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THE OFFICIAL NEWSPAPER OF TRADETECH 2018
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1
Buy-side bond traders reevaluating
traditional RFQ model
Asset managers trading corporate
bond markets are evaluating a move
away from the traditional request-
for-quote (RFQ) model, opting
instead for electronic execution to
meet best execution requirements,
according to a study from Liquidnet.
2
MiFID II tick size regime sees
transaction costs increase
THE FRENCH FINANCIAL REGULATOR HAS FOUND MIFID II’S TICK SIZE REGIME
HAS WIDENED THE SPREAD ON CERTAIN TRANSACTIONS AND IMPACTED HFT
MARKET MAKERS.
T
he cost of small transactions on some of the
most liquid securities has slightly increased
following the implementation of MiFID II’s tick
size regime, according the French financial
regulator.
Autorité des Marchés Financiers (AMF) carried
out the analysis of the initial impact of the re-
gime on just over 500 shares on Euronext Paris,
including CAA40 stocks.
It found the effects of the tick size rules were
positive overall with less messages to create
noise in the market, increased traded volumes
and an increase in quantity available at best
limits.
“It reveals a sharp increase in depth and a
significant reduction in the number of messages
sent to the market, at the cost, however, of
a widening of the spread for the most liquid
securities,” the analysis said.
“The outcome for market participants is a
slight additional cost that is offset by the ben-
efits of noise reduction and the increase in the
quantity available at the best limits. For small
caps, implementing appropriate tick sizes…re-
sulted in a more dynamic order book and, above
all, a sharp increase in traded volumes.”
European authorities introduced a harmonised
tick size regime under MiFID II, although it proved
to be controversial with certain market partic-
ipants claiming it was put in place to control
high-frequency trading (HFT) flow and activity.
The AMF’s study suggests the positive effects
of the regime only concerns orders of non-HFT
participants, with a decrease in market share
seen across HFT firms.
HFT market makers’ share of the depth and
traded volumes decreased for securities with
an increased tick size, compared to securities
where the tick size remained the same.
The AMF said this suggests that increasing
tick size allows more players to place orders at
competitive prices in the order book, while HFT
market makers fail to offset the competition of
the other players at the best limits by gaining
a better position in the queue. The regulator
reiterated that the study presents average
magnitudes by a group of securities and covers
a period of low volatility.
Head of FX operations at Barclays
charged over front-running scheme
The former head of FX trading oper-
ations at Barclays, Robert Bogucki,
has been charged for orchestrating
a major front-running scheme. He
allegedly manipulated £6 billion
worth of FX options to depress the
price of volatility prior to the execu-
tion of large trades.
3
MiFID II wipes $300 million from
equity research industry
The European equity research mar-
ket has plummeted by $300 million
in the wake of MiFID II’s rules on
unbundling payments for invest-
ment research and execution fees. A
Greenwich Associates study found
research budgets were slashed 20%
year-on-year.
4
Hudson River to acquire Sun Trad-
ing as HFT continues to contract
Hudson River Trading is to acquire
market-making firm Sun Trading as
high-frequency trading continues
to shrink in the face of low market
volatility and increasing costs. The
deal is expected to be finalised in Q1
2018, subject to regulatory approval.
5
Interactive Brokers fined $4.5
million for algo trading system
failures
The Hong Kong-based arm of
Interactive Brokers has been fined
$4.5 million for failures relating to
its algorithmic and electronic trading
systems. Asian authorities found
the business had breached a code
of conduct for execution of market
orders using the systems.
Issue 1
TheTradeNews.com
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