6 – 12 JUNE 2013
vendor of trading software. Frank Piasecki, ACTIV president, said ACTIV will provide access to its European equities, futures and options data to PFSOFT’s Protrader platform, as well as vendor of record capabilities. PFSOFT will have access to ACTIV’s European market data feed, and the implementation of vendor of record technology will add permission and exchange reporting support to Protrader. FRANK PIASECKI ACTIV president Protrader covers multiple asset classes and is available for desktop, web and mobile use, Piasecki said. It does not cover over-the-counter fixed income, but Piasecki said as more of those instruments move to exchanges they will be added to the agreement and will be accessible for trading by the PFSOFT’s clients. ACTIV and PFSOFT took about eight months to firm up the deal, Piasecki explained, noting the introduction came from a Turkish brokerage looking to service a prime brokerage client that wanted access to Protrader. The bulk of PFSOFT’s clients are the active trader segments made up of asset managers, day traders, hedge funds and other smaller institutional participants, Piasecki added. MARKET STRUCTURE
MARKET STRUCTURE
ITG cautions on mimicry of Canadian dark rules
report in May from ITG cautions markets considering limits to dark trading could see increased trading costs similar to increases experienced by the Canadian market in the months after dark trading rules were implemented there. In October, rules mandated by the Investment Industry Regulatory Organization of Canada were applied to curb dark liquidity by requiring price improvement, minimum order size for undisplayed orders and a preferencing of displayed orders before dark orders, among other things. ITG’s report noted the impact in Canada, which was inconsequential related to market quality and negative with respect to exchange fees for those executing active orders, would likely be seen in any other market with similar rules. “We urge regulators around the globe to carefully consider our analysis before rushing to duplicate the Canadian rule set,” the report stated. The report, authored by a group of ITG execs led by Doug Clark, managing director of research, noted retail broker dealers have seen the greatest impact from rule changes due to the migration of trades away from dark books like Alpha IntraSpread onto lit books.
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Dodd-Frank, EMIR may force big banks to break up
Proposed financial reforms as part of the Dodd-Frank Act and EMIR may force large multi-nationals to break up, according to Gregory Lyons, partner at Debevoise & Plimpton, who spoke during a panel at the Securities Industry Financial Markets Association’s Collateral Conference
As an example, the report noted the fee for active trades on IntraSpread is just $0.0004 per share versus $0.0028 per share on Alpha’s lit book. By annualizing out the increase in costs, ITG estimates that these firms will see their costs rise by C$9m. “[I]f such a rule were to be implemented in the US markets, where dark trading is far more mature, we expect the exchange cost impact would be a large multiple of that seen in Canada,” it stated. In comparison, the rebate for passive orders for traders moving from IntraSpread to Alpha moves up from nothing to $0.0024 per share, much of which is likely to be captured by the high-frequency trading players, the report stated. The rules have also required significant resources for reprogramming of algos and smart order routers to comply with the regulation, and the rules have limited available trading options, the report states.
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in New York in May. With regulators eschewing the widely accepted practice of measuring exposure using value at risk (VaR) in favor of percentages, firms will be subject to requirements that don’t take their business models into account, Lyons argued. In the case of counterparty exposure limits, only
25% of an entire banking group’s Tier 1 capital can be exposed to a single counterparty, including subsidiaries directly or indirectly controlled by the parent company, Lyons explained. “I can’t emphasize enough how much [this] will limit banks’ activity,” Lyons said, adding it will cause significant drops in activity, leading