Buy-side Perspectives Issue 14 Special edition | Page 25

K&KGC - K E Y F I N D I N G S F R O M T H E AT F 2 ND H A L F 2 0 1 8 Below: K&KGC buy side poll at the Alpha Trader Forum cross asset derivatives on 9th October 2019. participants of which factors to consider in their broker reviews which is a fundamental component of the formal best execution process. In the short term, the broker relationships will undoubtedly be focused on how to overcome any Brexit challenges and in particular in the event of a hard Brexit on 29th March 2019. Listed vs. OTC derivatives Data, transaction cost analysis and best execution Best execution was formally regulated for derivatives with the implementation of MiFID II on 3rd January 2018. There are still a number of underlying areas such as aggregation of data and electronification of derivatives trading needed in order to find similar levels of efficiencies in the process of evidencing best execution as found in for example, listed equities. Any information and analysis will never be better than the quality of the underlying data and this is another challenge for the heads of derivatives trading. Whilst the analytical models are not complicated, there is a lack of electronic consolidated data. 38% of the participating buy side are currently manually aggregating the data which they add to their in-house built analysis tools to make more informed decisions. 31% of the trading desks have no TCA solution at all. Those firms that do have TCA in place, experience various degrees of business benefits from their chosen solutions. Global regulation is increasingly incentivising the market to trade more derivatives on listed venues for increased transparency. The decisions of which instruments to trade ultimately lies with the buy-side heads of derivatives trading and their firm’s portfolio managers. They will jointly need to evaluate which listed derivatives will be suitable alternatives to OTC derivatives over time. For a real shift towards more listed derivatives to happen, there would need to be a concerted willingness and effort in the chain of brokers, buy-side technology firms and venues. The poll at the ATF cross derivatives debate revealed on a weighted average that the buy-side participants were trading about 64% listed derivatives. While every buy-side participant present traded for hedging purposes, there were also many who were trading to take positions for funds while 29% were engaged in systematic trading. 2019 Sponsorship now open! Contact information: Anita Karppi | Managing Director Email: [email protected] Telephone: [phone] BUY-SIDE FEEDBACK: BUY-SIDE FEEDBACK: Brokers and venues Most of the buy side are trading derivatives bi-laterally with their broker relationships. K&KGC assisted the buy side with consolidating a benchmark among the buy-side 2019 SPONSORSHIP SPACES AVAILABLE - ACT TODAY!