For example, Hock says that in equities,
due to fragmentation and other factors,
traders are used to dealing with a
variety of different types of venues and
sources of liquidity and also execution
benchmarks such as implementation
shortfall calculated versus arrival price or
VWAP (volume weighted average price)
and PWP (participation weighted price).
There are also specialist block trading
facilities.
By contrast, in fixed income and FX,
business has traditionally been done
by RFQ, asking brokers for prices,
while the concept of arrival price was
not well known in these asset classes
at all. There was a lack of data and a
lack of transparency. Now that these
asset classes, especially FX, are shifting
towards trading more like equities,
fragmentation, electronification and
TCA are becoming features of the new
trading landscape and block trading
venues are entering the market; algos
and dark pools are also entering the
market. A trader coming from an equities
background may have a valuable
perspective that can be applied to the
non-equity asset classes; conversely,
fixed income and FX traders can benefit
from a greater understanding of how the
equities market has changed as a result
of MiFID I back in 2007/8, in preparation
for comparable changes in their own
market.
“Similar things that have happened in
equities over these past few years are
now happening in fixed income and
FX as well, and we need to be ready
for that in the very best interests of our
portfolio managers and our investors,”
said Hock.
One of the other major shifts in
the market is the development
of new market models based on
collaboration between buy-side and
sell-side firms – for example, Project
Neptune in fixed income, and the Plato
partnership in equities. “In the past, the
implementation of new platforms was
mainly sell-side driven, which didn’t
necessarily fully favour the buy-side
and the interests of investors,” said
Hock. “We need the buy-side and
the sell-side to work together.” These
new platforms are part of a new wave
of platforms built with active buy-side
participation. Others include Turquo