efforts is focused around how I can maximise the potential with
our partnerships.
• As technology is core in the automation and workflow, I
need to involve the IT department and ad hoc organise special
task forces to, for example understand how our technology
suppliers are adapting to regulatory change and will support us
in the transformation.
Looking at the current workload, I can foresee that there
may be a further need to organise an additional oversight
committee responsible for the increasing number of
policies and processes in the unbundled organisation.
I also work actively with our broker counterparties, MiFID
II consultants as well as the buy-side peer association
Association Française de la Gestion financière (“AFG”) to
make sure we leverage as much external knowledge as
possible.
Partnerships and market outlook
It is important for us to maintain a good broker list based
on objective quantitative data where we have granular
understanding of flow. We want to work with brokers that
invest in best-of-breed in-house trading system for low
touch and we need brokers with many liquidity specialists.
The brokers must make strategic business decisions
in the areas they want to lead, be it order processing,
flow management or being a flow specialist. It is hard
to cover all areas. I believe that brokers that neither
demonstrate best in class in-house technology nor offer
liquidity specialists will be challenged by losing buy-side
relationships in the future. Broker specialisation will not
disappear as it is very important with good knowledge.
The spread between order-flow brokers and specialists are
likely to widen and all brokers cannot be specialists.
While the trend is to reduce the number of brokers is
mainly true for low-touch flow algorithmic trading,
the opposite challenge applies to the small-/mid cap
market where we must work with whoever is the liquidity
specialist.
Post 3rd of January 2018 with the implementation of MiFID
II, we need to make hard decisions if we want to interact
with systematic internalisers (“SIs”) and all new venues.
We need to understand how the venues meet our chosen
benchmarks and the level of toxicity. We prefer to post
passive orders in less toxic venu es and to be able to use
conditional order types such as minimum quantity to trade.
We need to configurate our order routers to minimise
market impact. While want to be interactive with SIs, the
value of the order book can be changing. If the SI can only
fulfil a small part of the order, it may signal the market
too much. We have many discussions with our brokers
about the SI regime and need to understand their level
of interaction with high frequency traders (“HFT”) and if
we can trade truly anonymous or not. The broker will be
challenged to deliver real liquidity and the large trades
must be truly dark. SIs will likely need to reveal what type
of flows they interact with.
We are also making sure that we have all the tools ready
to execute and interact with alternative venues such as
BATS LIS, Liquidnet, and Plato as an alternative pool for real
liquidity.