European Trading Survey

8/17/2019 European Trading Survey

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The Winning FormulaEuropean Equity Trading & Technology Report

DOWNLOAD THE TRADETECH 2016 AGENDA

The

WinningFormulaE U R O P E A N E Q U I T Y T R A D I N G& T E C H N O L O G Y R E P O R T


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‘A true representation

of the European equity

market. All the market

players were there

in force’Gianluca Minieri,Global Head of Trading,Pioneer Investments


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T A B L E O FC O N T E N T S

Introduction

P A R T 2Trading Technology Strategies and Investments

About TradeTech

About WBR Digital


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I N T R O D U C T I O N :

L O C A T I O N C L A S S I F I C A T I O N P R O F E S S I O N

Regulatory change is shaking up the European equity market. Participants

are on the lookout for how to best ensure limited impact on their business.Concerns around research payments, best execution, and sourcing liquidity,

amongst others, are bringing to light issues around broker relationships and

what truly adds value to current partnerships.

Added pressures have forced trading professionals to up their game to ensure

they have a competitive advantage. Trading desks need to be more exible and

cater for multi-asset trades. The need for smarter, more intelligent trading is

essential in a market that remains volatile and illiquid.

Conducted in November 2015, this senior level survey was tasked with

identifying key challenges, opportunities and industry trends related to equity

trading and technology in Europe. The survey was conducted by telephone

interview with 150 senior equity trading buy side professionals made up

primarily of Heads of Trading, CEOs and senior management from leading

asset management rms and hedge funds.

UK 50%

Germany 20%

France 15%

Other 15%

Asset Manager 33%

Prop Traders 33%

Hedge Funds 33%

Global Head, Trading 10% Global Head, Dealing

Head of Trading/Head Trader 20% Head of Dealing, EMEAHead of Investment, EMEA

Head, Equities/Equity Trading 50% Head, Multi-Asset Trading

Head, Trading Technology 10% Head, Front OfceTechnology

Chief Information Ofcer 10% or CTO Head, IT Trading


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I S H I G H - T O U C H T R A D I N G A S T R A T E G Y

T H A T Y O U H A V E T O E N G A G E W I T H

M O R E T O F I N D L I Q U I D I T Y ?

2016

77%

23% Yes No

2015

61%

39%

Yes No

The popularity of high-touch trading has not only been a response to the over electronication of modern

trading practices, but that it add a human touch. The result nicely mirrors 2015 with a slight increase in the

number of people feeling that high-touch trading is a strategy that ‘helps’ traders to nd liquidity.

“This result seems to contradict a few of the earlier responses: most respondents view their

brokers as overpriced, and 64% think they could develop their in-house trading tools (incl

Algos?)… You can’t have your cake and eat it too! If clients want high touch services, they

need to realise that it costs a broker a lot more to maintain human traders (especially for agency

brokers). If the buy-side really got organised and wanted to disintermediate (i.e make use of

buyside crossing platforms), they wouldn’t need to engage with high touch services.”

Alexander Neil, Head of Equity & Derivatives Trading, EFG Bank SA

“A trusted sales trader who can access liquidity will always be enormously valuable.”

Richard Balarkas, Chief Executive Officer, Quendon Consulting


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H O W M U C H O F A N I M P A C T W I L L T H E

N E W D A R K P O O L T R A D I N G C A P S H A V E

O N H O W A N D W H E R E Y O U T R A D E ?

No impact 7%

Minor impact 60%

Major impact 15%

Signicant impact 18%

“Here I denitely agree with the consensus. The caps have been designed to maintain the overall market

share of dark order books to the status quo. I don’t think the caps will see a major shift to lit order books,

and instead, we will have to put more thought about which individual orders we submit to dark order

books. This will be more of a minor inconvenience than an actual major impact. Sadly, I think some of

the smaller buy-siders though will be priced out of the dark space, as they might not have the resources

to design dark-specic pre-trade SOR tools.”



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D O Y O U W O R K W I T H

H F T S / M A R K E T M A K E R S ?

2016

57%

43%

Yes No

2015

34%

66%

Yes No

“I think this was a tricky question for people to answer, because I think buy side client order ow

interacts with HFT liquidity more than most people realise. I think HFT gets a lot of bad press and that

the contribution to lit order book quality is underestimated. If the buy side really wants to limit their

chances of getting ‘gamed’, they have the tools to insulate themselves to a certain extent.”



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H O W A R E Y O U M O N I T O R I N G H F T

A C T I V I T Y A N D W H E T H E R T H E

B E H A V I O U R I S D E T R I M E N T A L T O Y O U R T R A D E ?

2016

I rely on my broker for 26%

this information

I am investing in 74%

analytics to evaluate

potential front running

2015

I rely on my broker for 86%

this information

I am investing in 14%

analytics to evaluate

potential front running

“I’m personally surprised by the apparent high number of buyside rms actually

investing in toxicity detection. It is not an easy or cheap exercise! And if you think

about it on balance, it seems dreadfully inefcient for every buyside rm to do this

quality control exercise individually. In an ideal world, this is something that an

impartial party, or the regulator could be doing for everyone”



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H O W M U C H O F T H E B U D G E T G O E S

I N T O N E W T R A D I N G T E C H N O L O G Y

I N V E S T M E N T S P E R Y E A R ?

2016

None- we are not 2% investing at present


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A R E Y O U I N V E S T I N G I N S O R

F O R B E S T E X E C U T I O N ?

Smart order routing was previously a technology that only applied to the sell side community, however

as more investment managers invest in these technologies they are able to gain a clearer picture over

where brokers are routing their trades. 48% of respondents still rely on their brokers for this information.

However there is an increase with 31% of respondents looking to replace their current systems - a clearsign that SOR for the buy side is becoming increasingly attractive in the light of market transparency,

the monitoring of trade execution and overcoming conicts of interest.

N o , I a m

h a p p y w i t h

t h e s y s t e m I h a v e i n

p l a c e

Y e s , I a m l o o k i n g t o

r e p l a

c e m y c u r r e n t

S O R s y s t e m

I r e l y o n m y b r o k e r

f o r t h i s a n a l y s i s

35% 46% 19%21% 48% 31%

20162015


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I N W H A T T Y P E O F A N A LY S I S A R E

Y O U P R I O R I T I S I N G I N V E S T M E N T ?

In order to make smarter trading decisions, and indeed, to be able to understand and evaluate the market,

traders need more transparency. In addition, increased investment in trade analysis demonstrates the

growing need for real time information.

P r e t r a d e a n a

l y s i s

T r a d e a n a l y s i s

P o s t t r a d e a n a l y s i s

A l l o f t h e a b o v e

8% 15% 21% 56%7% 33% 15% 44%

20162015


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A R E Y O U I N V E S T I N G

I N O M S A N D E M S ?

Historically speaking OMS and EMS are systems that are only used by the sell side. However, mirroring

last year, 69% of respondents state they are investing in both order and execution management systems.

The FCA’s best execution review forced the buy side to detail how and why trades are executed,

demonstrating why the majority are investing in both systems.

O n l y O M

S

I a m i n v e s t i n g

i n b o t h

O n l y E M

S

14% 14% 73%8% 23% 69%

20162015


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A R E Y O U H A P P Y W I T H Y O U R

C U R R E N T T C A A N A LY S I S ?

2015 2016

Yes 83%

No 17%

Yes 50%

No 50%

The need for real time TCA is increasing due to an environment of dynamic algorithms, fragmentation,

dark pools and SORs. Last year respondents were evenly split, however, with a plethora of new TCA

providers, and many providers improving their data quality and multi-asset capabilities, the majority of

respondents are now happy with their TCA analysis.


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T H E T O P R E A S O N S F O R

U N H A P P I N E S S W I T H T C A

A N A L Y S I S

2015 2016

Does not provide real 12%

time data Not good value for money 46%

Can not provide analysis 15%

for the asset classes

I work with

Too expensive 35%

We do our analysis

with in house tools 46%

Can’t deal with the

amount of data 27%

Bad interface 4%

Does not provide real 24%

time data Not good value for money 20%

Can not provide analysis 32%

for the asset classes

I work with

Too expensive 28%

We do our analysis

with in house tools 20%

Can’t deal with the

amount of data 24%

Bad interface 28%

For those who are not satised with their TCA provider the biggest downfall is value for money.

This provides colour to fact that close to 50% of respondents are developing TCA analysis

capabilities in house.


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W H A T O T H E R T E C H N O L O G Y A R E A S

A R E Y O U L O O K I N G T O I N V E S T I N ?

Cloud services 52%

Social media data analysis 41%

Algo development 35%

Infrastructure 33%

Data analytics 25%

Automation 24%

It is apparent that cloud services are the hottest area for technological investment. The cloud can help

capture alpha from data sources anywhere. Trading and asset management business functions centre

on data, and the need for improved cloud computing and big data capabilities for security, data transfer

compliance and regulation is growing. Investments have increased in light of these improvements to cloudsecurity and with the market becoming increasingly cost conscious.


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A B O U T T R A D E T E C H

TradeTech is the world’s largest annual conference for over 1,000 senior equity

trading and technology professionals. Since its launch in 2001, TradeTech has

become the industry’s prime source for strategies, information and networking

and is the most comprehensive industry get together in the world. It is an

event created “for the industry by the industry” where all the key issues

are uncovered, discussed and resolved. TradeTech is fully supported by the

large investment banks, as well as dozens of solution providers, MTFs, stockexchanges and technology innovation companies and industry media.

Earlier this year TradeTech returned to Paris and this was very well received

by the 1,000+ senior equity trading professionals who attended. Now in it’s

15th year TradeTech will be returning to the Palais des Congrès de Paris, April

12th – 13th and some of the market’s most pressing issues to be discussed over

the 2 days include:

The impact of the new regulations on commission payments,best execution and the impact of MiFID II

Market structure and the buy side – sell side relationship

Next generation trading strategies

New tools for monitoring best execution: TCA, EMS/OMS and SOR

Trading opportunities in developed and emerging markets

TradeTech Europe brings together all market participants in the equities

markets, allowing those essential discussions to take place to inuence the

future of equity trading. Do not miss out on hearing from leading market

experts from the buy side, sell side, exchange and technology community to

understand how this is happening.


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A B O U T W B R D I G I T A L

At WBR Digital we design and execute bespoke content marketing campaigns

all year round, delivering our clients unparalleled access to the wider WBR

event audience.

We believe in creating rich content that engages and inspires. We conductin-depth industry research, then add analysis and a double-shot of creativity,

before marketing it for you, to targeted audiences of your choosing.

It’s industry research, it’s thought leadership, it’s quality content – it’s the

perfect opportunity to generate qualied sales-ready leads.

Contact us to nd out how your business could benet from:

Lead generation campaigns that t your priorities

Bespoke webinars, benchmarking reports and whitepapers

In-depth research on current fast-moving issues and future trends

The opportunity to position your company as a thought leader

Contact:

Tanyel Crossley

Head of Digital PublishingTel: +44 (0)20 7368 9708

Email: [email protected]

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European Trading Survey

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