[ N E W S R E V I E W | T R A D E T E C H 2 0 1 8 ] des Marchés Financiers ( AMF ), said : “ We are far from having achieved a satisfactory outcome . While it is fair to recognise that MiFID II is most demanding , it should also be recognised that , as things stand , one must strive to do better .”
The topic of systematic internalisers ( SI ) also remains a hot button issue . While SI operators were keen to extol the virtues of their services to the buy-side , exchange operators continue to suggest that SIs hold an unfair advantage by taking liquidity away from the lit markets , which inherently flies in the face of the objectives of MiFID II .
How this will play out in the long run is anyone ’ s guess , but it ’ s fair to assume that this conversation will continue to dominate the regulatory space for some time to come .
Artificial intelligence is the future This may not be surprising to anyone who has even a passing familiarity to the financial technology sphere , but almost every panel at this year ’ s conference made some reference to the various forms of artificial intelligence ( AI ) out there and how it can benefit the industry .
In comparison to other technology buzzwords such as blockchain that create more noise than actual substance , AI and its subsets of machine learning , neural networks and deep learning , are already making inroads into the industry and the pace will ramp up considerably in the near future .
Speakers from firms such as JP Morgan , BlackRock and Generali Investments all laid out how they are using AI to enhance their trading and investment processes , although the unifying theme is that the technology cannot be relied upon as a silver bullet : The right balance of human expertise and computing power is the future .
Sean Kennedy , head of investment operations at Vanguard , highlighted one barrier that can hinder the adoption of AI systems : transparency . Until systems designed to aid decision-making can show how data has been used to arrive at specific outcomes , users and regulators will continue to mistrust the technology .
Data is king While AI may be the new darling of the financial technology world , the reality of getting these systems right is rooted in the more mundane world of data . The buy-side in particular has historically struggled to adapt its approach to data management and structures to the new operating landscape , but it seems that may now be a problem of the past .
Many speakers throughout the conference were confident enough around their data practices and the message that building fancy technology without being prepared to do the hard work first has finally sunk in . The presence of Google at this year ’ s conference will also go some way to cementing this attitude . While the tech giant may have been promoting its cloud services , perhaps as a competitor to the already well-established AWS , there ’ s no doubt that it will see its data capabilities as a key asset to sell to the industry in the near future .
Popularity of periodic auctions will continue Similarly to large-in-scale trading , periodic auctions have exploded in popularity since the introduction of MiFID II , particularly in the wake of the double volume caps on dark pool trading , belatedly brought into play in March .
Periodic auction book operators such as Cboe have seen volumes surge in recent months on these types of venues and there is little sign of that stopping any time soon . The Chicago-based institution recorded a new one-day record of € 1.08 billion notional value traded on 25 April and these totals are more than likely to increase in future .
But not everyone is enthusiastic . The AMF ’ s Ophéle specifically called out Cboe during his keynote address , questioning the limited transparency of periodic auctions and suggesting that many of these trades could be pre-arranged ( see page 15 ). As such , it won ’ t come as a much of a surprise to see regulators targeting periodic auctions for review along with largein-scale trading in the near future .
Diversity issues should be front and centre It ’ s no secret that capital markets are facing a diversity problem . A prime example was the alarming gender pay gap statistics coming out of the UK asset management market earlier in the year , but this is just one small piece of a larger problem that asset managers are grappling with .
Many conferences in the industry now hold specific panels on this very subject and TradeTech is no exception , but it ’ s time that this conversation moved to the main stage and a wider audience . Limited-space think tanks or pre-conference breakfast sessions do nothing to address the systemic issue of the diversity problem and , as with so many other issues , education is the first step towards positive action .
As the worlds of institutional finance and technology become even more tightly entwined , the industry has a golden opportunity to embrace change and put inclusion at the top of its agenda . Financial institutions are already facing a touch challenge to recruit and retain top technology talent , so why not learn from other sectors where these people want to work ?
Issue 56 // TheTradeNews . com // 13