Out the box: there is more than Equities

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4 March 2013
Joséphine de Chazournes
Two weeks ago I attended two very different conferences in London back-to-back: the World Exchange Congress and the AFME Liquidity Conference. After this schizophrenic experience and a week's holiday, I felt I needed to share a few thoughts. But let me give you the timeline: 1) I stopped covering Equities four years ago, and on the evening before day 1 during the more private debate organized by one of the sponsors, I found myself listening to exactly the same people that were speaking not four years ago but six years ago: remember the old equity guard of Chi-x who used to publicly insult the CEOs of the incumbent European exchanges? Well some of them were there presenting yet a few other upcoming equity MTFs... Thankfully there was also a pinch of salt from some interesting derivative ventures. 2) day 1 of the World Exchange Congress: There was a lot of talk about transparency and how regulators could help increase it, how data and technology are the ways exchanges are making money considering how low the Equity trading fees and volumes are now, and about expansion in emerging markets (e.g. selling technology or data centres to emerging market exchanges or buying smaller exchanges) 3) day 2 of the World Exchange Congress I skipped and went instead to the AFME Liquidity Conference which focused on Fixed Income and FX. Just a reminder for our US based colleagues: the AFME is the European association of the banks (and now buy-sides). Here transparency was an issue, there was a lot of talk on how too-much pretrade transparency would impair liquidity, about single dealer or multi-dealer (bank-led or not) platforms or trading protocols that could be set up to try to concentrate liquidity in discontinuous markets (e.g. credit) and what would be the next asset to create a platform for (NDFs? FX options? IRS? CDS indices?). By now you can tell why I said schizophrenic, and why all exchanges and dealers or equity and fixed income traders cannot fully understand each other. Those exchanges/MTFs that still only speak about equity, please take a look outside of the box at fixed income (cash and derivatives, rates and credit) and fx, all the more so considering the still high margins and/or volumes these assets bring to banks, dealers and OTC platforms Did I mention the multitude of regulation that is overhauling that OTC business model and offering more electronic (and hopefully somewhat transparent) opportunities? It even comes as a surprise that a company like Getco is so far publicly hiring only top notch Equity people from UBS and GS and is potentially selling its fixed income trading activity. And I have not mentioned that inside Knight Execution Services one can find both an FX and a cash Fixed Income trading platform, namely HotSpotFX and Bondpoint... But that is another story...


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