trading in the dark: a buy side perspective
TRANSCRIPT
Trading in the dark:A buy side perspective
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TRADInG In ThE DARK: A bUY SIDE PERSPECTIVE
Contents
1. Executive Summary ......................................................................................................................................................................... page 3
2. Introduction ....................................................................................................................................................................................... page 4
3. About the research........................................................................................................................................................................... page 5
4. The shifting dynamics of asset managers’ trading behaviour .................................................................................................. page 6
4.1 Changes in self directed and broker intermediated fl ow
4.2 On and off exchange trading patterns
4.3 Reasons for using dark pools
5. Current use and knowledge of dark pools ................................................................................................................................. page 12
5.1 Do asset managers specify which dark pools to access?
5.2 Do asset managers receive adequate information about where they have traded?
5.3 Do asset managers have enough information about the dark pools they trade in?
5.4 Has the experience of dealing in dark pools been positive or negative?
6. What next? ....................................................................................................................................................................................... page 15
6.1 The issues that the buy side would most like to see regulators address
6.2 Should buy side fi rms be allowed to internalise fl ow without being subject to the same rules as other dark pools and systematic internalisers?
6.3 The future of dark pools
7. Conclusion ...................................................................................................................................................................................... page 18
8. Appendices ..................................................................................................................................................................................... page 19
8.1 How this report was put together
8.2 The questionnaire
8.3 Biographies of the interviewees
Christophe Roupie, Global head of Trading and Securities Financing (TSF), Managing Director, AXA Investment Managers
Paul Squires, head of Trading (TSF), AXA Investment Managers
Fabien oreve, Global head of Dealing, Dexia Asset Management
Markus Ferber, MEP
jon Ross, head of GETCo Execution Services Europe
8.4 About TradeTech Pulse Research Services
This report was brought to you by
IMPORTANT DISCLAIMER:The information herein is based upon sources believed to be reliable but is not guaranteed as to accuracy or completeness although TradeTech and Market Structure Partners believe it to be clear, fair and not misleading. To the maximum extent possible at law, neither TradeTech nor Market Structure Partners accept any liability whatsoever arising from the use of the material or information contained herein.
The author of this report hereby certifi es that the views expressed in the research report accurately refl ect the results of the study and subsequent interviews. Any compensation received had no infl uence on the questions or fi ndings and that have been used in this report.
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EXECUTIVE SUMMARY
OTC trading and the future of dark pools in Europe is a hotly debated and unresolved topic. Whilst many market participants maintain that they are critical for the efficient functioning of the market and the protection of investors, they have not yet provided enough meaningful information to substantiate their arguments in the eyes of the regulators and politicians.
We asked 70 heads of trading at asset managers “the buy side” across Europe to respond to a questionnaire about dark pools in order to gauge how their approach to trading has changed over the last 5 years, to specifically understand their use and knowledge of dark pools and to look at how the use of dark pools might develop.
The study showed that:
• Assetmanagershavesignificantlyincreasedtheamountofcontrol they have over their trading in the last 5 years but not all asset managers trade in dark pools.
• Priorto2007,smallerassetmanagersweretradingonaveragejust over 70% of their business on transparent order books and larger asset managers were trading between 50 – 60% of their flow on transparent order books. Over the last 5 years all firms have further reduced this on average by 5-10%.
• Theextenttowhichassetmanagershaveundergonesignificantoverall changes to their OTC trading behaviour depends on their size and the foundations of their domestic market pre MiFID - asset managers in countries that enforced concentration rules pre MiFID have undergone the most significant migration from order book trading to OTC trading. Larger asset managers in more mature markets have experienced only a marginal change. However, the amount of flow being conducted on an “OTC” basis, including dark pools, appears to be levelling out at around 30-40% of the respondents’ total flow.
• Inallcasesthenumberoftradesbeingconductedoverthephone has significantly reduced and the number of trades being executed in agency dark pools and broker crossing networks has increased.
• Themostcommonreasonforusingdarkpoolshasconsistentlybeen to reduce market impact but a strong message emerged that market fragmentation has more recently caused asset managers to increase their use of dark pools. High frequency trading is a consideration but less of an issue.
• Assetmanagersrequirealotmoreinformationaboutthedarkpools in which they trade but their desire to find liquidity and to reduce their footprint in the market often outweighs other factors such as possessing detailed information about the dark pool. The majority of respondents reported positive experiences when dealing in dark pools although that varied according to the different types of dark pool.
• Themostimportantissuethatassetmanagerswouldliketheregulators to resolve is a mandated consolidated tape and consistent application of data standards and reporting rules across all jurisdictions.
• Assetmanagers’viewsaresplitastowhetherinternalisationoftheir own flow should be subject to the same rules as dark pools and systematic internalisers.
• Alargemajorityofrespondentsbelievedthattheiruseofdarkpools would increase over the next 3 years but this depended on the impact of different potential regulatory changes.
Overall our findings suggest that there has been, and will continue to be, an important need for asset managers to have appropriate mechanisms to trade outside of transparent central limit order books in order to execute blocks. The subject of dark pools is inextricably linked to many other elements of market structure and cannot be viewed in isolation. Dark pools are often considered the only option for execution in a fragmented market which is hard to navigate. This does not mean that dark pools do not have an important use but they appear to be enjoying greater usage because the total balance of market structure is out of kilter.
Technology has permanently changed the nature of the markets and the shape of a broker’s relationship with its client. Regulation has also had a significant impact in changing the market place but the implementation of MiFID 1 is still playing itself out and requires further enhancements.
If regulators are concerned about dark pools, they must first address the need to more easily aggregate and improve the quality of data. Secondly they must continue to promote a more level playing field across market infrastructure that will lower costs for all participants, accelerate consolidation and reduce the current incentives for market participants to excessively create and use large numbers of dark pools and crossing networks.
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InTRoDUCTIon
Over the Counter “OTC” trading and the use of dark pools is part of the everyday activity of many equity buy side traders and their sell side counterparties as they search for liquidity and ways to reduce information leakage about large trades. However, the combination of technological improvements, the consequences of new regulation in the form of the Markets in Financial Instruments Directive “MiFID” and the financial crisis have whipped up a perfect storm for regulators; the result is an environment focused on creating more transparency where the continuing rationale for dark and OTC trading is not well understood.
Unfortunately there is no easily aggregated and reliable source of information about OTC trading and dark pools which means that the public at large, and those who are responsible for new legislation, have little fact on which to base their rhetoric and future decisions. In the words of Markus Ferber, MEP and Rapporteur on MiFIR and MiFID2, “the public perception is that no one knows what is going on and the name dark pool is an unfortunate reflection of reality”.
Firstly, however, it is important to deal with terminology, which is both a source of confusion and still not clearly defined at European level. The definition of OTC trading has changed over time and has had a number of nuances as the market evolved. It usually refers to trading that is executed outside of a regulated market, which means that in many markets and asset classes, OTC trading is not transparent. However, within European equity markets it has been used in more recent times to refer to business that has been executed away from the main exchange’s order book where the agreed price and size of the trade has subsequently been reported subject to regulatory reporting timeframes and standards that should provide transparency; it is therefore much more transparent than OTC trading in other asset classes. The reason for executing an OTC trade is to attain speed of execution in an urgent situation, prevent information about a trade from leaking to the wider market until it has been partially executed or to find sufficient liquidity when there is not enough in the wider market.
The phrase dark pool or crossing network has been used to refer to many types of automated trading systems where the orders and prices at which people are willing to trade are hidden. The reason for hiding prices and orders is to protect information about the likelihood of a large trade until a counterparty willing to take a substantial part of the other side of the trade has been found. If a large trade were to be placed in a more transparent market, then other market participants react in a way that significantly moves the market against the buyer or the seller before the transaction can be completed. Dark pools have tended to be viewed as a subset of OTC trading as their origin has been to substitute manual phone trading with automated methods. Some brokers run their dark pools as separate licensed multi lateral trading facilities “MTFs” whilst others run them as part of their every day broking activities, known as broker crossing networks “BCNs”. Some exchanges now run dark pools as well hence the fact that not all dark pools can be categorised as OTC. Some people make a distinction between broker crossing networks and dark pools but this
report refers generically to dark pools and makes clear when going into details about any types of sub categories.
The origin of dark pools goes back to the introduction of electronic central limit order books in the 1990’s and the simultaneous evolution of electronic order and execution management between clients and brokers which allowed the buy side trader to start taking more control of his/her trading. The introduction of central limit order books increased transparency and also the speed at which market information was being transmitted to other market participants. The size of the trades being conducted on the order book started to reduce and asset managers found it hard to execute large blocks without a resulting deterioration in price as other market participants quickly discovered their intentions. As technology improved, innovators created automated dark pools for easier execution of larger block trades.
Ironically, the launch of MiFID simultaneously created transparency and a lack of transparency of OTC data in the equity market. This has triggered the intense debate around dark pools. Prior to MiFID, Europe was split into different camps as to how equity OTC flow was managed. This was a reflection of the maturity of each national market in terms of the approach to pension provision and existence of mutual funds, the composition of the market participants and the market’s preceding history as an order driven or a dealer market.
Countries with a strong history of dealer based markets and institutional pension fund business tolerated OTC trading and dark pools for the trading of large orders and established appropriate rules to ensure a level of post trade transparency under the rules of the domestic national exchange. Others allowed OTC trading but did not facilitate the transparency of it. In contrast, others enforced concentration rules that required all trading to be directed onto the main domestic electronic order books and prohibited OTC trading. However, they could not prohibit the significant amount of cross border OTC trading happening outside of their national jurisdiction.
Despite many countries lacking information about OTC business pre MiFID, regulators generally assumed that under the new MiFID structures, OTC business would migrate to exchange and MTF venues or move into the newly created Systematic Internaliser category. The surprise for markets that had no prior measure of OTC business is that now that they can see it post MiFID, the OTC flow is more than many expected. For markets where transparency of OTC flow was previously measured and consolidated in one place, the lack of a single consolidated tape and increased fragmentation in the post MiFID world has actually decreased the transparency that they previously enjoyed in their own domestic market.
Hence there is much confusion, with the growth in dark pools under scrutiny in case it affects the price formation process of the overall markets. The debates are mostly fuelled by the powerful lobby of the for-profit exchanges whose revenues have suffered from the competition created by MiFID and the brokers who are fighting to keep their heads above water in a post crisis environment. The voice of the investment managers “the buy side” whose opinions should matter most is rarely heard. This study therefore set out to a provide more accurate picture of how large, medium and small asset managers across the continent have traded over the period between 2007 and 2011, how and why they use OTC and dark pool alternatives and, in their view, the critical issues that they need addressing to improve their trading environment.
“the public perception is that no one knows what is going on and the name dark pool is an unfortunate reflection of reality”
Markus Ferber, MEP
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AboUT ThE RESEARCh
At the end of 2011, TradeTech Pulse asked heads of trading at 70 asset management firms across Europe to respond to a questionnaire on OTC trading and dark pools (see Appendices 1 and 2). Once the results were aggregated, in-depth interviews were undertaken with asset manager representatives: Fabien Oreve of Dexia Asset Management and Christophe Roupie and Paul Squires at Axa Investment Management. Markus Ferber, a Member of the European Parliament, and Jon Ross of dark pool operator, GETCO Execution Services were also interviewed.
Of the 70 organisations approached, 51 trade in dark pools and 19 do not trade in dark pools. The aggregated responses used in the rest of this report are taken from the 51 firms who do trade in dark pools. The bias of responses is therefore heavily weighted towards asset managers based in the UK where the use of dark pools is most evolved. However, not all UK asset managers approached use dark pools and 41% of the respondents who do use dark pools are based in other European countries.
Figure 1: GEoGRAPhICAL bREAKDoWn oF 70 RESPonDEnTS Who Do AnD Do noT TRADE In DARK PooLS
TRADE In DARK PooLS Do noT TRADE In DARK PooLS
n UK ............................... 30%n Switzerland .................... 3%n France ........................... 3%n The Netherlands............ 2%n Finland .......................... 1%n Sweden ......................... 1%
n Malta ............................. 1%n Poland ........................... 1%n Belgium ......................... 1%n Germany ....................... 1%n Denmark ....................... 5%n Luxembourg .................. 2%
n UK ................................. 4%n Switzerland .................... 3%n France ........................... 1%n The Netherlands............ 2%n Finland .......................... 1%n Sweden ......................... 2%
n Turkey ............................ 1%n Greece .......................... 1%n Norway .......................... 2%n Liechtenstein ................. 1%n Ireland ........................... 1%
The survey respondents who do trade in dark pools mostly trade global and Pan European equities and collectively represent over US$2 trillion assets under management “AUM” broken down as follows:
AUM $billion number of Companies Interviewed Equity Coverage
1-10 15Global Equities: 13
European Equities: 2
10-50 17Global: 10
European: 6Domestic Only: 1
50-100 13Global Equities: 12
European Equities: 1
100-500 6Global Equities: 3
European Equities: 3
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4.1 Changes in Self Directed and broker Intermediated Flow
Participants were asked to compare how much trading they self direct now versus 2007.
The results showed that during this period, the control that the buy side trading desk has over their flow has increased considerably. The evolution of technology and improvements in order and execution management systems, “OMS” and “EMS” for both client and broker has meant that buy side traders no longer outsource many of their trading decisions to brokers. This means that whilst their flow may still be directed through a broker platform using tools such as Direct Market Access “DMA” or algorithmic trading strategies, it is the decision of the buy side rather than the broker’s decision as to where and when to place the trade in the market.
According to this study, large buy side firms now control where 50% of their order flow is directed whilst the other 50% is intermediated by brokers. Smaller asset managers now control where over 30% of their flow is traded with the rest being intermediated.
Figure 2: RESPonDEnTS’ ChAnGES In SELF DIRECTED VERSUS bRoKER InTERMEDIATED FLoW bETWEEn 2007 AnD 2011
The impact of this transition has been twofold. Firstly the trading skills and associated technology of the buy side trading desk have improved considerably in line with the technology. Paul Squires of Axa Investment Managers says that this is very much in line with their experience. “Five years ago, we only had one algo provider and a basic OMS which was not able to easily connect to third party algos. At that point in time we were only doing 5% of our volumes by algo. Since then we have invested in our infrastructure and rolled out an EMS which has been a great success. In the last twelve months we have moved from one algo provider to twelve, so about 20% of our business is now done through algos as well as some further business being executed on crossing platforms like Liquidnet and ITG’s POSIT”.
There’s been a shift away from decision making being done by the sell side. The consequence of this is that cost of servicing for the broker is becoming more expensive because of the squeeze on margins and the effect of unbundling. Brokers want their clients to finance the change by giving more flow to less counterparties and being more selective about who their counterparties are but it is a difficult balance to strike.”
Five years ago, we only had one algo provider and a basic OMS which was not able to easily connect to third party algos. At that point in time we were only doing 5% of our volumes by algo……In the last twelve months we have moved from one algo provider to twelve so about 20% of our business is now done through algos ….
Paul Squires, Axa Investment Managers
Asset Managers with $1-10 billion AUM Asset Managers with $10-50 billion AUM
Asset Managers with $100-500 billion AUMAsset Managers with $50-100 billion AUM
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Participants were asked to state the percentage of trading that they were undertaking on transparent order books versus other OTC style trading strategies in 2007 and then contrast that with their trading activity in 2011.
The results showed that almost all asset managers, regardless of size, were already directing between 20-30% of their flow away from transparent order books in 2007 and making use of other tools available to them such as trading over the phone, trading automatically against the risk books of brokers, using agency dark pools such as Liquidnet or looking for an intermediated natural cross. By 2011, this increased to 40-50% of their flow being directed away from transparent order books.
Figure 3: ConTRASTInG ThE PERCEnTAGE oF FLoW bEInG EXECUTED VIA DIFFEREnT STRATEGIES bETWEEn 2007 AnD 2011 (ALL PARTICIPAnTS)
Asset managers, regardless of size, were already directing between 20-30% of their flow away from transparent order books in 2007. By 2011, this increased to 40-50% of their flow being directed away from transparent order books.
Note: For some asset managers these figures are based on estimates only
When broken out into sub categories according to the size of assets under management, it is possible to see that larger asset managers were already trading between 40-50% of their flow away from transparent order books in 2007 and that they have further reduced the amount they trade on these order books by only 5-6%.
The greatest increase in OTC trading has been by the smaller asset managers that were originally trading a larger percentage of their flow on transparent order books in 2007. They have increased their OTC trading by up to 15% bringing it closer in line with the proportion of OTC trading being undertaken by larger asset managers. This suggests that smaller asset managers have been catching up with their larger peers’ trading techniques and capabilities. This may be because the smaller asset managers have become more sophisticated or it could be because the trading tools and strategies required to access dark pools have become more widely available but is most likely to be a combination of both.
Some people may use the statistics collected in this study to substantiate the oft argued claim that OTC trading in Europe is as high as 40% of total equity trading. However, this study is focused on the trading of buy side firms, especially those most likely to deal OTC and in dark pools which does not equate to 100% of the market.
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Figure 4: ConTRASTInG ThE PERCEnTAGE oF DIFFEREnT SIZED RESPonDEnTS’ FLoW bEInG EXECUTED VIA DIFFEREnT STRATEGIES bETWEEn 2007 AnD 2011
Asset Managers with $1-10 billion AUM
Asset Managers with $50-100 billion AUM
Asset Managers with $10-50 billion AUM
Asset Managers with $100-500 billion AUM
Note: For some asset managers these figures are based on estimates only
The AUM categories are based on 45 companies only as 6 companies declined to provide a figure for their assets under management and therefore could not be included.
Regulators and legislators are particularly concerned to assess the impact of change post regulation. For example, some market infrastructure providers and regulators appear to believe that the move away from transparent order books has deteriorated sharply since the onset of MiFID. However, this study shows that pre MiFID, a substantial amount of flow was already consistently being directed to alternative trading tools. Market participants are concerned that the legislators do not understand this but Markus Ferber says that legislators understand that the market has not come from a position of all flow being executed on exchange.
Some people may use the statistics collected in this study to substantiate the oft argued statistics that OTC trading in Europe is as high as 40% of total equity trading. However, this study is focused on the trading of buy side firms, especially those most likely to deal OTC and in dark pools which does not equate to 100% of the market. On the basis that high frequency trading is known to have significantly increased over the last 5 years, that it takes place on exchange and that retail and general brokerage activities have to be included in overall statistics, the total overall percentage of OTC trading is therefore likely to be significantly less. This lends some credence to the statistics that have been published by AFME and the FSA (i). Nonetheless, it does point to the fact that trading outside of lit order books has been and continues to be a critical part of buy side execution activity.
(i) April 2011, Association for Financial Markets in Europe, Market Analysis: The Nature and Scale of OTC Trading in Europe suggests that the real proportion of OTC trading is
around 16%.
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However, the manner in which asset managers execute this flow has changed. As expected, given changes in technology and skill sets, the greatest reduction in trading activity has been in over the phone risk trading and the greatest increase has been in the use of Broker Crossing Networks and agency only dark pools.
Additionally, when looking at the statistics by geography there are some notable differences. The greatest contrasts are between the trading behaviours of French versus UK asset managers. In 2007, the asset managers in France who responded to the survey were trading around 90% of their flow on lit order books which, by 2011 has dropped dramatically to just above 50%. In the UK, asset managers were trading just over 60% of their flow on transparent order books in 2007 and the subsequent decrease in that flow has been marginal. This demonstrates that the impact of MiFID has been much greater in some countries than others, depending on their starting point and original approach to concentration rules. The findings suggest that, for the respondents of the survey at least, the percentage of trading being executed away from the transparent order books is levelling out at 30-40% but the way in which the OTC flow is executed may change.
Asset managers interviewed in other parts of continental Europe generally fell somewhere between the spectrum of the UK and France with a consistent starting point of between 70-75% of flow being transacted on transparent order books in 2007 followed by a 10-15% decrease over the last 5 years
Figure 5: CoMPARInG bY CoUnTRY ThE PERCEnTAGE oF RESPonDEnT’S on oRDER booK TRADInG bETWEEn 2007 AnD 2011 bY CoUnTRY
For the respondents of the survey at least, the percentage of trading being executed away from the transparent order books is levelling out at 30-40% but the way in which the OTC flow is executed may change.
It is important to note that some of the statistics provided by respondents were based on estimates rather than actual figures but many respondents do keep accurate records of where their business is transacted and make some interesting observations. Fabien Oreve, Global Head of Dealing at Dexia Asset Management, is one such respondent. He not only keeps statistics about the breakdown of flow that is posted to primary markets and MTFs versus dark pools or negotiated blocks with brokers but he also reviews the amounts by breaking out the flow that is included and excluded in the closing auction of the primary market. This highlights the on-going importance of participating in the primary market closing auction for the buy side trader, something that the exchanges still effectively have a monopoly on, and the fact that outside of this period asset managers are more likely to send flow to alternative platforms including dark pools. There are many reasons for participating in a closing auction, most notably for benchmark reasons but it is also interesting to note that even the closing auction is a less transparent process than the continuous matching sessions.
Figure 6: DEXIA ASSET MAnAGEMEnT bREAKDoWn oF TRADInG FLoW DESTInATIonS 2011
% breakdown including Closing Auction %breakdown excluding Closing Auction
Primary Market 65% 40%
Other Transparent MTF 15% 30%
OTC block trading 15% 20%
Dark Pools 5% 10%
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4.3 REASonS FoR USInG DARK PooLS
Buy side trading desk heads were questioned more specifically about their reasons for using dark pools and consistently cited the ability to match against other block orders and reduce overall transaction costs as the most compelling reason for using dark pools.
Figure 7: RESPonDEnTS’ REASonS FoR USInG DARK PooLS bY ASSET MAnAGERS oF DIFFEREnT SIZES
Veryimportant
Not at allimportant
Veryimportant
Not at allimportant
Veryimportant
Not at allimportant
Veryimportant
Not at allimportant
Asset Managers with $1-10 billion AUM
Asset Managers with $50-100 billion AUM
Asset Managers with $10-50 billion AUM
Asset Managers with $100-500 billion AUM
Notes: For some asset managers these figures are based on estimates only.
The AUM categories are based on 45 companies only as 6 companies declined to provide a figure for their assets under management and therefore could not be included
However, market fragmentation has also become a much bigger issue over the last 5 years and the majority of respondents noted this as their second most important reason for using dark pools in 2011; Market fragmentation and the lack of easily consolidated data about the overall market has made it harder for buy side participants to understand where the real liquidity is. One respondent stated that he needed access to dark pools because they provided the best outcome in a bad situation of fragmentation.
Christophe Roupie has a similar view. He says “liquidity is too diversified and doesn’t put all participants on a level playing field. The fragmentation of the market is making execution more complex and more risky especially for smaller players or less sophisticated investors. The use of algorithmic strategies can help reduce market impact by slicing and dicing institutional flows into retail-like orders as the average execution size has seriously shrunk since MiFID kicked in”. Fragmentation has also caused an increased burden of cost to the buy side. Roupie says that AXA has made significant investments over the last 5 years which has a direct impact on their bottom line as Commission Sharing Agreements “CSA’s” cannot be used to offset some of these costs.
Jon Ross of Getco Execution Services, a London-based broker crossing network says the full effects of competition and lower barriers to entry still
have a long way to go in Europe. He also points out that the lack of consolidated clearing in Europe can increase a broker’s total execution costs. “For example, if I trade BMW on Chi-X, the cost of trading and clearing is radically different to the same trade being traded and cleared on Deutsche Borse where the cost is much higher. Most brokers cannot afford to connect to multiple clearing houses as dealing with multiple clearers is a really onerous business proposition,” Ross says. Brokers therefore have a huge incentive to push their crossing networks as an alternative for their clients as it reduces their overall costs if they don’t have to go out into the market and pay the high costs of trading and clearing to the exchanges.
“ The fragmentation of the market is making it more complex and more risky. It’s becoming ridiculous when institutional investors have to slice and dice their orders to look like retail orders”
Christophe Roupie, Axa Investment ManagersSE
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Ross points out that the presence of one consolidated clearing house in the US has brought about some efficiencies from a market structure perspective. He also makes another fundamental comparison about between the US and European equities markets. “In the US, smart order routers are a commodity but in Europe, they are rare and expensive because fragmentation is so much more complicated and costly and not everyone has the benefit of using them.” The lack of clarity around best execution benchmarks and the fact that smart order routers are not uniformly used across Europe are also concerns Ross says.
This leads to the question of whether the newly proposed category of an Organised Trading Facility, “OTF” will help or hinder fragmentation. Fabien Oreve raises the following concerns, “the proposed delineation between OTF’s and Systematic Internalisers will incentivise even greater complexity in an already complicated market. The increased costs that will be required in areas such as smart order routing and clearing will ultimately be borne by the end client”. In contrast, Paul Squires says that he is broadly supportive of the OTF category “although it definitely needs some tweaking”. Roupie adds “The European regulators mean well but the appropriateness of this new category can be easily challenged; OTC markets cannot be organised overnight. At the same time recent developments on European Fixed Income markets and notably the launch of BondMatch Order Book do show the way forward in terms of liquidity, transparency and governance thus allowing a smoother evolution of the OTC model.”
Markus Ferber says that he appreciates that the market has become more fragmented and he is not necessarily in favour of the OTF category, which in his opinion seems to be more appropriately dealt with as a sub category of an MTF. He says “if another category is introduced then we may yet get more fragmentation but I am not yet clear whether the market is better served by a strongly fragmented market or less fragmentation”. He adds that the European Parliament has already said they don’t believe that another category is needed. Squires comments “We’re disappointed to read that it may be removed. Broker Crossing Networks are a key channel for us as we rely on brokers to govern what goes on in there which they won’t be able to do with an MTF”.
Despite the hype and perceived concerns around high frequency trading, this seems to be less of an issue for the buy side trading desks than the ability to match blocks, avoid information leakage and overcome fragmentation. However, Squires says this could be misleading as high frequency trading leads to an increase in overall transaction costs so it could be seen as one and the same thing.
Geographically, the countries where asset managers had the greatest concerns about high frequency were The Netherlands, the UK, France and the Scandinavian markets. However, this still did not outweigh the concerns they had over the ability to reduce overall transaction costs and market fragmentation issues.
“Broker Crossing Networks are a key channel for us and we rely on them to govern what goes on in there which they won’t be able to do with an MTF”.
Paul Squires, Axa Investment Managers
Figure 8: ConTRASTInG RESPonDEnTS’ REASonS FoR USInG DARK PooLS bY GEoGRPAPhY
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Respondents were questioned about their knowledge of the dark pools that they traded in and the results that they achieved.
5.1 Do Asset Managers Specify which Dark Pools to Access?
In the first instance, respondents were asked if they specified which pools they did or did not want access to.
Only 35% of asset managers interviewed actually specified which pools they wanted access to when dealing via a broker and only 29% specified which pools they did not want access to. Respondents who answered “sometimes” generally stated that they treat every order differently, depending on the market and market conditions.
Those who did not specify which pools they wanted access to generally said that wanted access to every possible liquidity pool and saw no reason to limit their search. Roupie also says that it is very hard to specify which dark pool you want access to, “Even if we release a large order, a lot of our flow may end up in tiny fragments in multiple pools but we have no control over that.”
Those who did not specify which pools they wanted access to generally said that wanted access to every possible liquidity pool and saw no reason to limit their search.
Do YoU SPECIFY EIThER ThRoUGh YoUR oWn oRDER RoUTInG CAPAbILITIES oR To
YoUR bRoKER WhICh DARK PooLS YoU WAnT ACCESS To?
Do YoU SPECIFY EIThER ThRoUGh YoUR oWn oRDER RoUTInG CAPAbILITIES oR To YoUR bRoKER WhICh DARK PooLS YoU Do
noT WAnT ACCESS To?
Figure 9:
SoMETIMES23% YES
35%
no41%
SoMETIMES23%
YES35%
no41%
5.2 Do Asset Managers receive adequate information about where they have traded?
Respondents were asked whether their brokers provided adequate information to them about where they had traded. 61% of respondents agreed that they received the information that they required. However, most of them would like to see more standardisation of information, greater accuracy as there were often mistakes in the information provided and more detail to enable better analysis. Many respondents acknowledged that the latter point was not always a broker issue as their own systems were not able to digest some of the information that they would like.
Figure 10: Do YoU GET ThE InFoRMATIon YoU REqUIRE AboUT WhICh DARK PooLS YoU hAVE TRADED In?
Most asset managers would like to see more standardisation of information, greater accuracy as there were often mistakes in the information provided, and more detail to enable better analysis.
SoMETIMES23%
YES35%
no41%
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5.3 Do asset managers have enough information about the dark pools they trade in?
Asset managers were asked if they had enough information about the different types of dark pools in which they are trading.
Figure 11: Do YoU hAVE EnoUGh InFoRMATIon AboUT ThESE DIFFEREnT TYPES oF DARK PooLS?
n Yes I have adequate information
n No I would like to know more
n I don’t need to know
n Yes I have adequate information
n No I would like to know more
n I don’t need to know
n Yes I have adequate information
n No I would like to know more
n I don’t need to know
n Yes I have adequate information
n No I would like to know more
n I don’t need to know
Agency/neutral Dark Pools eg: Liquidnet, ITG
Exchange owned Dark Pools
broker owned MTF Dark Pools
broker owned Crossing networks
23%
53%
24%60%
25%15%
13% 13%
32% 34%
55% 53%
Respondents felt most comfortable with the information that they had about agency dark pools such as Liquidnet and ITG and the least comfortable about exchange owned dark pools, perhaps reflecting the fact that exchange dark pools are a step farther away from them as the buy side are not direct members of exchanges. Some said that brokers did not volunteer information but gave it when pushed and others said the answers they got constantly varied. However, in all cases respondents would clearly have liked more information than they are currently receiving.
Oreve points to the pie chart about the information on broker crossing networks and says that the fact that only 34% of respondents understand what is going on reflects the buy side’s frustration and confusion about what is happening in some dark pools. He says that fragmentation has already gone too far and regulators need to provide the keys to understanding the dark pools that are out there. “There are so many different models with many different features. I want to know what the rules of each dark pool are, who I am interacting with, what is the market share and the crossing rates in which stocks?” He also states that the complexity in the market does not help. “Broker’s dark pools are often connected to other dark pools with different rules in place so one broker tells you that there is one set of rules but they maybe onward routing to another dark pool with different rules. Brokers do not explain how their SORs (smart order routers) work and I am not sure that they help the execution of block trades.”
Paul Squires agrees “We’d like to do a beauty parade of dark pools by really closely analysing the venues but although we are close now to having enough data it is difficult to draw meaningful conclusions. A lot of execution tags are bundled into an OTC field that is generically labelled and there is no easy way to identify exactly how each fill was executed – it’s a complex series of mappings. There’s also a divergence as to how brokers prioritise the accuracy of this data.”
Some of the issues cited by both asset managers could be regarded as more commercial than regulatory issues. Oreve says he has gone some way towards addressing this by ensuring that evaluation of broker crossing networks and dark pools are part of his firm’s overall execution review process. Both firms agree that the role of the sales trader has completely changed. Oreve continues “What we now value is quality information to help understand the available technology and advice on dark pools and risk.”
“We’d like to do a beauty parade of dark pools by really closely analysing the venues but although we are close now to having enough data it is difficult to draw meaningful conclusions.”
Paul Squires, Axa Investment Managers
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5.4 has the experience of dealing in dark pools been positive or negative?
When asked to rate their experience of dealing in dark pools, the buy side’s lack of knowledge about dark pools did not completely correlate with their experiences of dealing in dark pools. Despite high percentages saying that they did not have enough information about the pools in which they were trading, there were a significant percentage of respondents who reported positive experiences when trading in dark pools regardless of the information available.
Figure 12: RESPonDEnTS’ EXPERIEnCE oF TRADInG In DARK PooLS
n Positive
n Negative
n Confusing
n Don’t use them
n Positive
n Negative
n Confusing
n Don’t use them
n Positive
n Negative
n Confusing
n Don’t use them
n Positive
n Negative
n Confusing
n Don’t use them
Agency/neutral Dark Pools eg: Liquidnet, ITG
Exchange owned Dark Pools
broker owned MTF Dark Pools
broker owned Crossing networks
8%
77%
13%2%
7%
29%
7%
57%
7%
14%
31%
48%
25%
64%
11%
Oreve concurs that despite his desire for more information, overall he needs the ability to be able to execute in dark pools and he has had positive experiences. Critically for him, large block orders may only be 20% of the daily flow but their execution requires 80% of a trader’s time and a number of other respondents echoed his view. Dark pools aid them with completion of their most complex orders.
The evidence also suggests that the advantage of not leaving a footprint about your trading intentions when executing in a dark pool often outweighs other factors such as possessing detailed information about the dark pool.
Some firms also want access to every possible type of liquidity and are therefore not bothered about more information, but others are worried about interacting with high frequency traders even though it does not top their list of concerns. Many dark pools hold themselves out as being for institutional flow only but Ross, whose firm is also an electronic market maker, acknowledges that many broker crossing networks and MTF’s solicit electronic liquidity providers in an effort to increase liquidity. “Brokers are highly incentivised to do this as the more they internalise flow, the lower their own transaction costs become”.
The newly proposed OTF category is supposed to prevent proprietary trading and hence should make it clearer as to whom the participants of the trading platform are but Oreve cautions that this could make things worse. “There is a lot of confusion about proprietary trading and principal trading which, if not properly understood, will result in lost opportunities for my trading desk. I want to be able to cross business with principal trading which results from other customer trading activity such as risk unwinds and swap hedges. There are a diversified range of activities on offer now and I don’t want MiFID 2 to restrict these offerings”.
Axa Investment Managers take a different view. Squires points out “We’re happy that principal trading is to be excluded - it would give a much cleaner pool. There is no clarity on how the systematic internaliser category is going to work and we like the fact that an OTF would provide discretion. “
“Large block orders may only be 20% of the daily flow but their execution requires 80% of a trader’s time….Dark pools aid traders with completion of their most complex orders. “
Fabien Oreve, Dexia Asset Management
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The lack of easily consolidated data and consistent use of terminology makes it hard for regulators and legislators to make the right decisions.
WhAT nEXT?
6.1 The issues that the buy side respondents would most like to see regulators address
Respondents were asked what they would most like the European regulators to fix in order to improve their ability to trade in the market. The overwhelming answer from all participants was that they wanted to see a mandated consolidated tape, followed by greater cooperation and consistency between regulators. High frequency trading remained a relatively low issue for virtually all respondents except those based in France who rated it as an issue of equal importance to the mandated tape.
Figure 13: RESPonDEnTS’ VIEWS oF ThE MoST CRITICAL ISSUES FoR REGULAToRS To FIX
Improving the aggregation of data will clearly help to address market fragmentation issues but will make it so much easier for the buy side to do their job in trying to analyse their trading performance.
Ross points out that in the US the consolidated tape provides a much better benchmarking tool for execution quality. “You can easily give your execution data to an independent third party and get it analysed. In Europe there is a huge amount of technology work and data cleansing that has to go on before you can get the same results”. This increases the costs and often the buy side has to rely on their broker to do it which conflicts with the preference for an independent opinion.
Most importantly the lack of easily consolidated data and consistent use of terminology makes it hard for regulators and legislators to make the right decisions. Again Ross points out that in the US, “the regulators only need to go to the tape consolidators to find out what is happening and you can see the regulators making informed policy decisions based on that data. In Europe, without standards and a consolidated tape, it’s very hard to separate the wheat from the chaff”. On a positive note he points out that that there is a lot more data available in Europe than there used to be but the terminology keeps changing which only makes it more confusing. This was a point repeatedly recognised during this
survey as respondents struggled to define exactly what a broker crossing network was.
Ferber says that he believes fixing the post trade tape will help the process and “Parliament has taken note of the desire to have a consolidated tape and may try to speed up the process”. However, he does not believe that this is the only answer; he wants a fair price building process for the market.
Squires notes that a fair amount of progress has been made in the Commission’s proposals. “ Things like the APA regime will go a long way towards helping sort out this problem. The debate seems to be moving more to whether it should be a utility or commercial entities that provide it”.
Respondents voted overwhelmingly that they wanted the European regulators to address the lack of consolidated data, followed by forcing greater cooperation and consistency between regulators.
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6.2 Should buy side firms be allowed to internalise flow without being subject to the same rules as other dark pools and systematic internalisers?
With price discovery being an important issue for regulators, buy side participants were asked whether or not they believed that they should be able to internalise their own flow without being subject to the same rules as other dark pools and systematic internalisers.
The respondents were split in their views. Those who did not believe that the same rules should apply stated that they owned the flow, and internalisation helped reduce their costs and those of their customer. They implied that they were in a strong position to do this. Those who were against it talked less about their own flow but the ability to be able to interact with other flow, implying they were in less of a position to internalise their own flow and wanted to ensure a more level playing field. A number of respondents were unsure.
Figure 14: ShoULD bUY SIDE FIRMS bE ALLoWED To InTERnALISE FLoW WIThoUT bEInG SUbjECT To ThE SAME RULES AS oThER DARK PooLS AnD SYSTEMATIC InTERnALISERS?
n Yes
n No
n Not sure
n More
n Less
31%
43%
26%
19%
81%
6.3 The future of dark pools
When asked about their future use of dark pools, 81% of respondents believed that they would be doing more trading in dark pools in 3 years time, particularly if fragmentation continued. However, many said this depended on regulation as well as market conditions and their own firm’s capabilities.
Figure 15: WILL YoU EXECUTE MoRE oR LESS FLoW In DARK PooLS In 3 YEAR’S TIME
When asked about the number of dark pools that they expected in 3 years time, respondents’ answers varied enormously. Some believed that dark pools would be consolidated into 2 or 3 major pools and others forecast up to 50 potential pools which may set the regulators’ pulses running.
This did not necessarily indicate that they would do more OTC trading overall but that more flow may have to be directed into dark pools because of the knock-on effects of other regulation. Respondents were uncertain about the wider implications of regulation such as Dodd Frank, Capital Requirements Directive 4 “CRD4” and Basel III and whether the restrictions on broker capital and proprietary trading would increase their need to source liquidity elsewhere.
81% of respondents believed that they would be doing more trading in dark pools in 3 years time, particularly if fragmentation continued
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n I would increase flow
n I would decrease flow
n No Change
69%
27%
4%
Figure 16: IF bAnKS CoMMIT LESS CAPITAL DUE To ChAnGInG REGULATIon WoULD YoU ChAnGE ThE AMoUnT oF FLoW DIRECTED To DARK PooLS?
Oreve says that there is genuine concern in the market that the legislators want to ban dark pools but this doesn’t take into account the importance of block trading and the fact that dark pools add value. Ross states that listening to everyone’s plans in the market, there is likely to be a lot happening in the OTC and dark pool space but he thinks that the number of ideas that actually come to fruition will result in less growth than people might think. However, “exchanges have traditionally not been very innovative and if we take OTC and dark pool capabilities away then we are likely to lose innovation.”
Ferber says he and his fellow MEPs understand that the market needs dark pools and have supported the requirement for different execution venues. He does, however, think they need more regulation. He talks about having to ask what percentage of business is right to be undertaken in the dark but he is not clear in his own mind what this is. However one thing is clear to him and that is that the use of dark pools is on an increasing curve and they somehow need to find a maximum that makes sense and to improve post trade transparency. He is particularly worried about the price formation of less liquid stocks and his concerns are heightened because he understands that much of the trading undertaken in dark pools is in those very stocks.
Oreve and Ross both say that the difficulty with approaches such as trying to determine a maximum percentage to be traded in dark pools is that traders’ requirements change according to market volatility. In volatile times, dark pools are likely to be used less but phone based trading will increase as waiting in a crossing network may take too long.
Ross cautions that regulators need to think about what the consequences of any changes to dark pools and OTC flow would mean and whether it would result in better execution. He states that in markets where there is zero OTC trading allowed, such as the US options market, “the market still comes up with pseudo arrangements that allow you to internalise flow on exchange”, thus defeating the original purpose and highlighting the fact that one model can never fit all.
Roupie concludes that much focus has already been given to equity markets and he hopes that regulators and end-users can learn from previous experiences -and mistakes- to avoid unintended consequences across all asset classes this time around. “Overall the equity market just needs some finessing but things are moving forward. It’s the fixed income markets that everyone is in denial about. We need more debate on this as some of the decision makers in Brussels have a highly remote view, or experience, of the complexity of the OTC markets.”
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“..exchanges have traditionally not been very innovative and if we take OTC and dark pool capabilities away then we are likely to lose innvotion”
Jon Ross, GETCo
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n In ConCLUSIon
Overall our findings suggest that there has been and will continue to be an important need for asset managers to have appropriate mechanisms to trade outside of transparent central limit order books in order to execute blocks. The subject of dark pools is inextricably linked to many other elements of market structure and cannot be viewed in isolation. Dark pools are often considered the only option for execution in a fragmented market which is hard to navigate. This does not mean that dark pools do not have an important use but they appear to be enjoying greater usage because the total balance of market structure is out of kilter.
Technology has permanently changed the nature of the markets and the shape of a broker’s relationship with its client. Regulation has also had a significant impact in changing the market place but the implementation of MiFID 1 is still playing itself out and requires further enhancements.
If regulators are concerned about dark pools, they must firstly address the need to more easily aggregate and improve the quality of data. Secondly they need to create a more level playing field across market infrastructure that will lower costs for all participants, accelerate consolidation and reduce the current incentives for market participants to create and use large numbers of dark pools and crossing networks.
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1hoW ThIS REPoRT WAS PUT ToGEThER
Original research and thoughtful analysis are the cornerstones of TradeTech Pulse Research Services. Our team of research professionals dissects emerging trends in the capital markets using mailed surveys and personal, on-the-record interviews with respected capital markets executives and regulators. Our research reports often provide a backdrop to conference themes and illustrate new applications of technology and breakthrough strategic thinking.
The purpose of a TradeTech Pulse Research Report is to document an important trend, establish its relationship to current practices and outline insightful solutions so that a senior management team has the information, analysis and advice it needs to make informed decisions about the future.
To produce the content for this report, TradeTech Pulse Research Services worked with Market Structure Partners who conducted the in-depth interviews and wrote the body of the content.
TradeTech Pulse Research Services together with Market Structure Partners selected a topical issue which is currently having an impact on the way the trading landscape is evolving: the Regulation and Use of Dark Pools. A questionnaire (see appendix 2) was created that was fielded to senior traders at 100 of Europe’s largest buy side organisations. These questions solicited data that was used to identify the pace of business, need for services, current initiatives and response to regulation. 70 completed questionnaires were collected which represented feedback from a range of different types of buy side organisation across Europe.
Personal in-depth interviews were then conducted on the basis of the findings with some survey respondents as well as political / regulatory bodies. These interviews were used to add depth and context to the aggregated responses from the questionnaire in the form of on-the-record response and case study.
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2 ThE qUESTIonnAIRE
This is the questionnaire that was fielded to European buy side heads of trading at the end of 2011.
Section 1 - Information about the firm
1) What is the approximate value of equity assets under management that are serviced by your trading desk?
2) What country is your trading desk located in?
3) In equities are you trading?
a) Domestic (one country) equities only?
b) European equities only?
c) European and US equities only?
d) Global – European, US, Pacific/Asia and Emerging Markets?
4) Which of the following trading strategies are you managing trades for (can tick more than one)?
Active Strategies
Passive Strategies
Long
Short
Section 2 – Understanding trends in oTC trading and dark pools on the trading desk
1) on average (even if you need to estimate) roughly what percentage of the value of your flow was executed via the following strategies in 2007 compared with 2011:
Strategy 2007 2011
On a transparent order book e.g an exchange .....................................................................
Risk trades manually executed over the phone with brokers ................................................
Risk trades automatically executed with brokers ...................................................................
In a broker owned crossing network/MTF/dark pool .............................................................
In a neutral agency dark pool e.g. Liquidnet or POSIT ..........................................................
Through your own in-house crossing capabilities (i.e internalising your own flow) ..............
Natural cross intermediated by a broker over the phone ......................................................
Unsure ....................................................................................................................................
100% 100%
2) What percentage of your flow was/is now broker intermediated versus self directed
2007 2011
Broker Intermediated ..............................................................................................................
Self Directed ...........................................................................................................................
3) What were the most important reasons (ranked 1-5) why dark pools were important in your strategy in 2007 and how has that changed in 2011(Rank with 1 being the most important and 5 the least important)
2007 2011
a) because market fragmentation makes finding real liquidity harder ............................
b) to avoid high frequency traders detecting your orders ...............................................
c) to avoid leakage to investment banks and brokers ....................................................
d) to match against other block orders and reduce overall transaction costs ................
e) to avoid paying broker commission ............................................................................
f) Other? Please state......................................................................................................
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2Section 3 – how well do you know your dark pool?
1) Please answer the following questions Yes, no or Sometimes
Yes no Sometimes
a) Do you specify either to your broker or through your own routing capabilities which dark pools you want access to?
b) Do you specify either to your broker or through your own routing capabilities which dark pools you do not want access to?
c) Does your broker report back the details (fills and prices) of how your trade was executed across different trading venues including dark pools?
d) Do you actually get the information you require? If not why not and would you like this to change
e) Has the proliferation in the number of dark pools helped you to trade orders?
2) Do you know who else trades in the dark pools you have access to?
I don’t need Yes I have no I would like to know adequate information to know more
Agency/Neutral dark pools eg: Liquidnet, POSIT
Broker owned MTF dark pools
Exchange owned dark pools
Broker owned crossing networks
Section 4 – Current regulation and the future of trading in the dark
1) MiFID was supposed to improve best execution, reduce costs and protect the retail investor. how do you think that dark pools have helped achieve these objectives:
Agree Disagree not sure
a) Dark pools help achieve best execution
b) The existence of dark pools reduces the overall cost to the end customer
c) In trying to protect the retail customer, MiFID has had a negative impact on the experience of the institutional investor
2) If as a result of regulation such as Dodd Frank (separating prop trading from a bank) or basel III (Increasing capital requirement for banks), banks were less likely to commit risk capital or make markets in their own dark pools would you change the amount of flow directed to dark pools
Yes I would increase flow No I would decrease flow No change
3) Please state in order of importance the issues that you believe the regulators need to fix in order to improve the oTC and dark trading environment
Issue order of importance
a) Greater co-operation between regulators to improve consistency in current data standards ...........................
b) New improved and expanded standards around OTC data ..............................................................................
c) Make all dark pool operators operate on equal terms regardless of their status as either an exchange, MTF or BCN (e.g. complete separation of internalisation from crossing flow and no ability to choose participants) .............
d) A mandated consolidated tape ..........................................................................................................................
e) Reducing the cost of OTC data ..........................................................................................................................
f) Imposing a minimum trade size on dark pools ..................................................................................................
g) Not allowing high frequency/latency dependent traders to trade in dark pools ................................................
4) Should buy side firms be allowed to internalise flow without being subjected to the same rules as other dark pools and systematic internalisers?
Yes – why………………………………………………………………………………………………………
No – why………………………………………………………………………………………………………
Not sure
5) Do you think you will be executing more or less flow via dark pools in 3 years time?
More Less
6) how many dark venues do you think there will be in Europe in 3 years time?.............
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3 bIoGRAPhIES oF InTERVIEWEES
Thank you very much to the following for their additional time and input.
Christophe Roupie, Global head of Trading and Securities Financing (TSF), Managing Director, AXA Investment Managers
Christophe Roupie joined AXA Investment Managers in May 2005 as Global Head of Trading and Securities Financing (TSF). Christophe oversees equity, fixed-income, forex and derivatives trading activity, as well as securities lending and repo on desks located in Paris, London and Greenwich. Christophe is also Chairman of the NYSE BondMatch Strategic Committee. Prior to joining AXA IM, he was Head of Trading at Ixis AM for 5 years. Christophe started his financial career by joining the Tradition Bond Broker group in 1993 and working in various brokerage firms in Paris and London before joining Ixis IM in 2000.
Fabien oreve, Global head of Dealing, Dexia Asset ManagementPrior to joining Dexia Asset Management, Fabien was at Credit Agricole Cheuvreux where he started working as a Sales-trader and co-founded the
Program Trading desk in 2000. Today he manages an experienced and specialised Buy-side trading desk at Dexia AM centralising orders from different business units and various locations in Europe, reinforcing commitment to direct execution and Transaction Cost Analysis across various global asset classes: Sovereign bonds, corporate bonds, Equities, derivatives and Foreign-Exchange. His top priorities are to improve execution quality, optimise workflow and improve productivity from Equities to Fixed-Income instruments. Sourcing liquidity through different and well-identified ways, reducing trading costs, minimizing execution issues, building-up relationships of confidence with core executing brokers, are a key combination to add performance to portfolios and provide more services to clients. Fabien has more than 10 years experience in the Sell-side industry and starts a new career in the Buy-side. He holds a Master degree from Caen University (Normandy France)
Paul Squires, head of Trading, Trading and Securities Financing (TSF), AXA Investment Managers
Paul Squires is currently Head of Trading within the Trading and Securities Financing (TSF) team, covering all asset classes. He has held this position since 2006. Paul started his professional career as a UK equity trader for Mercury Asset Management (now Blackrock) in 1993, before becoming a UK Equity Trader for Sun Life Investment Management in 1996 (subsequently taken over by AXA) and going on to trade European equities there in 1999. In 2003 he headed up the newly created Fixed Income Trading Team in the UK. Paul graduated with a BA (Hons) from Reading University and holds both the IMC and the SFA Registered Representative qualifications. He is also an Independent Non-Executive Director of Smart-pool.
Markus Ferber, MEPMarkus Ferber is born on 15 January 1965 in Augsburg, Bavaria and is a German politician. After his degree in electrical engineering in 1990 and subsequent employments for Siemens AG (Munich) and Pfister GmbH (Augsburg), Markus
Ferber, MEP became a Member of the European Parliament in 1994. He is Member of the Committees on Economic and Monetary Affairs, Substitute Member of the Committee on Transport and Tourism and Member of Delegation to the Euro-Latin American Parliamentary Assembly. In 1999 he became Chairman of the CSU delegation in the European Parliament. Since 2005, Markus Ferber is also Regional Chairman of the CSU Schwaben and Member of the bureau of the CSU.As Member of the Committee on Economic and Monetary Affairs he is the rapporteur for the MiFID/MiFIR in the European Parliament.
jon Ross, head of GETCo Execution Services EuropeJon Ross is the head of GETCO Execution Services (GES) in Europe. In this role, he oversees order management, execution and technology solutions for European clients. Jon led the creation of
GES’ European offering in 2010 after successfully launching the U.S. business in 2007. GES provides trade execution services for market participants in the U.S. and Europe and is uniquely able to leverage the liquidity and technology of GETCO, a leading global market maker. GES Europe is a crossing network that matches orders from brokers seeking liquidity with passive orders posted by GETCO Europe Limited traders. GES is an appointed representative of GETCO Europe Limited, an authorized and regulated FSA entity. Prior to joining GETCO, Jon was the Chief Technology Officer of the NASDAQ Stock Market after it acquired Inet ATS, Inc. in 2005. While at NASDAQ, Jon led the “Single Book” integration of Inet ATS, Brut and NASDAQ’s SuperMontage into a single platform and oversaw NASDAQ’s initial RegNMS implementation. Prior to his position at NASDAQ, Jon was the CTO of Inet ATS, Inc. Jon previously had served as first vice president of technology in charge of development and maintenance of Inet ATS’ core trading platform. He held the same position at Island ECN, which was acquired by Instinet in 2002. Jon has worked in the software and technology industries for more than 15 years. His experience includes development for MarketXT’s ECN offering; writing video games for Microsoft’s operation systems division, Maxis, Inc.; and developing inertial guidance sensors for military applications at Systron Donner.
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4AboUT TRADETECh PULSE RESEARCh SERVICES
TradeTech Pulse is an independent research services group within the TradeTech brand family which includes large scale conferences for capital markets professionals the world over, as well as webinars and networking.
Constant engagement over the past 12 years with senior buy side and sell side professionals on the development of our conferences gives the management of TradeTech Pulse Research Services deep knowledge of the biases, behaviours and aspirations of capital markets executives.
Our research professionals are dedicated to improving the performance and business value of the trading desk. Our focus is on comparative analysis – trading strategies, process innovations and new forms of decision-support. Senior capital markets executives at large organisations both participate in and read the reports we produce. Funding for our research comes from a variety programme sponsors.
TradeTech is collaborating on Pulse Research Services with Market Structure Partners a specialist strategic advisory and implementation fi rm offering unbiased, independent advice and insight about global capital markets structure.
Founded in 2008, by Niki Beattie, one of Europe’s leading experts on market structure, the team of consultants is made up of experts with fi rst hand experience of the investment process, the technological and regulatory aspects of the industry and the key drivers for change.
Market Structure Partners’ clients have included some of the world’s leading investment banks, exchanges, alternative trading platforms and clearing houses, as well as high frequency fi rms, asset managers, private equity fi rms and hedge funds.
