Wednesday, February 02, 2011

Buy-side Technology European Summit 2011

I'm moderating the panel at the above conference. Here's some notes I sent in:

Market structure: Confronting the issues around market fragmentation, the impact of HFT and globalization

The future is multi-venue, multi-asset fusion trading using global VPLS networks with QoS and high precision time.

It's a war - you have to use engage in deep research and new techniques in order to win it . And you
must know every layer of your technology - down to the wires. If you're not processing on the network card - you're too slow. Microtrading engines are effectively here.

Economic situation: New risks resulting from the financial landscape and the implications for technology

I predict the move to a dynamic cost of market data and trading leading to a growth in liquidity and the emergence of financial cryptography techniques to mitigate market risk. Ideas such as Triple Entry Accounting allowing third party risk analytics.

Technological developments: What are the opportunities created by new technologies such as cloud computing and SaaS?

SaaS can be used for autonomic computing - dealing with failure dynamically sourcing services from a reputation based market place, paying for them by microcash.

It's also a great place to do
regulatory transaction logging, audit and risk management in near-real time and where enterprise wide service level monitoring and security can take place a la Loggly. I described how this works here.

New regulation: How are buy-side firms coping with the regulatory flood?

Largely ignoring it.

With regards The 15:50 Panel

I think the buy-side would like to see is a transparency from liquidity providers. In particular, older technology is prone to "queue allocation" due to fan-in/fan-out techniques which is opaque and can be seen as unfair and often the cause of friction. What would help is detailed performance stats (internal timings, distribution latencies) and new technology: multicast data distribution by topic in binary and high speed dedicated trading connections straight to the matching engine infra rather than fan-in via multiple tiers.

Mitigating the cost of accessing multiple trading venues

Standard pricing and transparency would be a good start. How about dynamic pricing for market data and cost of trade. Combine this with a "reputation index" - ie the likelihood of being filled, this would lead to a dynamic, fair market system.

Ensuring effective liquidity access

See above

Consolidated tape: What the buy-side really want


How are the buy-side planning to prepare for new regulation

We need new thinking on how we achieve transparency whilst enabling the regulators access to transactional data otherwise we'll fall victim to centralisation which would kill the markets. One good example would be logging transaction information to the cloud in a secure way for post transactional analytics.

How equipped are the buy-side from a technology standpoint in the front middle and back office? Which areas will see less or more investments?

This is an area which is widely neglected and opens the opportunity for risk.

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