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attributes . This means orders are no longer limited to a one-sizefits-all wheel approach . There are some sell-side firms who offer this clustering information but we ' ve chosen to use our own data because we ’ re trading for UBS AM not for the street . We know how our past orders have acted and therefore we should be using that to navigate what we do in the future with our algos . These are algo wheels 2.0 . Most buy-side firms have an algo wheel and we all need to start thinking about the next stage of evolution .
Which market structure and regulatory changes are you most aware of ? For a very long time , the industry has had an exchange-centric model . However , in the last two to three years we ’ ve seen a move towards alternative venues and disruptors , primarily because of their innovation . For example , you have some ELPs now looking to quote directly into your EMS - firms like XTX are pushing very hard for that bilateral relationship . In the past you would reach them via a smart order router or a broker algo . If I ' m dealing directly with one of the ELPs then they know who I am and my risk profile and can price accordingly ( and probably more competitively ) versus when I interact with them via an algo . We ’ re also seeing buy-side to buy-side options such as Appital . In addition , we also have some of the more traditional venues such as turquoise which have turned on their rebate again . The momentum is definitely with the innovators .
Regarding regulation , we are seeing a divergence post-Brexit between the UK and EU . The UK is looking more pragmatically about where orders are executed and the EU will have to take note of this and adjust accordingly . It ’ s almost like the EU is waiting and watching . If the UK makes significant changes to Mifid II then the EU will either have to match the UK or find a way of blocking perceived advantages . We ’ ve got to pay a lot of attention in the near future to regulation as it increases the cost to the brokers . It ’ s also very onerous in terms of the information required . We must also be mindful of what ’ s happening around T + 1 settlement . Long term , this concept will probably expand to Europe and other major markets . I understand T + 1 from a counterparty risk and credit risk perspective but there are other factors that we will have to consider in terms of increased settlement failure , as well as the implications for ETFs and FX flows .
The most important topic for me is outages . Ironically , the Investment Association put out their recommendations on what should happen in outages the week that Nasdaq OMX went down and we lost four Closing Auctions . At a minimum , we need some standardisation of messaging from the exchanges but we should expect the development of a mechanism to circumvent these events . Outages are a second order consequence of a lack of regulatory coordination and planning in the EU .
How has the relationship between the buy- and sellside evolved over the years ? The real change is with the low touch broker relationships . These don ’ t exist as they once did - it ’ s medium touch now . I expect a high level of service for our electronic orders , with our coverage adding value where they can . I ' ve made that very clear in particular to our wheel brokers . There ' s a lot of people who want the chance to be on our wheels and if brokers aren ’ t prepared to work for it then we move on .
62 // TheTRADE // Q4 2022