Videos
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CRD IV bonus cap has perverse effect of increasing risk
The EU's Capital Requirements Directive CRD IV has imposed a bonus cap on credit institutions and investment firms with the intention of discouraging the excessive risk-taking with client monies that contributed to the financial crisis. However, the inappropriate application of this bonus cap to principal trading firms now has the potential to result in the perverse effect of actually increasing risk, whilst hurting market quality.
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Liquidity and Quote Fading
One observation I see made regularly by commentators on electronic markets is that liquidity can 'disappear in an instant' and is somehow ephemeral. Quotes, they say, tend to fade as soon as the market notices there's a seller around. I'm always rather bemused by this observation, because it implies that in more manual markets, liquidity is (or was) more stable.
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Non-discriminatory access to MiFID II derivatives trading venues: Critical for market transparency and competition
With the requirement for MTFs and OTFs to have objective participation criteria, MiFID II aims to dismantle existing barriers and increase competition and pre-trade transparency for all market participants. It is worth remembering, however, that despite similar objective participation criteria requirements in the US, additional guidance from regulators was required in order to address certain discriminatory practices.
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Financial Markets 2.0
FIA EPTA's Acting Chairman, Mark Spanbroek, presents a John Lothian MarketsWiki Education series on 'Financial Markets 2.0'.
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The myth of order cancellations: a new study
It is sometimes said that high frequency traders aren’t really providing liquidity to the market because they cancel orders more frequently than other market participants. A new research paper shows that this really isn’t true.
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High Frequency Trading: What’s the big deal?
This is the question asked by Evangelos Benos, from the Bank of England’s Financial Markets Infrastructure Division, on the Bank’s staff blog (Bank Underground). As well as providing a useful summary of the evolution of HFT, the main focus of the blog is a discussion of the overall impact of HFT on market quality. His conclusion? That while there are “some aspects of HFT activity that are still contentious… the inescapable conclusion that so far emerges is that HFT has mostly had a positive impact on market functioning.”
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Further evidence that new rules could threaten market liquidity in Europe
A preliminary research report by three professors at the Toulouse School of Economics[1] has raised concerns over the impact impending regulations could have on market liquidity.
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A vote of thanks as Remco Lenterman resigns as Chairman
We're sad to say that Remco Lenterman is stepping down from his role as Chairman of FIA EPTA following his departure from IMC.
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Trading in control
The Netherlands Authority for the Financial Markets recently released a report on its expectations around the current and future use of internal controls for automated trading. This is an important theme for FIA EPTA and we are pleased to see that the AFM's report sets clear principles and shows the importance of industry best practice and the principles of proportionality.
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Tackling the risks of algorithmic trading
Since the introduction of automated trading, much has changed in the operation of our markets: how to improve market structure and implement safeguards has been a key topic of conversation for both market participants and regulators for some time. This is why the report by the Senior Supervisor’s Group (a group that consists mostly of Central Banks) on algorithmic and high frequency trading makes for curious reading.
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