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P R E D I C T I O N S ]
Anish Puaar Naz Quadri Michael Horan
European market structure
analyst, Rosenblatt Securities global head of enterprise data
science, Bloomberg director, head of trading, Pershing
Depending on
the outcome of
Brexit, we may see
politically-driven
liquidity fragmentation that
could hurt investor perfor-
mance. If Britain leaves the EU
without a deal, MiFID II’s share
trading obligation will restrict
where certain shares can be
traded, according to whether
market participants are based
in the UK or in the European
Union. The European Securities
and Markets Authority has
laid out the EU’s stance on
this issue, but the Financial
Conduct Authority is yet to
make its position clear. London
could lose its position as the
home of alternative pan-Euro-
pean equity markets as trading
moves to the continent, which
could raise transaction costs.
Longer-term, we could see
further regulatory divergence,
with distinct rules in the UK
and EU for periodic auctions,
systematic internalisers and
commission unbundling.
Several EU regulators have
complained about the new
unbundling regime, while the
FCA has lauded it. With the
European Commission already
planning targeted adjustments
to MiFID II, these fissures may
appear sooner than expected. In 2020, we will continue to
see the democratisation of
data and proliferation of artifi-
cial intelligence (AI) reshaping
the financial services industry.
The front-office was the first
to fund and research AI’s
potential to unearth valuable
insights and possibly improve
portfolio strategy and perfor-
mance, and next year will be
critical as organisations evolve
the culture necessary to realise
these benefits firm-wide.
Commitment from senior man-
agement to foster firm-wide
collaboration and investment
in data-driven technology will
be pivotal to establish and
spread a more data-centric
culture across organisations.
This cultural transformation
should be approached like any
strategic shift a firm under-
takes, by allocating capital
and rethinking the
personnel and
62 // TheTrade // Winter 2019
skills neces-
sary to succeed.
Data science talent, for
example, will be at a premium
as financial firms look to
harness the power of ubiqui-
tous data lakes for enhanced
computing and advanced data
analytics across the
front, middle and
back-office functions.
The relentless
march of algo-
rithmic trading
into execution
workflows will con-
tinue to add to rising volumes
in closing auctions across
Europe. This will show more
intensity around blue chips
stock and ETFs as passive
investing takes a further hold
on equity trading investment
profiles, further compounding
the skew of liquidity disper-
sion towards the close. Intr-
aday trading will see growing
use of systematic internaliser
liquidity and periodic auctions
as the sell-side attempts to
squeeze implicit trading costs
as low as they can through-
out the coming year.