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discussions next year . The additional challenges that SA-CCR has caused for banks is focusing minds on what can be done to alleviate this . Will we see the start of a shift toward cleared OTC FX ? Will we see an increase in the trading of FX Futures to express views ? If either of these are to occur , it needs to be at the right price and easily fit into current buy-side workflows . Peter Welsby , senior multi-asset trader , Manulife
European capital markets face a reckoning of sorts in 2023 , as policymakers crystallise their plans for reforming Mifir . This review has become a key vehicle for reversing the fortunes of EU markets , which have become less competitive vis-à-vis other regions in recent years . The early signs are positive : a real-time pre- and post-trade consolidated tape for equities has already gained strong support across key EU institutions , and is something we at Cboe have long advocated for to help drive investment and improve the resilience of markets . In the area of equity transparency , the Bloc has a choice : pursue an approach supported by incumbent EU exchanges , of forcing market participants into low latency central limit order books in the naïve belief that this will enhance institutional investor outcomes ; or realise that the best way to attract investors to Europe is by catering their diverse needs and offering different trading mechanisms for price and size discovery . The UK is embracing the latter approach , and we are hopeful that EU policymakers will follow suit to restore its competitiveness and promote open , competitive and pan-European markets , which ultimately benefit end investors .
Elsewhere , we believe brokers will continue to migrate their passive , displayed liquidity to pan- European venues that offer higher execution certainty and lower costs , as well as to alternative mechanisms such as pre-trade transparent frequent batch auctions that help minimise price slippage . Natan Tiefenbrun , president , Cboe Europe
This year another period of global geopolitical and macro shocks to challenge the markets . That said , markets have mostly handled the volatility well and shown resilience in the face of heightened uncertainty and despite decaying liquidity . We do not know what the new year will bring , but the major issues we have seen have not been fully resolved , so 2023 could be a bumpy ride . Innovation will continue to drive market structure , and I expect to see growth for the relatively new disruptors who are challenging the old , exchange-centric model . I think this competition is a good outcome , but liquidity remains key , and those who can offer it in a viable and timely way will be the winners . We will also be keeping a watchful eye on UK regulation as it further diverges from that of the EU , as this will clearly affect the liquidity landscape . Further , market structure decisions made in other regions , such as a move to T + 1 , will no doubt resonate through Europe . In addition , the drive for more ESG-focus within the industry will become more prominent as well . Stuart Lawrence , head of UK equity trading , UBS Asset Management
The last 12 months have resulted in some of the most volatile and challenging liquidity conditions the bond market has faced in recent memory . Recent periods of volatility have created a greater desire from market participants to innovate and adapt to new approaches in the market . In fixed income this has continued to drive electronification and the use of data to enable transparency in decision making . We continue to believe that all-to-all trading is an essential mechanism to allow investors to navigate stressed market conditions , where there may otherwise be liquidity shortages . Raj Paranandi , chief operating officer EMEA and APAC , MarketAxess
We expect 2023 to be a bumpy year for financial markets globally . It will be a year for playing defence , optimising income , and tactically looking for a weakening dollar to potentially allocate to emerging markets . My main prediction centres around this defensive play . As such , we believe multi-factor smart beta ETFs , especially those focused on quality and income generating strategies , will outperform their relative AUM growth from this year as the decade of “ cheap ” money and record low interest rates is gone . The by-product of such monetary policy over the last decade has certainly benefited ETFs and index funds and in particular , market capitalisation weighted schemes , often heavily overweight growth stocks , was a good “ buy and hold ” strategy returning solid annualised returns . However , the new interest rate environment calls for a more tactical approach to asset allocation and equity market exposures . Hence , ETF investors may start looking favourably on alternative weighting schemes
86 // TheTRADE // Q4 2022