THETRADETECH DAILY THE OFFICIAL NEWSPAPER OF TRADETECH 2021
GREGG DALLEY : navigating the new liquidity landscape
Global head of trading at Schroders , Gregg Dalley , tells the TRADETech Daily about the impact of market structure changes on liquidity and trading processes since Brexit , and provides his thoughts on other hot topics such as SPACs and the consolidated tape .
Ahead of your participation on a panel discussion at TradeTech ’ s virtual conference on liquidity in a post-Brexit environment , tell us about the impact of market structure changes since Brexit . We were quite fortunate and not massively impacted by the equivalence issue relating to trading venues because we don ’ t have any EU share trading obligation ( STO ) clients , so that part has been relatively straightforward for us . But I think the situation with the Swiss Stock Exchange when they had 100 % market share for a period after losing equivalence was a good experiment for the industry in many ways . It took away competition and it went back to a single venue . I ’ m keen to discuss that on the panel and whether we have gone too far in the debate about the benefits of competition between multiple trading venues , with all the issues that go with that around the availability and cost of market data , smart order routing , plus the impact on volumes , spreads , costs etc .
With the Brexit scenario , we had a lot of time to prepare , and it was well thought out internally . The execution mechanics might be slightly different , but we still get the same outcome . London has lost its market share as the number one place to trade shares in Europe and most of that share has gone to Amsterdam , but it is just that venue location which has changed .
When you look at market share and where volumes have migrated to it appears to have had quite high impact , but from the dayto-day point of view it has been very low impact . Whether the smart order router goes to Amsterdam or London , you know you ’ re getting the same price , at the same time from the same place .
What are the main challenges for traders sourcing liquidity in a post-Brexit landscape ? Operationally the main challenges were around client reporting . There were lots of
“ The consolidated tape should be much more insightful than just looking at the volume , it should go a step further and look at participants ’ market share .” new MIC codes that suddenly sprung up that nobody had seen before and they weren ’ t set up in the systems , so there were some issues on the transaction and trade reporting side . It took a few weeks to resolve those challenges .
Structurally the liquidity hasn ’ t necessarily changed and it hasn ’ t suddenly created new participants . However , in terms of coverage , we ’ ve seen banks moving people to EU destinations and I think that has had quite a big impact . There have been some positive comments from the government about regulation and how they can make the UK more attractive while ensuring there is still a stringent code of ethics and protection . But for London as a trading hub , the impact is potentially much greater than on individual asset managers .
What are your thoughts on the UK ’ s decision to loosen rules on dark trading ? Is this a positive development for market participants ? I think the development could take away a complication that emerged from MiFID II . The double volume caps and dark trading rules , even the large in scale calculations , were not quite right . But the market is very good at providing a solution to work around such issues . The outcome will be the same for us , but the venue that we are trading with will potentially be different . It won ’ t create new liquidity and it won ’ t take liquidity away , it will just change the mechanics of how it works .
There are other areas too like IPO listings . The UK is trying to make that more attractive , which is quite interesting . It has been a hot topic for years , but it seems things have really started in earnest with that . We , at Schroders , are very supportive of the proposed changes but I am conscious that there are differences of opinion . I ’ m also interested in other people ’ s opinions around SPACs as they come into Europe
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