Best Execution special report
Click here to download the PDF
The Next of Best
What will best execution mean to you by this time next year? This month marks my one-year anniversary with Waters and in that relatively short amount of time the world of best ex has evolved-thanks to changes in regulation and market structure. While I came over from the retail, non-tech, banking side of the financial services industry, even I can recognize change when I see it.
To varying degrees, best execution has been the target of regulators-and savvy traders alike-on both sides of the Atlantic. In addition, Asian nations are grappling with the practice, most recently with India's regulatory body, the Securities and Exchange Board of India (SEBI), finally introducing smart order-routing to the marketplace, though the markets there are less fragmented.
Yet, inside this Special Report you will see that it is not just regulation that is driving best execution technology upgrades. As Sybase's Jeff Wootton points out in his Open Platform on page 4, this sea change is thanks more to market complexity and the emergence of ever-increasing numbers of venues for trading. Hardly a day goes by that I don't receive an announcement about this or that firm adding connectivity to some new exchange.
As a result, smart-order routing (SOR) technology has taken on greater importance at firms looking to gain an advantage over their competitors. In a matter of a year or two, smart order-routers have rapidly morphed from simple liquidity finders to become tools that can predict the probability of advantageous executions based on existing parameters and previous execution data, and adapt to changing market conditions.
I recently spoke with Thomas Chippas of Deutsche Bank; Ruth Colagiuri, then at Bank of America Merrill Lynch (BAML); and Jamil Nazarali at Knight Capital, each of whom is a major sell-side figurehead in the world of smart order-routing. They agree that putting a "Generation 2" or "Gen 2.1" tag on SORs is not appropriate, simply because this field of technology is improving so quickly (see Intelligent is the New Smart, Waters, April 2010).
It also must be noted that smart order-routing technology is just a piece of the best execution pie, as complex-event processing (CEP) has become a major buzzword throughout the industry. And finally, as Wootton points out in his Open Platform, as technology around best execution advances, so, too, will data requirements, which will create another headache-opportunity for advantageous trading shops.
As new geographies invest in routing technology; as rules geared toward best execution change; as new, sophisticated trading strategies take hold, firms on both the buy side and sell side will have to evolve with this market. So my asking, "What will best execution mean to you by this time next year?" isn't simply rhetorical. If you can't answer this question, then odds are that the market has already passed you by.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
An AI-first approach to model risk management
Firms must define their AI risk appetite before trying to manage or model it, says Christophe Rougeaux
Launch of Deutsche Börse’s midpoint dark pool delayed
The exchange group faces a roadblock as it awaits a reference price waiver from its regulator.
Tech VC funding: It’s not just about the money
The IMD Wrap: It’s been a busy year for tech and data companies seeking cash to kick-start new efforts. Max details how some are putting the fun into fundraising.
Bond tape hopefuls size up commercial risks as FCA finalizes tender
Consolidated tape bidders say the UK regulator is set to imminently publish crucial final details around technical specifications and data licensing arrangements for the finished infrastructure.
If M&A picks up, who’s on the auction block?
Waters Wrap: With projections that mergers and acquisitions are geared to pick back up in 2025, Anthony reads the tea leaves of 25 of this year’s deals to predict which vendors might be most valuable.
The Waters Cooler: A little crime never hurt nobody
Do you guys remember that 2006 Pitchfork review of Shine On by Jet?
Removal of Chevron spells t-r-o-u-b-l-e for the C-A-T
Citadel Securities and the American Securities Association are suing the SEC to limit the Consolidated Audit Trail, and their case may be aided by the removal of a key piece of the agency’s legislative power earlier this year.
After acquisitions, Exegy looks to consolidated offering for further gains
With Vela Trading Systems and Enyx now settled under one roof, the vendor’s strategy is to be a provider across the full trade lifecycle and flex its muscles in the world of FPGAs.