E-trading main driver behind Reg NMS
Daily news headlines
Rise of machines led to contentious regulation, says Andresen
The rapid evolution of electronic trading in the equities market in the last decade has not only forced new regulation upon equities traders, but is also driving a return to levels of block trading not seen since the late 1990s.
That was the prediction of Matthew Andresen, president of Citadel Execution Services, speaking at the Securities Industry and Financial Markets Association Technology Management in New York.
“I predict that in the coming years we are going to see substantial consolidation between asset groups to such an extent that in a few years we will look back and think it was strange that equities and equity derivatives were traded separately,” Andresen said.
“I think we will also see a return to large scale block trading. The level really dropped after the dot-com bubble burst, but people are still in need of large volumes of liquidity,” he added.
Andresen’s speech focused on how electronic trading has transformed the look of the equities market in the space of a single decade. “E-trading on equities really began back in 1997 and it worked in harmony with the old-fashioned means until about 2002. This success came at a price however, since the regulatory framework governing equities never contemplated that the rise of computers could force human beings out.”
“Even though side-to-side trading between electronics and people worked it was a short-term solution and of course, as we all know, the final answer to the challenge of e-trading was Reg NMS,” he added.
Andresen concluded by touching on the futures market and a key difference between the futures market and other types of trade.
“Crucially, some futures exchanges, like the operation in place at the Chicago Mercantile Exchange, have their own clearing houses and this effectively eliminates settlement risk in different markets. This is something that other instruments, such as equities options market, do not have since they have to share clearing houses. This is a big difference for the equities sector to think about,” Andresen concluded.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Risk management
Beware war exclusions in cyber insurance, risk managers told
Risk Live: Experts say policy wording is tightening up following rise in ransomware attacks
Top 10 operational risks for 2024
The biggest op risks for the year ahead, as chosen by senior industry practitioners
Top 10 op risks: AI fears drive cyber risk to record high
External fraud re-enters top 10; change management now a top five concern
Harsh judgements: why Stateside lenders are upping the Q-factor
As CRE stalls, qualitative adjustments are forming a larger part of US banks’ credit risk allowances
As FCMs dwindle, regulators fear systemic risk
Panellists highlight dangers of clearing membership becoming more concentrated
Bank credit risk: how well do you know your counterparties?
As financial markets evolve, evaluating the complex credit risk exposures of non-bank counterparties is crucial for effective risk management, says Quantifi’s Dmitry Pugachevsky
EU index managers face funding risks as US moves to T+1
Rotations from European to US assets will need prefunding due to slower EU settlement
CCPs show support for daily stress margin tools
Anti-procyclicality measure floated by HKEX official sparks interest from rivals including Nasdaq
Most read
- As FCMs dwindle, regulators fear systemic risk
- Options market still searching for cause of the Vix plunge
- Top 10 op risks: AI fears drive cyber risk to record high