Mind
the
gap
“We may be a small island, but we are not a
small people,” remarked Edward Heath, UK
prime minister, in June 1970. Over the next three
years, Heath took the UK into the European
single market, which later became the EU. At
the time, it was seen as a step forward for the
UK, which had previously feared isolation.
In the aftermath of the UK’s shock decision to
leave the EU on 23 June 2016, much discussion
inevitably turns to the question of how Brexit will
affect the world of capital markets. The result
was one which few had expected, even just
hours before the result became clear. In the
aftermath, the pound crashed to the lowest
level in over 30 years, falling by 13% on the
Friday after the result was announced.
From a trading perspective, the outcome may
yet prove significant in terms of capital markets
regulation. Buy-side observers have raised
concerns that the European Commission’s
MiFID II legislation was heavily influenced by the
UK FCA, particularly on payments for research;
it remains to be seen how the legislation may
change between now and January 2018 given
that the UK is no longer a member of the Union.
Sometimes it can seem as though the only
constant is change itself, and nowhere is this
more true than on the trading desk. One of the
more interesting questions arising this issue is
how to organise the trading desk – a question
that was recently explored in our K&KGC
survey Organising the FX trading desk parts
one and two. On the one hand, there are
those who advocate a true multi-asset desk,
in which the true divide is between high-touch
and low-touch trading, not between the asset
classes. On the other are those who see the
question as mainly one of information sharing
and education, in which case traders from
one asset class can help to better inform their
peers in another. This issue, these questions
are tackled by Paul Squires, head of trading
at AXA Investment Managers, and Christoph
Hock, head of multi-asset trading at Union
Investments.
This month’s issue of the Buy-side Perspectives
August 2016
also focuses on how increased collaboration
between the buy side and the sell side is
helping to reshape the market in the interests
of the end-investor. For years, it has seemed
as though many developments in the market
were primarily driven by the sell side. Now,
however, new platforms in equities and fixed
income are bringing the buy side firmly on
board to lower the cost of trading, improve the
quality of execution, and tackle some of the
thornier challenges around trading technology
such as messaging standards, connectivity
and data. These platforms offer the prospect
of a more collaborative industry, which better
serves the interests of the buy side. At the same
time, the buy side is a