K&KGC
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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: +44(0)203 411 3996
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
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