unauthorised use of this publication will result in immediate legal proceedings.

All Rights Reserved © 2015

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ConTEnTs

FOCAL POINT

7 Boarding The Train To China - Chris Seabolt, Fidelity Management &

Research

10 Dealing With Unbundling - Jason McAleer, Jupiter Asset

Management

12 Commission Management - Anita Karppi, Kristian Karppi, K&K Global Consulting

INSIGHT

15 Standards And Regulatory Reporting - Chris Pickles, Open Symbology Team,

Bloomberg

18 Evolution of Istanbul - Muammer Cakir, Borsa Istanbul - Michel Balter, CameronTec Group

22 The Value Of The Human - Daniel Bisaillon, La Caisse

OPINION

23 A Revolution In Post-trade Operations - David Pearson, Fidessa

25 Voice is Still Sweet Music to our Ears - Neil Gray, IPC

EUROPE

27 Big Data’s Role In Compliance And Risk Management, Roundtable Coverage

- Peter Waters, GlobalTrading

31 The Changing Technology Landscape - Nick Greenland, BNY Investment Management

AMERICAS

34 Changing Technology, Finding Alpha - Bill Stephenson, Franklin Templeton

- Joe Sowin, Highland Capital - Michael Lynch, Bank of America Merrill

Lynch

38 A First Look At Regulation System Compliance and Integrity

- Jim Northey, CameronTec Group

42 Driving The Debate - Dave Lauer, KOR Group

LOOk BACk

44 A Look Back at Unbundling - Editorial, GlobalTrading

ASIA

47 Hong kong’s New Era - Will Haskins, GlobalTrading

FRAGMENTATION

50 Evolving Market Structure

INDUSTRY 52 Company Profiles 55 FIX Trading Community Members

7 10 31

34

Cloud-based solutionsupports pre-trade,trade & post-trademessages

Access to over 500 counterparties around the world

Interconnects with your existing

systems & networks

Front, middle and back office

Buy-side and sell-side global reach with one connection

Reducing the need for point to point connections

Re-imagine global trading now. To find out how email: [email protected]

Global trading... re-imagined. SmartHub.PROBLEM: Financial market participants are facing cost pressures,

increasing competition and a need to trade with the global community.

SOLUTION: SmartHub will change the way you do business with the world and cost effectively trade globally, opening the door to client and revenue growth.

SmartHub is a new trade messaging and order routing network from IRESS. It connects market participants across the globe, reducing point to point connections and cost.

IRESS provides connectivity, trading, wealth management and market data solutions

Offices in: Australia, Canada, Hong Kong, New Zealand, Singapore, South Africa, United Kingdom. www.iress.com

C

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K

Global_Trading_Magazine_Advert_v6.pdf 1 23/04/2015 10:43

HiGHliGHTs“... - these were new market regulations covering a new trading mechanism; we had to develop an approach that fit our needs and risk tolerance; agreements had to be reached and accounts opened with brokers and custodians; trading, compliance and custody systems were set up and tested; education and updates were provided to senior management, our investment teams and oversight groups. Ultimately, this intense focus and effort across these various functional groups allowed us to address many of the issues that many other large investors could not.” P.7

“it is not only the direction of change towards unbundling that is important, but how that change manifests and what tools we can use to allocate our spend. There are vast differences between different buy-side firms. Dependent on the budget, the style of the house, you can break out your spending by fund, by individual manager etc, and there needs to be clarity as to how we pay.” P.10

Chris Seabolt, Fidelity Research & Management

Jason McAleer, Jupiter Asset Management

“on single trades one of the most important skills is finding market colour and what’s going on in the name and sector. The human is intelligent and has the instinct and the knowledge to build the complex data together. Then the decisions has to be made about how to execute, whether to use a broker, to use an algo, or whatever. You can use a machine to do the trade, but a human is needed to make the decision about how to trade in the first place. ” P.22

“The differences between the buy- and sell-side are blurring and will continue to do so. The effect on the broker dealers, for example in fixed income markets, means that the sell-side is much less able to hold inventory, and there is scope for the buy-side to take on more control of the asset class. However the sell-side still do a lot for the buy-side and we need to understand the changes in that role to be able to still get the most out of those relationships. The pattern of shifting human capital is beneficial for both sides once it has been understood..” P.31

Daniel Bisaillon, La Caisse

Nick Greenland, BNY Mellon Investment Management

“For us a key target is to identify areas within our firm where technology can enhance functional domains such as trading, risk management, compliance, and overall investment process. We also need to examine each vendor within each domain for interoperability and concordance with current systems capacity, and then create implementation schedule, and evaluate effectiveness.” P.34

Joseph Sowin, Highland Capital

fidessa.com

Fidessa systems are trusted because they work, and – just as important – they work together. We understand what the buy-side needs and what the sell-side wants, and our solutions span every possible aspect of the trading and investment process. With 30 years of experience, 1,700 expert professionals and operations across Europe, the Americas, Asia Pacific and the Middle East, you can trust us to keep you trading, 24/7.

Strength in breadth

196x267-Bleed-Advert-Fidessa.indd 1 2/14/2014 9:24:58 AM

Q2 • 2015 | GLOBALTRADING

FoCAl PoinT | 7

Chris Seabolt, Asia Head of Trading at US-based Fidelity Management & Research looks at the development of their use of the Shanghai-Hong Kong

Stock Connect, and its role in gaining China exposure.

Boarding The Train To China

More Buy-side Interviews

GLOBALTRADING | Q2 • 2015

8 | FoCAl PoinT

tested; education and updates were provided to senior management, our investment teams and oversight groups. Ultimately, this intense focus and effort across these various functional groups allowed us to address many of the issues that many other large investors could not.

How has this been advantageous? FMRCo was able to start building A share positions through the Connect starting November 17th, 2014 and our funds represented a substantial portion of the Northbound trading quota on the first days of the program.

Taking advantage of this early window of trading allowed us to establish substantial positions across a number of A share companies on behalf of our fund shareholders, and since then we have seen a substantial rally in the Chinese equity market. While we always take a long-term view, our timing was fortuitous and this has been a big benefit to our funds and shareholders.

Best/worst aspects – what would you change if you could? The pre-delivery requirement and the nuances around the tight settlement cycle are the two areas that have been the most challenging for us. In order to avoid pre-delivering stock on a sale trade, we have a process with our local custodians and their brokerage arms.

Still, we are exploring alternatives to have a full suite of execution counterparties for our A share sales. In terms of the settlement cycle, the non-standard DVP process is something that’s unique to China and a departure from our standard workflow. These are the two areas we would like to see enhanced. In the meantime, we are satisfied with the process we have developed to operate effectively in the Connect and we look forward to its ongoing evolution.

Enhanced model – are you going to engage, why/why not? Similar to the first iteration of the Connect, we are dedicating time to understanding the new model. While it could represent some improvements, such as the elimination of the pre-delivery requirement, there are still some issues we are facing relating to the tight settlement cycle. We will continue to use our current Connect process while we monitor ongoing developments.

What enabled you to use the Connect more than other firms? When the initial announcement of the Stock Connect was made, US-based Fidelity Management & Research Company (FMRCo) realised this presented a historic opportunity to invest directly in China that we needed to prepare for. We set up an internal task force across a number of functional areas such as trading, operations, compliance and legal to address the various aspects of the Connect.

This was no small task – these were new market regulations covering a new trading mechanism; we had to develop an approach that fit our needs and risk tolerance; agreements had to be reached and accounts opened with brokers and custodians; trading, compliance and custody systems were set up and

“......these were new market regulations covering a new trading mechanism; we had to develop an approach that fit our needs and risk tolerance; agreements had to be reached and accounts opened with brokers and custodians; trading, compliance and custody systems were set up and tested; education and updates were provided to senior management, our investment teams and oversight groups......”


FoCAl PoinT | 9

Chris Seabolt,Asia Head of Trading at US-based Fidelity Management and Research

Future of Connect – do you want more exchanges, more flow, more institutional firms involved? We look forward to the anticipated addition of Shenzhen-listed A shares and additional Shanghai-listed companies, which should increase the investable universe of Chinese companies that we can access through the Connect.

The potential addition of A shares to key market indices, which many global asset managers use as tracking benchmarks, is also a development we will watch closely in the coming months. FMRCo views the Stock Connect as a first step in the broader opening of Chinese capital markets which presents an exciting opportunity for investors globally.

“The potential addition of A shares to key market indices, which many global asset managers use as tracking benchmarks, is also a development we will watch closely in the coming months. FMRCo views the Stock Connect as a first step in the broader opening of Chinese capital markets which presents an exciting opportunity for investors globally.”


10 | FoCAl PoinT

expenditure. We are better able to break out what we are paying, which makes us more accountable to our clients, and more transparent to the regulator.

Sell-side impactIt is a very different matter when it comes to the sell-side. For some firms this drive towards full unbundling is undoubtedly a good thing. But for others it could cause their models to struggle, and that is definitely something we should be aware of when making changes to how the market functions. The smaller independent research firms are highly valued and managers do seek them out. Our ongoing and well developed use of CSAs is very helpful in breaking out payments to the smaller firms to get specialist research. But as we have seen, there could be changes to how CSAs function (or indeed exist), which would have consequences here.

It is not only the direction of change towards unbundling that is important, but how that change manifests and what tools we can use to allocate our spend. There are vast differences between different buy-side firms. Dependent on the budget, the style of the house, you can break out your spending by fund, by individual manager etc, and there needs to be clarity as to how we pay. There also needs to be a better two way conversation with brokers offering their services through more of a menu - this allows us to access their services in a way that both parties are happier with. We need to know the true cost of research and the true value that it provides us, just as much as the sell-side needs to start giving value to these metrics. Mid to small sized brokers whose model was to capture flow to pay for research could suffer as these changes manifest, and we could see mergers off the back of this.

One consequence is that more and more analysts are leaving the sell-side research houses, either to go independent or to move into the buy-side. This is an ongoing trend, and one that needs more time to develop, but buy-side firms are starting to look at the potential benefits of building out bigger in-house research teams.

Asset managers are now being a lot more explicit about how they spend and what they get for their money. This is being done through clear voting, identifying clear research needs, and generally, with asset managers appreciating that the money they spend on research is effectively their own. With greater care and due diligence about the research spend, the buy-side can make a big difference to how unbundled they are.

Drivers towards greater unbundling seems to come increasingly from the regulators rather than from the clients. We, of course, act in the best interest of our clients, but with the push from the regulators, we are having to engage much more in the process of thinking about what we receive for our cash. In a pure unbundled world we would be allocating individual brokers specific amounts for defined permitted services; bespoke analyst meetings, research, execution. Once we’ve established what we are paying for, we can start to look at budgets and managing that

Jason McAleer, Head of Dealing, Jupiter Asset Management, examines ongoing change in commission management and its impact across the buy-side and sell-side.

Dealing With Unbundling

Jason McAleer,Head of Dealing, Jupiter Asset Management


FoCAl PoinT | 11

Buy-side managementAt Jupiter we are currently building out our commissions management policy – taking key aspects of how we pay for research and pay for execution, and putting that into a formal policy. This allows us to better formulate research budgets across strategic groups – rather than have a budget that can run away this allows us to be much more focused on consumption and to properly value research that’s voted for. We are getting there slowly: as mentioned, it is a difficult conversation to get the brokers themselves to value research separately and to put a firm price on their offerings, and we need to work closely with our own fund managers . We are starting to work with a commission aggregation firm that allows us to organise and manage much of this operationally.

There is an angle to this which both benefits internal transparency and external transparency. By being more specific in information from our fund managers when they are voting we are much better able to put a specific dollar value on a given piece of research. That level of detail is very helpful for us. It is still very much more art than science – until brokers come up with tariffs – the same research will be worth different amounts to different people.

One slightly worrying consequence of this drive towards more specific pricing of research would be if the investment banks set that price targeted at the largest asset managers. We could see many small and mid tier buy-sides simply being priced out of being able to afford the research they need. So with smaller sell-sides suffering if they can’t use natural flow, and with buy-sides being priced out of the

market, there is a very real threat to the nature of the industry in the UK if this is not properly managed.

GlobalThere is an ongoing discussion as to how this feeds into a global conversation. The UK and Europe have been developing unbundling for a long time – pre MiFID I and into MiFID II. The US predominantly pay for research via soft dollar arrangements. In Asia global firms are starting to become more unbundled, but in less developed markets it is still very difficult. On the sell-side they can often see our money coming to them as being from us as a whole client. The specific split for research and commission doesn’t always happen resulting in a bundled view of the revenue. And I think that needs to change, as again that would give them a view as to their revenue flows, which allows them to cost back to us a lot more clearly. There is a debate as to whether Europe and the UK going alone on this opens us up to an arbitrage – why would an asset manager work in these environments that are more regulated than in the US or elsewhere?

We do need much greater transparency from the regulators as to what they are likely to implement and need to make sure that the CSA systems we are building out will be useful beyond January 2017. At the moment we don’t have that clarity and it is causing us difficulties.

To summarise, we need to become a lot more precise in how we are putting a value on research and commissions, and the sell-side need to become a lot better at putting a value on their products. Once we have our budgets and they have a price list, we can see how to work our needs and budget to that. It will be tough, but with CSAs and systems in place we can make the industry more transparent, and hopefully not disenfranchise too many of the smaller firms along the way.

“...with smaller sell-sides suffering if they can’t use natural flow, and with buy-sides being priced out of the market, there is a very real threat to the nature of the industry in the UK...”


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54 senior buy-side traders across Asia and Europe voiced their opinions about current and future commission management practices in the K&K Global Consulting Ltd’s (K&KGC) Buy Side Perspectives 2014 Commission Management report co-authored with FourFirth Consultants This follows a long and intense debate between the UK regulator Financial Conduct Authority (FCA) and the European Securities and Markets Authority (ESMA) who advise the European lawmakers about the future MiFID II regulation.

We conclude in the report that there is unlikely to be a single global approach, not even within many of the Asset Management firms, to commission management. There is an opportunity for the buy-side trading desk to refine their role within the firm and the focus will increasingly be around the value the trader can add in the investment process. K&KGC recommend that buy-side firms evaluate the benefits of establishing a formal Trade Management Oversight Committee (TMOC) to oversee commission management procedures. Unfortunately only a few national regulators and buy-side associations are being pro-active and helping the buy-side firms in this process so

By Anita Karppi, Managing Director, Co-owner K&K Global Consulting (K&KGC), and Kristian Karppi, Managing Director, Co-owner K&K Global Consulting (K&KGC)

Commission management – no one size Fits All

there is a strong need for buy-side peer debate, collaborating to resolve the common challenges. Examples of top level responses from the buy-side regarding unbundling: • 79%sayendinvestorsaregettingbetter

information on what their commission is spent on.• 68%confirmthatliquidityprovision

has not been affected due to changing commission management practices.

• 53%thinkthatunbundlingprovidethefirms with a competitive advantage.

• 50%thinktheyreceiveacostadvantage.• 42%havereducedthenumber

of brokers due to CSA’s.

The UK FCA was ambitious and early to implement regulation for unbundling in 2014, far ahead of MiFID II, with their own interpretation of how to treat research and corporate access within dealing commission payments. As the UK based buy-side were forced to unbundle their dealing commissions,59%ofthesurveyrespondentschoseto use Commission Sharing Agreements (CSA).

ESMA on the other hand, have deemed the current use and practice of CSA’s as not entirely meeting


FoCAl PoinT | 13

transition to budgeting fixed, instead of relative, amounts of research budgets on a quarterly basis which should not be linked to transactions. The buy-side will apply stronger due diligence of what form of research they are consuming and paying for and if the charges can be passed on to their clients or not. To complicate the challenges further, where bundled dealing commissions have been exempt from value added tax, the European authorities have been unwilling to confirm that the unbundled research component will remain tax exempt. Consequently independent research providers will increasingly be set in a fairer competitive position against research brokers.

With such dynamic changes and inconsistency, the Asia based buy-side are still observing how regulation will emerge, not only in Europe but also in the U.S.A., in order to predict the national Asian regulators next move. The Asia based buy-side have a significantly higher dependency on the relationships with their sell-side partners and are protecting the mutual interest in paying for relatively higher service levels.

More detailed analysis and commentary can be found in the Buy Side Perspectives 2014 report about Commission Management from K&KGC. To purchase the full report, please email [email protected] and take advantage of the GlobalTrading readers’ 10% discount.

the objective of decoupling research charges from transactions. Something that subsequent to the UK FCA initiative has given unfair advantage to the largest banks who had such CSA arrangements with the buy-side and are subsequently rapidly gaining market share to the detriment of smaller brokers. The buy-side in Continental Europe were given more time to choose their preferred method of unbundling and the buy-side in Sweden and Germany has alternative means to unbundling which they deem more efficient and less administrative compared to CSA agreements. Various buy-side associations are now lobbying and coming up with alternative solutions for how CSA agreements can remain in use within MiFID II.

The UK buy-side also waved farewell to the use of dealing commissions to fund corporate access services. ESMA is not following suit, being descriptive about the future classification of corporate access. This means that an unfair form of regulatory arbitrage where a fund manager based outside the UK may be permitted to meet a CEO of a listed company in the UK funded by dealing commission charges, whilst a fund manager in the same firm but based in the UK is not.

The European buy-side will, successively as new legislation is rolled out country by country, need to

Anita Karppi, MD, Co-owner K&K Global Consulting, andKristian Karppi, MD, Co-owner K&K Global Consulting

TBNAB2430_starXchange 267x196 GlobalTrading FA A115910 V2 OL.indd 1 28/04/2015 5:12 pm


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By Chris Pickles, Open Symbology Team, Bloomberg

standards And Regulatory Reporting

Whichever country you operate in, the demands and complexity associated with regulatory reporting have been gradually increasing over the last ten years. That includes transaction reporting to local regulators as well as trade reporting to the market as a whole, irrespective of asset class. As a result, the urgent need to agree and adopt standards that will help regulators to monitor markets and help financial institutions to achieve regulatory compliance more cost-efficiently has become more and more apparent to all involved.

Three key areas that market participants are addressing together with regulators and industry associations are: the process of identifying what has been traded, identifying the nature of the trade and establishing how to communicate all of this information to regulators consistently.

You might think it’s simple for firms themselves to identify what they have traded - but even that isn’t as easy as it seems. Each different area of financial markets currently has different ways of identifying what is being traded. Each country has its own system for identifying equities and bonds, and those domestic identifiers are at the heart of the ISO International Securities Identification Numbering (ISIN) standard.

However, regulators have recently started to recognise that ISINs are little-used outside of the securities (equities and fixed income) sector. Derivatives exchanges have historically generally used their own in-house identifiers with no international standardisation, with OTC derivatives frequently having no recognised identifiers at all. And when it comes to other asset classes, such as commodities, foreign exchange and money markets, and other financial products, such as loans and mortgages, standardising the identification of financial instruments is still in its infancy.

Work is ongoing in the USA and across Europe to agree on how to standardise Unique Product Identifiers (UPIs) and Unique Trade Identifiers (UTIs) for the OTC Derivatives sector. Regulators in Europe are separately proposing the use of non-standardised “Alternative Instrument Identifiers” (AIIs) to identify exchange-traded derivatives. These regulators have started to recognise the vast number of instruments for which there have been no standardised identifiers, saying firms will just have to describe those instruments to the regulators when they report transactions. As yet there is no clear agreement on the approaches to be taken.


16 | insiGHT

now been applied by Bloomberg to allocate FIGIs to all of the instruments that it covers.

The second key area being examined is about identifying the nature of a trade and how that impacts the basic information that relates to that trade. Without details of the nature of a trade, information about that trade could be interpreted wrongly. For example, the same identical financial instrument could be traded in two different ways and at two different prices: without knowing how the trade occurred, pricing information about that instrument could be used incorrectly to make investment and trading decisions. Understanding the nature of the trade is where the Market Model Typology (MMT) becomes invaluable.

It’s a natural tendency to expect that financial markets in all countries function in the same way as in your own country - but that’s very often not the case. Just taking one example of this, stock exchanges can operate a market in three ways that are fundamentally different - quote-driven, order-driven matching and order-driven auction - and each of those different market structures can result in different prices for the same equity. A single organisation can operate multiple exchanges and multiple market segments within those exchanges, and each of those can be operating in competition to other exchanges and non-exchange systems, such as Multilateral Trading Facilities (MTFs) and Electronic Crossing Networks (ECNs). All of these can be operating in multiple countries. Achieving a consolidated view of prices across the overall market may be relatively simple, but understanding what those prices mean and how they were arrived at is much more complex.

“It’s a natural tendency to expect that financial markets in all countries function in the same way as in your own country - but that’s very often not the case.”

While one solution could be to “glue together” lots of different data fields that describe the instrument in question, that approach contradicts basic principles of data management - principles that the Global Financial Markets Association (GFMA) emphasised when the global Legal Entity Identifier (LEI) system was being designed. For an identifier to be unique, persistent and unchanging, it must contain no information about the object that it identifies.

To put all of this into perspective, the ISIN standard was createdsome25yearsagoandsofararound30millionfinancial instruments have been allocated ISINs. In parallel, Bloomberg has confirmed that it now has to be able to identify over 220 million instruments and that, on average, the firm is now having to identify an additional 5 million instruments each month.

In the financial markets sector, it would be easy to think ISINs are the norm when, in fact, they identify less than 15%oftheinstrumentsthatagivenfinancialinstitutioncan be involved with. One result of this is that in October 2014 the Object Management Group (OMG), a global standards body, adopted a new standard for Financial Instrument Global Identifiers (FIGIs) that has

Chris Pickles,Open Symbology Team, Bloomberg


insiGHT | 17

In the European Union, where there is now a legal requirement to implement one or more systems for providing a consolidated view of the markets in equities across the region (European Consolidated Tape), it became clear some years ago that this would also require a clear definition of the data relating to equity prices. Trade reporting is a regulatory requirement for publication of pricing data to the market as a whole, but that is only of value to the market if the reported information can be clearly understood. The Federation of European Securities Exchanges (FESE) initiated the work on the definition of a “Market Model Typology” (MMT), later expanding this work by including participants from investment firms and relevant industry associations, including the FIX Trading Community. In order to ensure that the MMT is considered and managed as an open standard developed by and for the industry, the coordination of work internationally on the MMT has now been handed over fully to the FIX Trading Community.

At this stage we can therefore see that FIGIs provide a basis for unique identification of financial instruments across all asset classes and the MMT provides a basis for understanding the pricing information about those instruments. The third key area currently being addressed is how to communicate all of this information to the different regulators. Until very recently, regulators have dissociated themselves from industry standards, arguing that regulators are not part of the financial industry and issues surrounding industry standards therefore fall outside their remit. However, practical experience over the last ten years has proved that standards can make a major difference to regulators’ own work as well as to the compliance work of the institutions that they regulate.

As well as an individual country potentially having more than one regulator, financial institutions that have a broad range of activities and that operate in multiple countries frequently have to carry out regulatory reporting in more than one country. Added to that complexity is the fact that regulators want to be able to exchange information meaningfully with each other in order to regulate global financial markets to better effect. There is clearly a vital international requirement for the standardisation of how the market communicates with regulators and how regulators communicate with each other, both in terms of data standards and protocol standards.The European Securities & Markets Authority (ESMA) is one regulatory body actively examining this area. In March this year it gathered responses from market participants about which protocol and data formats they would find most helpful and appropriate to use for regulatory reporting. One of the options given was the use of FIXML, the XML version of the FIX Protocol.

The importance of FIX to the day-to-day operations of investment firms across Europe is clear, but not only for pre-trade activities through to trading: FIX is an ideal standard for use in trade reporting and transaction reporting as well. Being an open industry standard, FIX allows for the use of both ISINs and FIGIs, thereby ensuring that FIX can be used to report all trades and all transactions in any of the 220+ million instruments that financial institutions are involved with today. FIX also enables the MMT to be applied in regulatory reporting so that the information that is delivered has meaningful value to market participants and to regulators internationally.

Regulators are beginning to understand better the importance of standards to efficient and well-regulated markets. It’s now very much up to market participants to take the next important step and emphasise that free, open and non-proprietary standards such as FIX and FIGI are the most appropriate approach for regulators to adopt as well.

“In order to ensure that the MMT is considered and managed as an open standard developed by and for the industry, the coordination of work internationally on the MMT has now been handed over fully to the FIX Trading Community. ”


18 | insiGHT insiGHT | 18

With Muammer Çakır, Head of Derivatives (VIOP) Borsa Istanbul

Evolution of istanbulBorsa Istanbul,withhistoricalrootsgoingbackto1873,isadiversified regional and global trading venue in Turkey, home to the world’s oldest known exchange and birthplace of minted coinage, providing trading, settlement, custody and registry services for a wide range of products. Borsa Istanbul operates a broad range of equities, fixed income, derivatives, precious metals and Islamic finance markets in Turkey all under a single umbrella after successfully completing horizontal integration via acquisition of the derivatives and gold exchanges after its de-mutualisation in 2012.

WithaGrossDomesticProduct(GDP)of$786billion,Turkeyisthe18thlargesteconomyintheworld.Inlessthan a decade, per capita income in the country has nearly tripled and exceeded $10,000. Foreign Direct Investment (FDI) per annum has grown from just over $1 billion to an averageof$13billioninthepastfiveyears.Turkey’sgeopolitical advantage combined with growth opportunities facilitates its journey to become the largest financial center of the Eurasia region. Bridging East to West, Turkey is capable of combining Western and Islamic financial practices more than any other country.

The project to gather Istanbul Stock Exchange (ISE), Istanbul Gold Exchange (IGE) and Turkish Derivatives Exchange (TURKDEX) under the same umbrella to make Istanbulafinancialcenterwasstartedin2009.FollowingtheCapitalMarketLaw,enactedonDecember30,2012,Borsa Istanbul A.Ş. was founded to become the hub of all centralizedtradingactivities.In2013IstanbulGoldExchange (IGE) and Turkish Derivatives Exchange

(TURKDEX) merged under the umbrella of Borsa Istanbul. By these mergers, horizontal integration has been completed successfully. Borsa Istanbul has also increased its equity share at Takasbank (Istanbul Settlement and Custody Bank) and MKK (Central Securities Depository) to complete the vertical integration.

After this merger, all derivatives contracts have started to trade at Borsa Istanbul Derivatives Market (VIOP). As the

Muammer Çakır,Head of Derivatives (VIOP) Borsa Istanbul


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region’s leading and most liquid derivatives marketplace, investors and corporates use VIOP as a trading venue to manage their risk. VIOP offers the widest range of regional benchmark products across all major asset classes, including futures and options based on equity indices, currencies, precious metals, commodities and energy. With daily average of around 250,000 futures and options contracts traded in 2014, VIOP is an important derivative marketplace to manage risks in its region. The flagship BIST30Indexfuturesontheotherhand,currentlytrade,on average, more than 170,000 contracts per day

On the other hand, since March 2014 Takasbank has become Central Counterparty for all VIOP contracts. In the central counterparty practice Takasbank commits to complete the clearing and settlement for all VIOP contracts by acting as buyer against seller and seller against buyer. Takasbank regulates this service and related issues in line with the CPSS-IOSCO and European Union regulations.

To meet the demand of increasing order flow and trading activity, Borsa Istanbul and NASDAQ OMX Group signed a strategic partnership agreement, which includes the delivery of market-leading technologies to BorsaIstanbul.NASDAQhasbecomea5%shareholderof Borsa Istanbul. Key aspects of the agreement include the provision of NASDAQ OMX’s most advanced and complete selection of market technology solutions, based on the globally market-leading Genium INET suite and all associated platforms and applications, with regional resell rights and also eventual self-sufficiency for Borsa Istanbul. Further, the parties are working together to strengthen Borsa Istanbul’s position as a financial center of the Eurasia region.

Moreover, Borsa Istanbul signed a partnership agreement which covers derivatives and index products with the London Stock Exchange Group. Under the terms of this partnership agreement London Stock Exchange Derivatives Market (LSEDM) will offer tradinginfuturesandoptionscontractsontheBIST30Index first and on leading Turkish stocks. LCH.Clearnet will provide central counterparty services to LSEDM and its clearing members.

Borsa Istanbul VIOP is cooperating with other exchanges in the region. Sarajevo Stock Exchange blue chip index SASX 10 futures contracts have been listed at VIOP as of December, 2014. Other futures contracts based on the regional exchanges’ blue-chip indices are in the pipeline.

Borsa Istanbul VIOP launches new products in line with the investors’ preferences and hedging needs and has the vision of being a one-stop shop for all sorts of risk management needs in its region. Steel scrap futures contract based on The Steel Index (TSI)’s daily Turkish scrap price index published by Platts was launched on April 2, 2015 to meet the hedging needs of the growing Turkish steel industry participants.

Furthermore The London Metal Exchange (LME) and Borsa Istanbul A.S. signed a partnership agreement under which the LME licensed LME steel billet settlement data to Borsa Istanbul VIOP, and will work with Borsa Istanbul to develop derivatives products and related services for the steel market. Borsa Istanbul also acquired LME’s stake in the clearing house LCH.Clearnet. Additionally, Borsa Istanbul obtained the right to disseminate real time data from the LME and HKEx.

At the moment, VIOP is also working on overnight repo rate futures which will fill the need for an interest rate product in the Turkish markets. Another important project is to increase the liquidity of the commodity futures at VIOP. The currently cash settled contracts, mainly wheat and cotton, will be converted to physically settled ones via licensed warehouse system currently available in Turkey.

In April 2014, the FIX protocol was enabled at VIOP. At the same time Borsa Istanbul launched the Primary Data Center. Borsa Istanbul is able to serve as the data center of the region’s exchanges as part of its strategic partnership with NASDAQ OMX. The Primary Data Center will also offer co-location services for the financial institutions.

Borsa Istanbul VIOP also launched a popular market making program based on revenue sharing. The principle of the program is to distribute the exchange fees collected by Borsa to market makers. The program has become quite successful for single stock futures and is planned to be extended for other products.

Borsa Istanbul Derivatives Market VIOP is dominated by retailinvestorsflowwhichaccountsfor64%ofthedailytotal volume. One of the important strategic objectives is to increase the institutional flow in the Derivatives Market to peer standards. Similarly, even though the foreign investor participation in the total volume has almost doubledfrom15%in2011to28%in2015,asanexchangeweareaimingfor40-45%inthenextcoupleofyears.


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FIX alone however, is not the magic connectivity wand, and emerging markets can learn from FIX investment over the past decade or from across the more mature markets. In many cases the widespread adoption and rapid uptake of the FIX protocol has resulted in cobbled-together systems of home-grown and vendor-provided FIX-enabled services including FIX engines, rules engines, and systems for testing, monitoring, customer onboarding, risk management and support services. Many of these firms today are dealing with internal infrastructure that is aging and costing a small fortune to maintain. Upgrading and harmonizing their overall FIX routing, monitoring and testing infrastructure with a complete set of integrated products can dramatically reduce complexity and operational risk, while improving the customer experience.

Up-to-date FIX infrastructure should include integrated systems that enable the application of complex business logic and risk controls with minimal impact to latency. It should also include systems to support automated regression testing and customer onboarding, and make it easy to monitor and manage connectivity. Out-of-the box resilience can help firms optimize their operations, infrastructure and trading capabilities.

Detailed below are three tangible benefits firms can realize as a result of migrating from an outdated FIX network to a more advanced, functionally rich FIX infrastructure.

1. Reducing ComplexityMany financial institutions have grown through acquisitions, and these businesses often end up pushed together with dissimilar technologies and processes in place. This trend has exponentially increased complexity in banks’ infrastructures. When it comes to their trading framework, it’s not uncommon for these firms to have numerous FIX installations that are all siloed.

Accommodating client needs also increases the complexity of a sell-side’s routing infrastructure. Clients often have technical idiosyncrasies that require customization. In many cases, the customized processes are handled with custom code. Order routing infrastructure becomes increasingly convoluted as more custom code is layered onto the system to handle specialized business needs. These layers add more operational risk, increase the difficulty of debugging problems, and require increased maintenance and support resources.

As the transformation of Turkey’s financial markets continues, leading Brokers are investing in new technology to maintain and grow their business. Michel Balter, Chief Strategy Officer for CameronTec Group, takes a closer look at the advancement of FIX connectivity in Turkey’s emerging capital markets, and the ways Sell Side firms can gain more efficient access to Nasdaq BIST.

Today large financial institutions globally are increasingly investing in ways to reduce complexity around their electronic trading environments. Much focus has been around harmonizing front office systems across trading desks and asset classes to reduce disparate silos and redundant technology. The fragmented technology and regulatory landscape in emerging markets such as Turkey, has further complicated these challenges, adding operational cost and risk.

With Turkey now responding to market liberalization, the emerging technology adoption trend is for modern platforms and FIX protocol standards that help reduce cost and complexity, and build out a competitive business platform that will keep them in the game.

Michel Balter,Chief Strategy Officer, CameronTec Group


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At the same time, the markets themselves are becoming increasingly complex. While this complexity is unavoidable, it’s incumbent on firms to optimize their trading environments as much as possible.

Ideally, an advanced FIX infrastructure solution should help simplify a firm’s trading environment; making it easier to apply business rules without writing code. It should accommodate market complexity while making it simple to organize and update rules. It should include monitoring systems to make it quick and easy to identify issues and debug errors. In essence, it should provide the tools necessary to manage all the complexity.

2. Reducing Operational RiskAll failures have a cost. While not all incur multi-million dollar losses, even minor outages can jeopardize a firm’s reputation or relationship with a client. With allocations rapidly shifting to the emerging markets, operational risk is gaining increasing attention, with the sell-side or buy-side escalating its importance.

A lack of proper testing is often at the root of such outages. Typically regression tests run by firms are manual and based on testing individual FIX messages rather than business logic. Therefore, the tests are unable to provide a truly realistic picture of how a function might perform in a real-life trading situation. Part of the problem is that legacy FIX testing systems don’t allow users test real scenarios with complex flows that are consistent with real trading behavior, so they are unable to predict how systems will behave in more complex scenarios.

Quality assurance teams need the ability to test the entire order lifecycle in an environment that is as true-to-life as possible. They need tools that enable advanced exchange and client simulation capabilities in order to simulate real market conditions involving race conditions, volatility and high throughput, and a variety of order types sent in at volume. Most of these tests are too complex to set up manually. So the only way QA departments can truly run sufficient regression testing is by using sophisticated automated testing tools designed for testing FIX trading infrastructure.

Such an advanced automated testing solution will provide a combination of rich data model-based

testing to automate real client behavior; strengthening continuous regression testing and feeding script-based negative testing.

3. Reducing Operating CostsLegacy FIX architectures are expensive and time-intensive to maintain. Typically these solutions are built on rigid, dated technology with an abundance of custom extensions. So every time updates are required, FIX engineers are manually amending code. And often custom code is not well documented, making it more arduous to uncover issues or errors later on.

Staff reductions at many major banks have compounded the problems. Pared down IT teams are tasked with managing the volume of manual processes surrounding their trading environment. This increasing trend has exposed a real need for automation to be introduced into a number of routine processes that may have once been handled manually when more staff was available.

Advanced FIX infrastructure can automate many of these tasks and simplify others, thereby facilitating the offloading of many tedious activities. Additional order monitoring tools with a proactive alerting solution can provide transversal efficiencies to also help reduce operational costs by arming both business and IT staff with real time order flow insight for engendering a faster response time.

Weighing the OptionsEvaluating FIX infrastructure and maintenance costs is integral to investing in the right technology to deliver business value, ensure competitive capabilities and reduce total cost of ownership. When selecting the right technology partner consideration also needs to factor their ability to deliver future connectivity requirements, whether this be related to FIX, ITCH, OUCH or other. Firms migrating to a rich FIX solution that incorporates all of the integrated functionality needed in the trading workflow are able to reduce complexity, thereby allowing them to re-focus internal teams and resources on more strategic projects.


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have to do that digging and build the colour. I don’t want to compete with the computers buying a single lot of shares, I want to do blocks and bigger trades, which is more difficult to get purely electronically. And if I were to rely on purely electronic means, it is much easier to give away my intentions and the size of the positions I am trying to build. I can work it more subtly as a human and get the best execution. There is an ever growing role for technology, but the fundamental importance of the human remains.

There are limits to human intervention as even the best traders can’t watch everything at once. When crashes happen - if everyone is on the same side of the trade and algos react in the same way – human intervention can be very important to slow it down.

On single trades one of the most important skills is finding market colour and what’s going on in the name and sector. The human is intelligent and has the instinct and the knowledge to build the complex data together. Then the decision has to be made about how to execute, whether to use a broker, to use an algo, or whatever. You can use a machine to do the trade, but a human is needed to make the decision about how to trade in the first place.

It varies by market but certainly in Canada you need to make the phone calls, use the right broker, find the right clients, and it can be difficult. The human is a must in that process in a market of this size.

Finding the right price, finding the liquidity, working with the PM for their views on the market, requires more inputs and complexity than a program can handle. Computers are becoming more capable, but there are limits. They often react to the same inputs in the same way, which leads to events like the Flash Crash. People can calm it down and take that step back.

There are a lot more actors in the marketplace now, and you need technology to interact with the other technological elements of the markets, but then we need the humans to interact with the other human elements, which is what allows us to get the best trades, especially in illiquid trades. If the inputs for the machines are hidden by a lack of liquidity, the machine has nothing to go on. People

Daniel Bisaillon, Head Trader, Equity Markets, La Caisse examines the ongoing role of the trader.

“There are a lot more actors in the marketplace now, and you need technology to interact with the other technological elements of the markets, but then we need the humans to interact with the other human elements, which is what allows us to get the best trades, especially in illiquid trades. ”

The Value of The Human


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A Revolution in Post-trade operationsWith David Pearson, Head of Post-trade Strategy, Fidessa

The post-trade space is a vital area for firms. The consequences for failing to complete the trade cycle are serious; it’s not going to settle and it’s not going to clear. But to date the technology investment profile has been hugely tilted towards the front office where firms earn revenue, and where we’ve seen some new and exciting developments over the last ten years. More recently we’ve seen a greater focus on the post-trade space and recognition that whilst the job is being done, it’s beset with inefficiencies, unnecessary cost and operational risk. Trading organizations are now looking to move away from their historical reliance on proprietary solutions to handle parts of their post-trade business, realizing that there are alternatives.

One of the fundamental questions firms are asking is how resilient is the business to a single point of failure in the post-trade process? They are realizing that it is not acceptable for their business to be wholly reliant on a single, centralized system.

Setting new standards Some of the larger buy-side firms have led the way,

seeking to improve their operational efficiency and reduce operation risk through the adoption of standards, in particular the FIX Protocol. With the success of FIX in transforming front office workflows, its application in post-trade is a natural direction of travel and is resonating across the industry. And certainly Fidessa’s experience of defining the use of FIX for post-trade has led to wholesale improvements in the automation of the operational workflow, so fewer people and less time is spent managing what really ought to be a seamless process.

Gaining pace The wider buy-side community is now looking for the opportunity to adopt similar ways of working but without the overhead of a large IT investment. What is transforming the industry is the availability of service-based models from trusted suppliers.

We are now seeing solutions like Fidessa’s Affirmation Management Service taking on the work of running and managing the confirmation and affirmation process so that those firms can


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“The wider buy-side community is now looking for the opportunity to adopt similar ways of working but without the overhead of a large IT investment. What is transforming the industry is the availability of service-based models from trusted suppliers.”

process management and oversight and away from pure technology provision and support.

Unstoppable momentumAs a result of the business focus on improving the efficiency of the post-trade process, and reducing the operational risk of the existing models, the combination of a workflow built on an industry standard, and a service-based model is generating an unstoppable momentum in the post-trade operation. We are seeing an increasing number of firms adopt the direct affirmation model with the underlying confidence that they are moving in line with the direction of travel of the industry as a whole, and reaping the business benefits as a result.

realize the same operational benefits. It is this service-based approach that is driving widespread adoption of these new workflows across the industry globally, and across asset classes.

Embracing the service modelFirms want to achieve a more efficient business process at the lowest cost but still need to apply the most stringent levels of governance. They are acutely aware that they remain accountable whether or not they are operating the service themselves. Fidessa is seeing a significant increase in the due diligence and ongoing supervision of our services and we welcome that. We are happy to be scrutinized by any customers who wants to assure themselves that when the regulator asks the questions, they can answer knowledgably and confidently.

The most successful outsourcing partnerships work when the firm that is outsourcing is acutely bound into that process; asking the hard questions, leading the way in terms of knowledge, understanding where the regulator is going and maintaining a close relationship with its supplier. We’re seeing an evolution in operational skills towards supervision,

David Pearson,Head of Post-trade Strategy, Fidessa


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new Trading Communications Technology: Voice is still sweet Music to our Earsby Neil Gray, Vice President, Enhanced Services, IPC

Classical, jazz or techno. Creating a new song or piece of music hasn’t changed much over the years. But what has changed is how music is produced and delivered. Vinyl to tape to digital. Record players to boom boxes to iPods and iPhones. I suppose much the same can be said about trade execution, too.

A new song is still started by an individual’s idea, and then enhanced through collaboration with trusted colleagues – usually voice discussions on what lyric changes or melodies could make it better. But when it comes to recording and distribution, new technologies make the process faster, better, less expensive and enabled from and to all corners of the globe – almost instantaneously.

New technologies have also dramatically changed trading and trading communications. And looking forward, driven by the need for more efficient information flow and ever-greater productivity, we can pretty much count on more change leading to: • Smaller systems – perhaps virtualized, available

100-percent of the time. Equipment for trading communications systems used to fill entire rooms – sometimes even floors – of banks and trading firms. Today, it’s just a soft switch – usually compact and energy efficient.

• Improved end user productivity and accessibility – through a proliferation of custom applications, intelligent interworking and other systems. Sales people, traders, their support teams and


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“As new ideas develop for innovative financial instruments or enterprising trades, like creating a new song, voice is needed to communicate and collaborate.”

their capital markets counterparties will trade at anytime from anywhere with the utmost in capabilities, reliability and speed. Getting intellectual capital on line to close a deal anytime, anywhere is competitive advantage.

• Less human capital to manage and configure – sophisticated software and communication tools will continue to reduce the number of people required to effectively implement, maintain and monitor trading communications networks and systems. The ability to manage and make changes remotely or to make global changes from a central location is a huge savings in costs, time and resources. Taking advantage of self-service/self-provisioning tools and customer portals means tasks that required 40 people or more, now only need a handful or less.

• Real-time compliance oversight – with policy engines determining who can talk to whom, about what, and when. Today’s business intelligence can manage the more complex requirements and increasing number of variables/requirements of who and how and when any member of a trading organization can communicate with customers and counterparties throughout the capital markets while maintaining Chinese walls, highlighting conflicts of interests or flagging front running.

These technology advances will be interesting and exciting, but it all brings us back to music and the one thing that won’t change: voice and the need for it. As new ideas develop for innovative financial

Neil Gray,Vice President, Enhanced Services, IPC

instruments or enterprising trades, like creating a new song, voice is needed to communicate and collaborate. Only voice can convey the emotion, empathy and sentiments that are part of every trade. Human interaction will continue to drive markets, increase trust and enhance relationships.

As new technologies develop and accelerate the pace of change, both trading floor to back office and capital markets connectivity for voice communications becomes ever more critical. Like the music industry, we will continue to do much of what we do even faster, better, more electronically. But neither industry will be doing much of anything without the continuation of voice.


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By Peter Waters, GlobalTrading

Big Data’s Role in Compliance And Risk Management, Roundtable Coverage

On the 11th March a wide range of industry participants gathered in London to discuss the latest matters of data management and visualisation, and how compliance and regulation need to embrace the latest technologies to stay ahead of technology and provide positive benefit to the firm as a whole.

An initial area for discussion was the challenge of finding the balance between having expertise in house and being able to make the decision on what solutions might or might not be fit for purpose.

One way to work towards this is through collaboration across a firm. Everyone has to address this issue. The ongoing regulatory push is to bring wider transparency across asset classes and markets – OTC derivatives; swaps etc. Rules are the same, as are the problems and challenges, but it can be hard for people to change workflows. Collaboration across market participants and vendors is also increasingly needed. Investment banks need to agree on priorities, namely where they are drawing data from, and how to manage risk.

Next the panel moved on to discuss wider trends in risk and compliance. To date many compliance investment decisions are being made on a back foot. It was suggested, though not all agreed, that firms need to get rid of excessive staffing in compliance and invest in infrastructure/systems.

Discussion centred around the fact that the quality and quantity of data is much better than it has ever been. That said, firms need to better identify and clarify what particular aspects of the data they need to figure out. Data needs to be cleverer to offer greater value, but it is a lack of discipline that means individuals can’t articulate what they want out of it. There is seemingly a lack of skills in financial services, resulting in a trend in managed analytical services. External managed services may be a solution.

The room soon moved on to discuss what compliance officers can do themselves, and how other members of the broader firm can assist. It was determined that firms should also be looking at infrastructure and capturing


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Bruce Zulu,DATAWATCH

“Collaboration across market participants, vendors and practitioners is a viable means of influencing skill levels flow and delivering fit for purpose solutions and expertise. Visualising big data aids compliance and risk officers in exploiting the data that they have to the fullest.

Technology has to align as firms standardise underlying systems. The focus shifts towards where their data is stored, as firms have a better understanding of the data and how it can improve their business.

Within financial services, a combination of complexity, frequency and the constant need for accuracy and precision are driving factors for innovation. What inhibits progress is not technology but, the cost implication, the rate of adoption, infrastructure, expertise and the need for standardisation.

Real time high density visualizations and alerts can transform millions of data points into insight and highlight potential abuse. surveillance focused on market abuse and market manipulation has been post-trade. Emerging pre-trade surveillance using behavioural analysis and pattern recognition can identify potential violations before they occur. These pre-trade techniques validate trade instructions and manage trade threshold breaches.Contextual and unstructured data changes the workload of compliance using sophisticated alerting and thresholds to minimize false positives.

As automated trading systems move to leverage cloud-based infrastructure, financial regulators will apply the same regulations and standards to cloud computing and outsourcing activities; accelerating implementation, reducing costs and improving collaboration between regulators and market participants. The competitive differentiator for Cloud is agility.”

information properly and efficiently. They have to adjust systems and processes much more rapidly, embracing a model of more fluid adaptation.

Because of limited resources (both human and technological) and because there is so much data from so many sources, firms are trying to figure out how to best exploit it. Is there a roadmap that can be agreed and followed?

One difficulty highlighted is that analytics means different things to different people and technology isn’t necessarily the problem. People need to clearly define what they want to get from the data, and then share across the firm. The problems emerging in Europe when conducting cross border trades has been evident in Asia for some time.

One positive developing trend is that a lot of banks are standardising underlying systems. Alignment is happening, meaning that data is coming from one centralised source within a firm. But this development is not going to happen overnight. The changing regulatory burden, and how it continues to shift from the regulator to market participants is equally evident.


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Angus Pearson,MinT Partners (part of BGC Partners)

“i greatly enjoyed attending the event and found some of the ideas and perspectives very interesting. The members of the panel were well chosen for their complementary expertise and insights. i enjoyed the informality of the event, and the willingness for people to linger and enjoy a drink afterwards confirmed that others enjoyed it too and that there remained scope for further conversations around what is a complex and multifaceted topic. Conclusions? Difficult to tell what they were and perhaps they were specific to each attendee. in any case, big data remains a big topic, and the conversations around it remain ongoing, in line with the evolution of both needs and solutions in this space.”

Brandon DeCoster,FiX Flyer

“it’s very easy in our industry to get away with a bad User Experience. There aren’t many UX professionals working in finance. Moreso, regulations drive requirements: the checkboxes all have to be checked. There’s never a checkbox for good interface design. no law requires a usable system: just a working one.

interface and dashboard design aren’t static fields: they’re moving forward just as fast as technology is, and they have been for a long time. Yet in finance, we treat them as though they are just that -- static. The moment i see a pie chart, it’s like a network admin running into a Token Ring. Pie charts are obsolete. They’re information sparse, and they’re often misleading. no modern interface should display data in a pie chart. We have better components. The field has advanced. ”

There is however a disconnect between the financial services industry and other industries in terms of how the user experience develops. There is a need to get dashboard designers involved. It’s very easy to give a terrible interface because there is a lack of incentive to invest and firms are choosing to not spend unless it is deemed an absolute necessity. Industries such as healthcare and some engineering sciences, offer users of data the opportunity to not only access large amounts of data, but also more intuitive interpretation. In financial services, for example – highlighting a position that that breaches an accepted standard deviation may be more valuable in terms of identifying any immediate risk to the firm, than concentrating on the overall trading picture.

It was generally agreed that the scope of products – alerts, flags and other user interface points, have to get smarter. The ongoing battle is one of accuracy vs. precision, as when data quality drops there isn’t the capacity to adapt to the drop in quality of data.


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The debate moved onto the role of cloud computing, and how cloud services could help collaboration between regulators and market participants, and how data feeds could be shifted to a public cloud. This is a viable gateway to have data routed to your own private cloud. But a key concern hinges around privacy for internal data. Regulation tends to be nationalistic in approach which is particularly challenging in both Asian and European markets.

The elephant in the room, as decided by the panellists, is that the regulator has outpaced those involved in compliance and technological advancement. End users are not making the most of the products that they have access to. People don’t have the skill-set necessary to build their own technology.

A balance in a firm’s team is needed so they understand what they are talking about and individual decision makers are properly informed to enable them to do so. There is currently a disconnect between IT and everyone else. IT builds what they think a firm needs, but often it hasn’t been relayed what the technology is needed for. Technologists often fail to deliver because they are not practitioners. A balance is obviously required.

The broad conclusion was that people’s skills need to be updated so that the collaboration between developers and practitioners is much easier. The skills should flow in both directions, and that would help reduce unnecessary expenditure. More effective data visualisation and processing would support this, by helping compliance and risk officers exploit the data that they have to the full.

Michael o’Brien,nAsDAQ

“A very productive and thought-provoking discussion – the feedback from the audience and our customers was uniformly positive, and all found it valuable because it was a forum for exploring ideas around market data and market structure, rather than focusing solely on solutions or functionality. it also brought together a varied panel of experts – experts across data integration, service delivery, market structure, and data scientists – all with unique views on how best to apply analytics technologies across increasingly bigger data sets to bring about understanding and insight. ”


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The shift from the sell-side to the buy-side is not a new trend – the move of people and technology from one to the other has been talked about a lot, and it was also my route to the buy-side. But to my mind that is just part of the story. If we look at what is happening on the sell-side, they have been under pressure from a global and local regulatory environment. Businesses that were profitable are no longer core or as profitable.

“Necessity is the mother of invention”, and human beings are resourceful – human capital which has been developed in one part of the market is now more desired in other parts of the market. We have seen a wave of innovation across the market in terms of market structure and financial technology, for example the 50+ different platforms that are apparently currently under development in the fixed income market. Human capital has had to reinvent itself – the buy-side is also now under

Nick Greenland, Head of Broker/ Dealer Relationships BNY Mellon Investment Management EMEA and APAC

The Changing Technology landscape

more scrutiny and facing new challenges, and skills valued in one place are now more in demand elsewhere. It is more complex than the sell-side just migrating across, and it definitely isn’t uniform or moving at a constant pace.

The differences between the buy- and sell-side are in some cases blurring and will continue to do so. The effect on the broker dealers, for example in fixed income markets, means that on balance the sell-side is much less able to hold inventory, and there is scope for the buy-side to reassess how it looks at and manages involvement in the asset class. This is not to detract from the sell-side; they still perform many valuable services for the buy-side and we need to understand the changes in roles to be able to get the most out of those relationships for our underlying investors. The pattern of shifting human capital is on balance beneficial for both sides once it has been understood.


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We are in a state of unparalleled innovation in the financial markets. As the market conditions have changed, the playing field has changed, and whilst buy-side and investment managers may want to continue as normal, we need to look at different ways of accessing liquidity and obtaining information needed as part of our investment management and trading processes. As part of a level playing field, a solid partnership with the sell-side is the ideal state.

Sell-side evolutionSome of the experiences I have had in my career on the sell-side illustrate this shift. My colleagues and I on the buy- side who share these experiences, perhaps more

instinctively, understand the language and rules of the sell-side which differentiates us from the buy-side as we can naturally empathise with the sell-side. Now, on the buy-side, we are able to read the other side of the conversation and understand the at times unspoken sell-side part of the conversation as well. It adds that dimension of clarity. Our partnership (Buy to Sell-side) is much more than transactional day-to-day, it is much more complex and nuanced. I am very excited that there is a sea change of support amongst the buy-side to understand that whilst we may compete with one another when raising and investing money, we don’t compete when it comes to trading. We all face similar hurdles and have the same fiduciary duties and regulatory obligations and some of us are beginning to share the realisation that together we are stronger. A

co-operative of informed buy-side participants has much more power than individual firms. I am excited to be able to pick up the phone and talk to people in the markets around London, Europe and the US on matters of co-operation – how can we make this work for the best advantage of our underlying client and therefore meet our fiduciary duties.

Market initiativesThe very definition of what platform/function is a competitive advantage changes over time and with evolving technologies. As everyone is trying to strip out cost, things that were previously core are no longer core to all in the market. So all firms are starting to ask themselves to redefine their key areas of business, where they can add alpha and what differentiates them. If we can automate and reduce manual intervention and reduce errors, especially for the smaller value tickets, we can make trading as a whole more accurate and timely.

Historically the buy-side have not been as successful in partnering up with peers in industry initiatives and definitely not been as able or willing to invest and hold equity as the sell-side. Therefore, if we can partner with one another in a neutral industry manner to ease the issue

“if we can partner with one another in a neutral industry manner to ease the issue at hand, be it information flow, liquidity etc., then that has to be the betterment of our underlying investors who we have a fiduciary duty towards.”

Nick Greenland,Head of Broker/ Dealer Relationships BNY Mellon Investment Management EMEA and APAC


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get the best possible outcome from their people and changing role in the market. And technology is part of that – the market has always been changing and evolving. Experience matters with very few of today’s electronic traders having been around at the time of Black Wednesday(orindeedotherperiodsof“6sigmaevents”)– there is a strong element to which human traders and their ability to draw upon experience and relationships are able to take control of the situation and get their clients’ orders executed and manage their clients’ and their own firm’s risk. In an automated electronic environment things move lot more quickly – there is always a balance between people and technology.

There is always a technological drive and change, and there is always risk. The skills of traders are changing as a result. As long as I can remember, people have been looking at technology from two different kinds of the same coin – is it game changing and does it threaten my job. This analysis is overly simplistic. Human beings are very adaptable and it is unfair to say that dyed in the wool traders aren’t capable of being at the forefront of change, but they probably won’t be the ones coding. However they can still be driving the conversation and the industry and feeding in their requirements. Experience is highly valuable – seeing different markets, understanding different participants. Technology can enrich information flow and the decision making process, but it doesn’t replace it.

“Human beings are very adaptable and it is unfair to say that dyed in the wool traders aren’t capable of being at the forefront of change, but they probably won’t be the ones coding.”

at hand, be it information flow, liquidity etc., then that has to be the betterment of our underlying investors who we have a fiduciary duty towards.

There are a range of new and established industry consortia where the buy-side are playing an active part. The best ones in my mind are where the buy-side are “joined up” and are presenting a united front on a level playing field with the sell-side. Saying that, many of these consortia all have different points of origin and one size does not fit all, and many people are involved in multiple initiatives, again to the benefit of the wider industry.

There are probably too many initiatives currently being developed, and too many platforms for all to reach the necessary critical mass. This will mean that in due course there will be some consolidation.

Technological developmentsThe rise of “electronification” of trading is inevitable and it is a boon for us. Where it is both appropriate and possible for a trader to use those platforms, it enables them to spend more time working with the portfolio managers to give them more market colour and feedback and to spend more time talking about how to execute in more liquidity constrained markets. Making sure that traders have the time and freedom to be part of these industry groups and bodies is important because their input as seasoned and skilled practitioners is needed in the ongoing discussions around the evolution of our market structure.

Most of us have early experiences in life which colour your views, and on build versus buy. I formerly worked for IBM, so my natural inherent question is “why build when you can buy?” If a firm or person can build something more efficiently which meets all your requirements and you can tap into those skills and resources, why should you not take advantage of that? However, it is not a panacea. There are some specific parts of the markets where third-party companies don’t have the expertise required so the buy- or sell-side are better placed to build those technologies themselves. But I think with innovation as people move between the sell-side and buy-side and these consortia and tech companies launch, and companies move into more asset classes and markets, all of the definitions can become a little blurred.

The buy-side is being more demanding of our partners than ever before while the sell-side is enduring a wall of regulatory change and clients are asking more questions. It is natural that the majority of buy-side firms are looking to


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Franklin Templeton AiR summit 2015:Changing Technology, Finding Alpha

How technology is changing traditional operations at asset managers:Innovation will disrupt pretty much every industry over the next five to 10 years, and those that embrace change and different ways of thinking are most likely to be part of the next generation of winners. Technology is certainly at the center of innovation across industries, and the asset management industry will be no different. Many disruptors don’t even view themselves in the same industry as their supposed competitors. For example Uber, Tesla, and Airbnb consider themselves technology companies and approach traditional business problems from a completely different angle. The attendees at the Franklin Templeton AIR Summit were looking for that angle which will differentiate them from their competitors (some of whom were also in attendance), especially in the highly competitive arena of active portfoliomanagement,whichtodayisa$16trillionasset business in the US alone. There is no question a ‘technology’ company will look for ways to disrupt our business – we are already seeing pockets of this in the financial adviser space with so-called ‘robo-advisers’ gathering billions of dollars in assets and providing highly scalable personal investment advice. As Dan Kaufman said as part of his hour-long introduction to the innovative work at DARPA; don’t be someone with

a vested interest in thinking about the world the way you always have. In his example, that is why Amazon was able to disrupt the publishing business.

With many lines beginning to be become blurred within investment management, ie active vs. passive, trader vs. portfolio manager, alpha vs. beta, etc., strategic leaders are becoming more creative in how they think about the ways they add value to their domain and are driving more collaboration across different roles in the investment process. Certainly within trading, we saw the advent of algorithms 15 years ago, and now we are seeing traditional long-only trading and investment teams comprised of Phd caliber quants that are scouring social media data, satellite images, and other unique public data sets. This analysis is being leveraged throughout the entire investment process. Firms are becoming proficient in automation, machine learning, and other quantitative techniques that make their processes more predictable and scalable. Even portfolio managers are getting in the game by utilizing sophisticated tools to measure and understand their biases in their own decision making process. We have highlighted several of these vendors at our 2014 and 2015 events as the behavioral side of our business can be misunderstood – and hacking it can lead to a significant competitive advantage.


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hope the AIR Summit can be one of those events that can continue to get industry participants to re-think their process and how they can leverage technology solutions that will keep them competitive.

So, there is this symbiosis developing between technology and humans that will drive our industry to new heights and all innovation in general. Those that don’t shy away from innovation, change, and collaboration will ultimately generate new kinds of alpha and expand the active asset management industry. We

“With many lines beginning to be become blurred within investment management, ie active vs. passive, trader vs. portfolio manager, alpha vs. beta, etc., strategic leaders are becoming more creative in how they think about the ways they add value to their domain and are driving more collaboration across different roles in the investment process.”

Bill Stephenson, Director of Global Trading Strategy, Franklin Templeton


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Joseph Sowin,Head of Global Equity Trading at Highland Capital

One of the key takeaways from the conference for me was awareness: what new innovations currently exist that can improve investment making decisions? How do I access innovative and potentially alpha generating ideas? AIR Summit 2.0 provided a forum, a collaborative showcase for not only buy-side but all market participants. This continued through a theme of interoperability. Once new alpha enhancing innovations are discovered, it is our job to map across investment infrastructure, and with technology moving at a faster pace, innovation/capitalism knows few boundaries. My challenge is to remain ahead of the technological curve.

Social media has virtually zero boundaries. News is coming from non-traditional sources at faster paces. The challenge becomes filtering noise to deliver actionable signals for the investment process.

Technology has allowed us to do more in less time and in more efficient manner. Examples include but are not limited to; functions such as trade entry, pre-trade compliance, trading platforms, risk management, operations, and trading which are easier due to technological enhancements.

Trade Entry: at the click of a button, portfolio managers now have the ability to send multiple orders from positions screen to trading desk.

Pre-trade compliance: checks are automatically performed prior to an order being placed on blotter. This is scalable. Many rules for various investment preferences have widened the asset managers’ range.

Multi-asset class trading platforms: integration of exchange and broker data allows seamless routing to counterparties via fix connection which leads to facilitation of settlement process.

For the trader, electronic trading initially allowed a shift to less expensive trading. Secondly, customization of low touch strategies helped drive performance. There have also been steps taken in pre-trade trading strategies analyzing a range of factors including momentum, average bid/ask spread, block size, average dark liquidity available, etc.

And changes to pre-trade and post-trade execution analysis has allowed for process improvement and shortened feedback loop from trading desk back to portfolio manager.

Further developments have been made in commission aggregation, software designed at corporate access, securities lending, risk management and operations to name a few.

I am always amazed at the resources within our grasp. The presenters at the conference are building algorithmically designed services and products with the intent of identifying, classifying, and determining significance of real-time information to deliver alpha to the investment process. These signals are designed as a compliment to existing research process not a replacement by saving time and focusing on discovering actionable insights. Overall, I was very impressed with the structure and content of the conference.

Orbital Insight was the best presentation and carried a “wow” factor due to utilisation of satellite images as a compliment to the investment process. The visualisation of idiosyncratic factors is compelling. They spun out of Oxford University in 2011, and were intellectually compelling and thought provoking, and I look forward to following them more in depth.

For us a key target is to identify areas within our firm where technology can enhance functional domains such as trading, risk management, compliance, and overall investment process. We also need to examine each vendor within each domain for interoperability and concordance with current systems capacity, and then create an implementation schedule, and evaluate effectiveness.


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Michael Lynch,Managing Director of Senior Relationship ManagementBank of America Merrill Lynch

First of all, the conference was a great event, and an innovative effort to understand the buy/sell-side challenges that they face every day, including understanding big data and behavioural changes to markets, all the way from PM to Traders.

The conference tackled some really big themes last year, and this year a central theme was thinking about whether a given piece of data is a signal or noise.

The content was extraordinarily relevant and the organization and timing in the first quarter of the year, was great.

It covered a wider range of impactful solutions that address multiple forms of alpha generation. This year, there was a number of breakout sessions to understand and address the challenges faced by the trading desks, in a world where we all have to work smarter and faster to gain an edge in the marketplace.

I think the money managers, particularly those with large platforms, have the money to make the investment to push these innovative technologies into execution. There is also definite scope and potential to make the same investment into their portfolio management process to introduce these new products into their workflow, particularly as it applies to data mining to help their fundamental research go even further.


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Technology has created many efficiencies and benefits for the financial industry. However, it is an unfortunate truth that many drawbacks come along with the advantages that are gained. Unforeseen errors are an inevitable reality; some are small enough to go unnoticed by the majority, while others are large enough to shake confidence in the markets and in some cases (such as the Knight Capital glitch in 2012) threaten the well-being and existence of a firm.

In light of market dependence on complex technology, the industry needs to increase efforts in terms of overall system reliability and quality. The Securities and Exchange Commission (“SEC”) addressed this issue by unanimously adopting Regulation System Compliance and Integrity (“Regulation SCI”) in November of 2014 to ensure systems are operating with efficiency in the areas of capacity, integrity, resiliency, availability and security. OriginallyproposedinMarchof2013,theregulation,inshort, “establishes uniform requirements relating to the automated systems of market participants and utilities.”

This article will provide background on the events that led up to the proposal and eventual adoption of Reg SCI and which market participants are currently subject to it.

A Brief History of Regulation System Compliance and Integrity2010 Market ReviewMore than five years ago in January of 2010, Mary Schapiro, then-Chair of the SEC, asked her staff to begin a comprehensive review of the equity market structure. “It was a review that included gathering views on everything from the impact of high frequency trading to the continued rise of dark pools, to the complexity of a multi-venue market system. The focus was not so much on the infrastructure of our markets,” Schapiro said, “but on the way the markets and market participants operate and behave.”

The review included an evaluation of equity market structure performance in recent years and an assessment

By Jim Northey, Principal Consultant and Industry Standards Liaison, CameronTec Group

A First look at Regulation system Compliance and integrity

of whether market structure rules have kept pace with, among other things, changes in trading technology and practices. The SEC sought public comment which they used to “help determine whether regulatory initiatives to improve the current equity market structure are needed and, if so, the specific nature of such initiatives.”

Flash Crash and AftermathNot long after the review took place, the Dow Jones plungednearly9%onMay6,2010,inaneventthatisnow infamously known as the Flash Crash. Soon after the Flash Crash took place, the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues was formed. This committee’s job is to “address market structure and regulatory issues that may contribute to volatility.”

During the beginning of the following year, in February 2011, the committee issued recommendations regarding

Jim Northey,Principal Consultant and Industry Standards Liaison, CameronTec Group


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a regulatory response to the Flash Crash. The 14-page report tackled volatility, restrictions on co-location and direct access, and liquidity enhancement issues. The committee outlined 14 recommendations in these areas, which they considered the “most important ones upon which to focus to ensure the integrity of the markets” and to “maximize investor confidence in the aftermath of the many market disruptions over the past several years.” While also acknowledging that there are many other issues that still need to be covered, the conclusion of the response urges the SEC “to continue to use the eventsofMay6andthesubsequentanalysis in their future market structure discussions and rulemaking.”

Roundtable DiscussionOver a year later, on October 2, 2012, the SEC held a roundtable focused on automated trading systems and how regulatory structure could be implemented. This roundtable sparked substantial discussion that would be used in the future to help revise the proposed Reg SCI to its final form.

At the roundtable, several of the panelists called for “implementation at trading firms of quality management systems and specific processes aimed at reducing the incidence of errors.” It was acknowledged that such measures would not eliminate all errors, for which reason mitigating solutions such as kill switches would be necessary. What was not made clear from the discussion was who would operate those switches, how they would be triggered, or how much control regulators would exercise over the process.

Proposal and Adoption of Reg SCIAs industry dependence on technology continued to heighten, Reg SCI was proposedinMarch2013asaresponse.The SEC initially welcomed comments ontheproposalfora60-dayperiod,


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which was later extended to 105 days. At the end of the commentperiod,theSEChadreceivedover60commentletters from a variety of submitters. Taking the comments intoconsideration,RegSCIwaspassedonNovember19,2014, and published in the Federal Register on December 5, 2014. The final rule keeps the majority of the language from the initial proposal intact, but does feature several changes to address issues that were raised during the comment period, as well as the automated testing roundtable that was held in 2012.

Effective DateRegulationSCIbecameeffectiveonFebruary3,2015,60days after its publication in the Federal Register. While the SEC understands that entities will need adequate time to prepare for and meet the requirements of Regulation SCI, they have decided to adopt a compliance date for entities subject to Regulation SCI of nine months after the effective date, with few exceptions. Many commenters suggested longer compliance periods or phased-in compliance periods, however the SEC has stated they believe entities need to comply to the rules of Regulation SCI as soon as possible, given the substantial number of system issues that have happened in recent times and in order to strengthen the technology infrastructure of key market participants.

How long do I have to comply?SCI entities have nine months after the effective date of February3,2015,tocomplywiththeregulation.Thereare only two exceptions to the compliance date for SCI entities:• ATSsnewlymeetingvolumethresholdswillhavean

additional six months from the time that they first meet the applicable thresholds to comply.

• Entitieshave21monthsfromtheeffectivedatetocomply with the industry- or sector-wide coordinated testing requirement.

How am I affected? Who must comply?The SEC made it clear that Regulation SCI should apply to those entities that they consider the most essential to the efficient functioning of the US Securities markets, which in this case consists of certain self-regulatory organizations (“SCI SRO”), alternative trading systems that satisfy equity volume thresholds (“SCI ATS”), plan processors, and exempt clearing agencies subject to Automation Review Policy (ARP). Collectively, these participants are referred to as “SCI entities.”

In total, there are 44 SCI entities currently subject to the regulation. The breakdown is as follows:• 27SCISROs• 18registerednationalsecuritiesexchanges• sevenregisteredclearingagencies,includingDTCC

and NSCC• theFinancialIndustryRegulatoryAuthority

(“FINRA”) • theMunicipalSecuritiesRulemakingBoard(MSRB)

• 14SCIATSs• Twoplanprocessors• OneexemptclearingagencysubjecttoARP

Regulation SCI states it applies to “systems operated by or on behalf of” these entities – which means that covered systems operated by third parties do fall under the new regulation. Another detail is that the SEC left the regulation open to the option of expanding compliance to other market participants in the future. Therefore, if you do not currently meet the criteria of an SCI entity, it is possible that you may be effected later on.

Definitions of SCI EntitiesSCI SROSCI SROs include all national securities exchanges registeredunderSection6(b)oftheExchangeAct,allregistered securities associations, all registered clearing

“While also acknowledging that there are many other issues that still need to be covered, the conclusion of the response urges the SEC “to continue to use the events of May 6 and the subsequent analysis in their future market structure discussions and rulemaking.”


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agencies and the Municipal Securities Rulemaking Board (MSRB).

There are two exceptions, including 1. an exchange that lists or trades security futures products that is notice-registered with the SEC as a national securities exchange pursuanttoSection6(g)oftheExchangeActand2.anylimited purpose national securities association registered withtheSECpursuanttoExchangeActSection15A(k).78

SCI ATSAnyATSthatduringatleast4outofthe6precedingcalendarmonths,inrespecttoNMSstockshad5%ormoreinanysingleNMSstockand.25%ormoreinallNMSstock,ORhad1%ormoreinallNMSstocks’averagedaily dollar value. With respect to non-NMS stocks and for which transactions are reported to a SRO, any ATS thathad.5%ormoreoftheaveragedailydollarvalueas calculated by the SRO to which such transactions are reported is included as an SCI ATS.

The only exception is ATSs that trade only municipal securities or corporate debt securities are excluded.

SCI Plan ProcessorsIncludes any entity that meets the definition of Rule 600(B)(55)ofRegNMS,whichisdefinedas“anyself-regulatory organization or securities information processor acting as an exclusive processor in connection with the development, implementation and/or operation of any facility contemplated by an effective national market system plan.”

The SEC received no comments on the proposed definition of “plan processor.” As noted in the SCI Proposal, the ARP Inspection Program included the systems of the plan processors of four national market system plans, which are the CTA Plan, CQS Plan, Nasdaq UTP Plan and OPRA Plan.

SCI Exempt Clearing Agencies subject to ARPCurrently, there is only one entity that meets this definition, which is “an entity that has received from the SEC an exemption from registration as a clearing agency under Section 17A of the Act, and whose exemption contains conditions that relate to the SEC’s Automation Review Policies (ARP), or any SEC regulation that supersedes or replaces such policies.”

What’s NextRegulation SCI does not cover all participants that can have an impact on the overall market as a result of system

issues. The SEC has the important - and challenging - task of figuring out how Reg SCI should be adapted or expanded to cover these entities. SEC Chair Mary Jo White stated that in the future the SEC may extend some types of requirements in Regulation SCI to additional categories of market participants, such as broker-dealers and transfer agents.

In this respect, it is a strategic move for entities and market participants who are not currently subject to the regulation to stay informed on the requirements of Reg SCI and keep their systems operating under similar regulatory circumstances. The rules cover establishing written procedures and policies, participating in scheduled testing, taking action with respect to SCI events, and conducting reviews. Furthermore, there are required responsibilities when it comes to recordkeeping, electronic filing of Form SCI, and access. For many firms, testing is often done without documenting the steps. Recordkeeping and documentation addresses the need for a more formalized system of testing.

The key take away here is that systems and operations oversight by regulators is increasing. Every market participant would be wise to examine their internal processes to ensure they can comply with these regulations as they evolve and expand.

List of key resources/further reading/areas of interest:Comments on Reg SCIhttp://www.sec.gov/comments/s7-01-13/s70113.shtml

The regulation itselfhttp://www.sec.gov/rules/final/2014/34-73639.pdf

2012 roundtable transcripthttp://www.sec.gov/news/otherwebcasts/2012/ttr100212-transcript.pdf

2012 roundtable webcasthttp://www.sec.gov/news/otherwebcasts/2012/ttr100212.shtml


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It seems that not a week can pass without mention of market structure, especially in US equity markets. While the debate has raged for decades, the years up to and following Regulation NMS have proven particularly dramatic. We’re now a year past the publication of Flash Boys, although many of us were focused on market structure well before that book, and most likely will be long after the paperback gathers dust in a used book store.

Over the past few years, many firms from across the industry have recognised the need to get further involved in the market structure debate. Generally this is a self-interested motivation – market structure has a dramatic (though not necessarily well-understood) impact on firms throughout the world. Certainly it is simple to understand why exchanges and broker-dealers are actively lobbying Congress and the SEC for / against new regulations, such as maker-taker reform to address broker routing conflicts, or a trade-at rule to bring more volume on to lit exchanges. What may be less obvious is why asset managers, and the buy-side in general, should be taking a much more active role.

When it comes down to it, the buy-side is the ultimate “consumer” of the market – it’s the buy-side firms whose orders are being executed in the market, and these are the firms that must ultimately answer to their clients. Reliance on the sell-side and their analysis of execution quality is no longer sufficient for the buy-side.

While several buy-side firms have recognised the importance of being represented in the ongoing debate, appearing on Congressional and SEC panels, or meeting with lawmakers and the SEC privately, these efforts have generally been loosely organised. There is no doubt that broader organisations such as ICI and MFA have been a part of this movement as well, but only as a small piece of their much larger and broader organisational focus.

These limitations have had significant consequences for the discussion around market structure reform. Buy-side organisations have struggled to find a common set of beliefs or ideas that their entire membership can coalesce behind, and so have found themselves mostly reacting to issues or ideas from others, rather than leading the debate. There have not been any strategic

Driving The DebateDave Lauer, Co-founder of Healthy Markets and President of KOR Group examines changes to market structure, and how firms need to involve themselves in the debate.


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To accomplish this, we believe we can drive changes within the industry. Our focus is on ATS transparency, data-driven research and better market structure metrics. Within each of these areas of focus, we are facilitating cooperation between the buy-side work and the rest of the industry, including ATSs, exchanges, market makers and broker/dealers. We work with leading ATSs to enhance voluntary disclosure in the industry, so that regulatory intervention is not needed. We work with market makers and SROs to build the Healthy Markets Research Institute, so academics can study markets with unprecedented data sets.

One of the more important initiatives worth highlighting is our work around Best Execution. As markets grow in complexity, the buy-side can no longer solely rely on brokers to reliably demonstrate execution quality. Third-party accreditation of both buy-side firms and brokers is needed, and Healthy Markets is leading the way by bringing firms together to agree on an accreditation methodology, a set of metrics and how those metrics should be measured. We seek to transform how the buy-side and brokers look at execution quality, order routing and meeting Best Execution obligations.

There is a tremendous amount of regulatory attention on Best Execution. Regulators often base regulations on industry best practices, which is why we believe that the buy-side must lead the industry forward to ensure those regulations are sensible and in the best interests of investors.

Some of our members have joined because they want to be leading voices and thought leaders as market structure changes happen. Others want to be publicly seen as contributing to this leading effort to promote sensible industry changes. And some want to join because they believe market structure is taking up too much of their time, and would like Healthy Markets and the work we are doing to relieve them of that burden.

attempts to mobilise the buy-side to drive the market structure debate, to lead with ideas and a concrete platform of changes.

We believe there is a better way. My colleagues and I formed the Healthy Markets Association almost a year ago to lead the way. We formed this non-profit to be a small group of buy-side firms to drive reforms, both within the industry and from a regulatory / legislative perspective. We believe that the buy-side should be the leading voice in the market structure debate, while constructively engaging the rest of the industry.

The Healthy Markets Association is a US non-profit coalition of buy-side firms led by independent experts in market structure analysis and research. Our mission is to reduce complexity, increase transparency, improve understanding, and enhance efficiency and quality in US markets. Healthy Markets coalesces around a clear set of principles for which we believe industry-wide support is achievable:· Transparency· Accurate Metrics· Data Freedom· Displayed Liquidity· Heightened Competition

“When it comes down to it, the buy-side is the ultimate “consumer” of the market – it’s the buy-side firms whose orders are being executed in the market, and these are the firms that must ultimately answer to their clients. Reliance on the sell-side and their analysis of execution quality is no longer sufficient for the buy-side. ”


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GlobalTrading tracks the issues that matter to you. In this special feature, we look back at the evolution of the unbundling conversation from 2013 to today.

A look Back: Unbundling

February 2015Rudolf siebel, Managing Director of German investment Funds Association BVi

“The FCA is correct to improve the pricing of research, but better pricing can be developed in different ways. one way which has not been tried before is to set a dedicated budget for research to make this budget transparent. That would have the effect of formally adding pricing to research, requiring asset managers to scrutinize the implicit cost of research in the execution of fees. if asset managers disclose their research budgets, this would facilitate client scrutiny of that spend.Beyond research pricing, the FCA identified certain problems such as the overconsumption of research but does not provide any evidence in this regard. The FCA also suggests the quality of research and trade execution is lower than expected. We believe that these alleged inefficiencies should be dealt with by regulation and in any case do not require the action proposed by the FCA. General pricing of research would help mitigate any inefficiencies.”http://fixglobal.com/home/unforeseen-consequences/

January 2015David lawton, Director of Markets, Financial Conduct Authority

“our regime is designed to incentivise buy-side firms to identify and put a value on the research that they want to pay for with commissions. We accept that there isn’t really a free market in research yet and that brokers currently provide a bundled service, so we are encouraging fund managers to have a dialogue with brokers to get them to price research. if that is not happening, fund managers can also look at benchmarking against other valuations that they can find. We do recognise that it’s a challenge and that’s one of the reasons we think a longer term better arrangement would be unbundling in this market and seeing research provided and priced for separately.”http://fixglobal.com/home/the-fca-and-unbundling/


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November 2014Martin Ekers, EMEA Head of Dealing, northern Trust

“The biggest challenge for the regulator is the unintended consequences of regulation, but i think that they’ve learnt lessons from previous actions. By way of example, we can look at commission unbundling and the FCA crack down on managers’ use of commission dollars to pay for research and pay for corporate access. Active managers may decide actually that they don’t need to be taking anywhere near the amount of research that they have been taking.”http://fixglobal.com/home/changing-the-question

May 2014Carl James, Former Global Head of Fixed income and FX BnP Dealing services and Managing Director of Dealing services Uk

“The idea behind CsA’s was to separate out what was paid for through execution commissions. Previously execution commissions, which let us not forget are the clients’ monies, were used to pay for a wide variety of third party services, which included research. With the implementation of CsA’s there was an explicit split made between execution costs and research costs. Transaction costs now have more clarity, as they are better understood and this has meant they have fallen.”http://fixglobal.com/home/unbundling-commissions/

March 2014Clive Adamson, Director of supervision, Financial Conduct Authority

“TWhen it comes to dealing commission, clients should expect that research purchased on their behalf offers clear value for money. However, this often isn’t the case. We’ve seen that research commission payments are still often influenced by trading volume and where asset managers direct their trades, even if a broker’s research is not highly rated or even used by the manager – this simply isn’t good enough.

Where brokers bundle research and execution costs together, asset managers are often unaware of how much each specific element costs, making it almost impossible to assess a ‘fair’ price for research or justify this cost to their end clients. We have looked at the use of dealing commission in banks, brokers and a range of asset management firms, and independent research providers. Early findings show that some firms are starting to address some of the key issues. But, banks and brokers struggle to cost research and asset management firms struggle to put a value on the research services they receive.”http://fixglobal.com/home/csas-and-the-fca/


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August 2013Edward stockreisser, Chairman of the Asian independent Research Providers Association“PMs don’t care which brokers their traders use. The brokers don’t care what research provider the PM has paid for. There are many examples of researchers who may have worked for six months and not been paid only to find that the relevant trader was paying the wrong research provider in the first place. There is a disconnect, which is not the fault of the trader or the PM – it is just the mechanism that’s at fault.”http://fixglobal.com/home/holding-the-cost-of-research-to-account/

February 2013Paul squires, Head of Trading AXA investment Managers

“Commission sharing Agreements (CsAs) are increasingly an essential facility for the buy-side. CsAs were really the avenue to enable CP176 (FsA consultation paper on unbundling). They reduce the extent to which trade execution might be constrained to where fund managers are getting their advice and service. in other words, the buyside executes with the broker where they have a CsA (provided they can give good execution), paying both an execution and an advisory component at the same time thus building the advisory pot, which can then be used to pay for independent research (or gives the fund managers the freedom to pay for advisory services from a broker whose execution service is not as strong).

More recently, the FsA has said that fund managers weren’t embracing the opportunity to split the different commission components as much as they had hoped, and the FsA is pushing again for that to happen. This is entirely appropriate from a client’s perspective, in my view. it’s the client’s money that’s being used every time the buy-side trades; if you’re paying a bundled commission, that’s effectively the client paying for the execution service and the advisory service and they should expect the best decision for both elements of that.”http://fixglobal.com/home/this-time-its-structural/


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Mainland links, regulatory changes and commodities expansion as well as the theme of innovation drove the discussion at this year’s HKEx Hosting Services Forum. Attendedbymorethan300marketparticipants,theeventdeparted from prior years focus on technical developments to identify the most pressing issues faced by Hong Kong’s markets.

Jonathan Leung, Senior Vice President and Head of Hosting Services, HKEx opened the forum highlighting the growth in market activity as a result of active take up of HKEx’s hosting services.

A new era of mutual market access beckons, according to Richard Leung, HKEx Managing Director and Co-Head of IT. He presented the current stage of HKEx’s development in the context of a recent history that’s featured more Chinese IPOs, domestic growth and finally opening up to international listings.

Having bought the London Metal Exchange (LME) in 2012, HKEx is now utilizing the LME’s price mechanisms to offer hedging tools to commodities users and traders in China. Connecting with China was a strategic motivation behind the acquisition of LME, according to Rebecca Brosnan, Managing Director and Head of Asia Commodities for HKEx. Brosnan, who helped orchestrate the £1.4 billion deal, has rolled out new commodities derivatives products to the vast commodities flows into China.

Work on the Shanghai-Hong Kong Stock Connect began almost immediately after the LME acquisition was completed, although it was only made public in 2014. After trading began in November 2014, there were many questions and concerns as the aggregate quota use remained relatively low. However, April’s sudden rise in southbound trading has demonstrated the possibilities traders had hoped for.

Hong kong’s new EraNew markets, assets dominate 2015 HKEx Hosting Services Ecosystem Forum

Jonathan Leung, Senior Vice President and Head of Hosting Services, HKEx


48 | AsiA

(Left) Chris Seabolt, Asia Head of Trading, Fidelity Management & Research; (Right)Tae Yoo, Managing Director and Head of Fixed Income Currency Development and Client Business Development, HKEx

Citi’s Endre Markos, Director and Regional Head of Execution to Custody, Markets and Securities Services lead a panel featuring buy-side and sell-side views on the six-month-old trading link between Hong Kong and Shanghai. Although the focus was on how the right balance between regulation and products was found for the initial launch, Tae Yoo, HKEx’s Managing Director and Head of Fixed Income Currency Development and Client Business Development, noted subsequent enhancements will improve the programme.

“The Shanghai-Hong Kong Stock Connect was eagerly awaited by Fidelity. From a fundamental perspective, we are excited about the opportunity to invest in China. From an operational perspective, there were a number of questions we had to address around trading, settlement and other functional areas to be ready to trade on day one, which we were able to do successfully.” said Chris Seabolt, Asia Head of Trading for Fidelity Management and Research.

Emma Quinn, Global Co-Head of Equity Trading for AllianceBernstein, commented that having another mechanism besides QFII to accessing China to service their China funds was a significant benefit.

Many broker’s QFII allocation was fully committed before the Stock Connect launched, and since then, QFII has become available again as firms choose to take positions through Stock Connect, noted Hani Shalabi, Head of Advanced Execution Services for Credit Suisse.

International investors have to become comfortable with an opportunity before they pursue it. Having already integrated QFII into investor disclosures, major fund houses may need to wait a year before beginning the comprehensive task of adding new compliance-approved disclosures about positions taken via Stock Connect, commented Dean Chisholm, Regional Head of Operations for Invesco.

After the forum’s break, HKEx’s PC Wong, Senior Vice President, Derivatives Trading gave an update on the take up of derivatives at HKEx, noting stock options now make up half of trading volume. After 1.2 million contracts were tradedon13April2015,Wongisconfidentthatlargercashmarketturnoverwillgeneratefurtherinterestinthederivative instruments.

With the consultation period on the exchange’s proposed Volatility Control Mechanism (VCM) and Closing Auction Session (CAS) recently ended, HKEx ’s Senior Vice President for Cash Trading, Sally Kwok, discussed the rationale for the proposals and HKEx’s objectives of protecting market integrity as well as satisfying the needs of all market participants.

Rebecca Brosnan, Managing Director and Head of Asia Commodities for HKEx


AsiA | 49

While a VCM is standard for trading venues in many different markets, there is open debate on the ideal VCM model and the specific features it should have, such as using dynamic versus static limits for volatility triggers, the number of times a trigger can be activated, and how to exit the VCM’s controls after they are triggered. The CAS is a significant priority for institutional investors required to trade at a closing price. The proposed model is aimed at addressing institutions’ needs as well as possible concerns of other market participants. HKEx anticipates it will publish its consultation conclusions and next steps sometime in 2015.

HKEx’s Winnie Poon, Senior Vice President and Head of Market Data, outlined HKEx’s tiered data offerings before a final panel on risk regulation and technology, moderated by Greg Lee, Barclay’s Director and Head of Equity Electronic Trading, Asia Pacific.

“A big change from our side is that we now make sure risk checks are also done on our side. The issue then becomes coordinating our risk checks with multiple brokers all employing slightly different approaches,” noted Lee Bray, Head of Trading, Asia Pacific, JP Morgan Asset Management.

Brokers also have to consider which regulator is reviewing the order, as retail orders will be assessed by the Hong Kong Monetary Authority with one set of objectives, while institutional orders are evaluated separately by the Securities and Futures Commission, observed Sanji Shivalingam, UBS’ APAC Head of Algorithms and Analytics.

Regulatory, technical and market structure changes have created a buzz around the Hong Kong market that is only surpassed by the din of broken trading records. A new era is underway.

Emma Quinn, Global Co-Head of Equity Trading, AllianceBernstein

Dean Chisholm, Regional Head of Operations, Invesco


50 | FRAGMEnTATion

GLOBAL FRAGMENTATION AT A GLANCE

MARKET SHARE ANALYSIS, Q1 2015

The analysis is based on lit venues only for Europe and lit and dark for all other regions.Venues with smaller than 0.01% market share are not included in the charts but included in the calculations. Source: Fidessa


FRAGMEnTATion | 51

EvOLvING MARKET STRuCTuRE IN ASIAQ1 marks a successful start to 2015 with global equity volumes on the rise and Asia one of the major contributors to this trend. Although the proliferation of new venues has not taken hold in all Asian markets in the way it has in Japan and Australia, this region has always been an interesting one. There are many relatively smaller venues in each country and each has its own trading rules and clearing regimes. It’s intersting to note that the average volume traded on these markets is considerably smaller than that traded per venue in either Europe or North America.

One market that has always managed to attract business is Hong Kong, and the link between HKEx and the Shanghai Stock Exchange is a good example. The Stock Connect initiative is certainly proving popular, with both volumes and number of trades increasing since the beginning of this year.

Source: Fidessa

Turnover velocity gives another validation of the favourable conditions in Asia. This is the ratio between the total value traded on a certain exchange and market capitalisation. It can be a good indicator of both breadth and liquidity in the market. The high levels of turnover velocity we have seen in recent months, along with buoyed volumes suggests a promising start to the year.


52 | REsoURCEs

industry Resources

Fidessa groupExceptional trading, investment and information solutions for the world’s financial community. 85%oftheworld’spremier

financial institutions trust Fidessa to provide them with their multi-asset trading and investment infrastructure, their market data and analysis, and their decision making and workflow technology. We offer unique access to the world’s largest and most valuable trading community of buy-side and sell-side professionals, from global institutions and investment banks to boutique brokers and niche

hedge funds. $20 trillion worth of transactions flow across our global connectivity network each year.

Fidessa’s unrivalled set of mission-critical products and services uniquely serve both the buy-side and sell-side communities.

Contact details:

[email protected]

www.fidessa.com/contact

Bloomberg Tradebook Bloomberg Tradebook is a leading agency broker that partners with both the buy side and sell side to provide high-quality liquidity,

market insight, and customized solutions based on innovative technologies.Foundedin1996,Tradebook offers its customer base trading solutions for equities, futures, options, and foreign exchange (FX) to actively manage complex trading strategies in more than 100 global exchanges. Our

solutions provide direct market access, algorithms, a breadth of trading analytics, and independent research to institutional traders who seek maximum alpha on every market transaction.

Contact details:

www.bloombergtradebook.com

FiX FlyerFIX Flyer develops advanced technology for managing complex, multi–asset, institutional securities trading using highly scalable software and network technologies.

Since 2005, as an agile technology provider we have partnered with our 170+clients worldwide, including UBS, Barclays, TD Ameritrade, Fidelity, Berenberg, Unicredit, GBM, Interacciones, Bank of

America Merrill Lynch, Goldman Sachs, and more to build high quality, feature-rich software.

Flyer has built a team of operational experts who manage and provide FIX software as a service. Our subject matter experts create and operate FIX servers for you to realize the full potential of our software to deliver the highest level of service and return on investment.

The FIX Flyer Engine is the first FIX server designed to manage high volume, ultra low latency trading networks and ECNs, easily scaling to thousands of connections.

FIX Flyer also provides the Daytona trade surveillance monitor, the F1 Risk Control Gateway, the Ignition regression test and certification tool; the Flyer Online hosted OMS; the Flyer Trading Network, and tools for commission management.

FIX Flyer has headquarters in New York City with offices in Boston and Hyderabad India.

Visit fixflyer.com for company information and to request a free demonstration. Follow us on twitter.com/fixflyer.Contact Details:

www.fixflyer.com


REsoURCEs | 53

CameronTec GroupCameronTec Group is the global standard in financial messaging infrastructure and tools for the Capital Markets industry that today powers the largest user base among financial institutions.

Uniquely positioned as a software and service provider for enterprise, hosted and managed platforms, our dedicated professional services team ensures optimal integration and deployment performance.

CameronTec’s flagship offering Catalys is underpinned by market-leading connectivity technology and engineered on the widely acknowledged standard in FIX engines, CameronFIX. Catalys Market Access offers FIX-powered gatewaystomorethan60equity,derivative and FX markets across the globe, as a locally deployed or managed / hosted service. Complementary FIX integration, testing, on boarding and management solutions including VeriFIX, FIX Conductor and FIX Technician CTS, build out an end-to-end global connectivity offering for any electronic trading

environment, using or migrating to FIX and proprietary protocols.

CameronTec’s solutions are tested and trusted by the world’s best firms in over 50 countries, on all five continents, representing the broadest cross section of tier 1 and 2 investment banks, brokers, fund managers, exchanges, regulators, and members of the ISV community.

CameronTec Group is owned by Nordic Capital Fund VII.

Contact details:

www.camerontecgroup.com

Convergex ConnexConnex is Convergex’s fully-managed technology solution for broker-dealers. Streamlining the onboarding life cycle for clients, our experienced professionals are committed to helping to reduce clients’ connectivity-related expenses. As a third-party, broker-neutral managed services provider, we act as an intermediary between broker-dealers and their network partners. We configure

connectivity for clients, tailoring infrastructure to meet business goals and requirements including cost reduction, connection engineering and FIX customization. Clients receive access to sophisticated tools that monitor their orders, while a web-based dashboard provides transparency into the onboarding lifecycle. Connex technologies and knowledgeable support group helps ensure that interfaces remain connected.

Managing operations for customers, Connex helps firms save on capital

expenditures and minimize risk. Outsourcing connectivity allows clients to focus on core business objectives and worry less about upgrades, hardware changes, scalability, redundancy and FIX customization. Connex also offers a pre-trade risk management module that helps clients address regulatory requirements.

Contact details:

For more information contact Bea Ordonez

via email at [email protected]

GlobalTradingThought leaders’ perspectives pack the GlobalTrading journal with the latest in industry trends, buy-side insight and global electronic trading news, however, it is only the tip of the iceberg of our offering.

www.fixglobal.com offers our entire searchable archive of industry contributions, meaning that over 10 years worth of leadership commentary and content is available in an accessible format, entirely for free.

We are also pushing out the latest industry-led thought leadership through our

Twitter feeds (@FIXGlobalOnline) and our LinkedIn group (GlobalTrading journal). These are forums for free-flow debate and to engage with industry peers on the burning issues of the day.

Contact details:

[email protected]

www.fixglobal.com


FiX TRADinG CoMMUniTY MEMBERs | 55

FiX Trading CommunityMembers*Premier Global Members marked in bold

360TreasurySystemsAGABN Amro ClearingActiv FinancialActuare AFME- Association for Financial Markets in Europe Albourne Partners Ltd Algomi Algospan LtdAllianceBernstein Alpha Omega Financial Systems, Inc American Century Investments Ancoa SoftwareAquis ExchangeARQA Technologies ASIC Australian Securities Exchange AXA Investments Managers Ltd B2BITS EPAM Systems Company Baader Bank Aktiengesellschaft Baillie Gifford & Co. Banco BTG PactualBanca IMI SpA Banco Itau S.A Bank of America Merrill LynchBarclays Baring Asset Management BATS CHI-X Europe Baymarkets ABBeijing RootNet Technology Co., Ltd. BlackRock, Inc. Bloomberg L.P.Bloomberg TradebookBlue Ocean Company BM&F BOVESPA BNP ParibasBolsa de Valores de Colombia Bolsas y Mercados Españoles (BME) Borsa Istanbul A.S. Brandes Investment Partners LP BridlineBrook Path Partners, Inc. BSE Limited BT Bursatec SA de CV BVI C24 TechnologiesCameron Edge CameronTec Cantor Fitzgerald Capital Group Companies, Inc.Cedar Rock Capital Charles River Development

Chicago Board Options Exchange Chi-X Global Inc CIBC World Markets INC CIMB Securities Cinnober Financial Technology AB CitiCitihub Consulting CL&B Capital Management CLSA Limited CME GroupColt Technology Services Compagnie Financiere Tradition Connamara Systems LLCConvergex Corvil CQG inc Credit SuisseCSC Cynopsis Solutions Daiwa SB Investments Daiwa Securities Group Inc. DATAROADDealogic DealHub Deutsche Bank Deutsche Boerse Group Dimensional Fund AdvisorsDTCC Eastspring Investments (Singapore) Limited Ecodigi Tecnologia e Serviços LtdaEdelweiss Securities Limited Egypt For Information Dissemination Enmetrica Orion K.K. JapanEquinixEspirito Santo Securities IndiaEsprow Pte. Ltd.ETLogic Ltd ETNA Software Etrading Software LtdEuroCCPEuronext Paris SA EuroTLX Exactpro SystemsEXTOLEze Software Group EZX Inc. FIA (Futures Industry Association) Fidel Softech Pvt Ltd Fidelity Management & Research CoFidelity Worldwide Investment Fidessa Group First Boston Group First Derivatives FISD Fiserv FIX Flyer LLC Fix8FIXNETIXFIXNOX

Forex Capital Markets, LLC FpML Franklin Templeton Investments Gamma Three Trading, LLCGATElab GETCO Asia GFI Group Inc Goldman Sachs & Co. Greenline Financial Technologies, Inc.GreySpark Guosen Securities Ltd Hatstand HM PublishingHong Kong Exchanges & Clearing Limited HSBC Bank PLC ICAP ICMA (International Capital Markets Association) IG Group Holdings PLCIgnis Asset Management Incisus Capital Partners Informagi AB InfoWare Infront AS Instinet Integral Development Corp. Intelcheck Services Inc. Interactive Data Intercontinental Exchange (ICE) International Securities Exchange (ISE) Investment Management Association Investment Technology Group (ITG) IPC Systems IRESS Limited IS Investment ISITC ISO J.P. Morgan Jordan & Jordan JP Morgan Investment Management(J.P. Morgan) JSE Limited K & K Global Consulting Ltd (K&KGC) KB TechKCG Holdings Kotak Securities LCH Clearnet Linedata LiquidnetLIST Group London Market Systems LSEGroup M&G MACD Macquarie Securities Limited MAE - Mercado Abierto Electronico S.A. MarketAxessMarket Prizm Markit

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56 | FiX TRADinG CoMMUniTY MEMBERs

M-DAQ MFS Investment Management Mizuho Securities Morgan Stanley Investment Management Morgan Stanley MTS SpA Nanospeed NASDAQ OMXNeonet Newedge GroupNICE Actimize Nikko Asset Management Nomura Asset Management Nomura Nordic Growth Market (NGM) Norges Bank Investment Management OCBC Securities Private Ltd.OMERSOMG (Object Management Group) OTAS TechnologiesOn Budget and Time Ltd Onix Solutions [OnixS] OpenSettlement GmbHOptions Clearing CorporationOptions Technology Ltd Orc GroupOslo Bors ASA Pantor Engineering AB Peresys (IRESS) PFSoftPioneer Investments Portware Pravega Financial Technologies, Inc.Primary E Trading PropelGrowth Proquote Putnam InvestmentsQuendon ConsultingQuod Financial R Shriver Associates Rabobank International Rapid Addition Ltd. Raptor Trading Systems, Inc. RBC Global Asset Management REDI Technologies Robin Associates Royal Bank of ScotlandRTS Realtime Systems S&P Capital IQ Real-Time SolutionsSantander Global Banking & MarketsSASLA (South African Securities Lending Association) Sberbank CIB Shanghai Stock ExchangeSchroders SIFMA SimCorp Singapore Exchange SIX Swiss Exchange

Skandinaviska Enskilda Banken AB smartTradeTechnologies Societe GeneraleSpotware SystemsSpring Securities International ABSquawker Limited Standard Life Investments State Street eExchange Solutions State Street Global Advisors State Street Technology Zhejiang Sumitomo Mitsui Trust Bank SunGard SWIFTSycamore Financial Technology Systemware Innovation Corporation (SWI) Taiwan Stock Exchange Tata Consultancy Services Telstra Global The Continuum Partners The LaSalle Technology Group, LLC The Nigerian Stock ExchangeThe Technancial Company The Vanguard GroupThomson Reuters TickSmith CorpTMX Atrium Tokyo Stock ExchangeTora Trading Services Tradeflow ABTradeHeader, S.L. TradewebTrading Gurus Trading Technologies TradingScreen Traiana (ICAP)Transaction Network Services, Inc. Transatron Systems trueEX Group LLC Tullett Prebon Group LtdTurquoise TWIST uBS Investment BankuLLINK VelocimetricsVersitrac Systems Corporation Volante Technologies Volta Data CentresWarsaw Stock ExchangeWellington Management Company Winterflood Securities XBRL Xetra (Deutsche Börse) Yambina LimitedYieldbrokerZeopard Consulting

New MemberFIX Trading Community wishes to welcome the following companies to its growing worldwide membership. For more information, please visit: www.fixtradingcommunity.org

Cedar Rock Capitalwww.cedarrockcapital.com

Dealogicwww.dealogic.com

Incisus Capital Partnerswww.incisus.com

Nanospeedwww.nanospeed.co.uk

Neonet www.neonet.com

Pioneer Investmentswww.pioneerinvestments.com

Schroderswww.schroders.com

Trading Guruswww.tradinggurus.com

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Documents

Boarding The Train To China - 2015Q2