GFO-X is the UK’s first regulated and centrally cleared trading venue dedicated to digital asset derivatives.

The trading venue stated that it has been working closely with these partners to deliver the requirements necessary to grow the institutional digital asset index futures and options market. 

Read more: LCH SA to launch UK’s first centrally cleared trading venue for digital asset derivatives with GFO-X

“We are delighted to announce our strategic partners as we drive towards launch in Q1 next year. Their support is a clear and strong endorsement of our vision of the market structure required to deliver digital asset derivatives to large institutional clients,” said Arnab Sen, chief executive and co-founder at GFO-X.

“It demonstrates the need for a highly regulated venue to bring additional depth, breadth, and diversification to the current limited choices in centrally cleared digital asset index derivatives. We believe the digital asset derivatives market will grow exponentially over the coming years.”

GFO-X offers a trading platform built for institutions, providing investors with a secure and efficient trading environment to manage digital asset exposure.  

“As a market maker, our strategic connection with GFO-X underscores our commitment to the institutional digital asset futures and options market – a rapidly evolving space we believe holds significant potential for continued growth and opportunity,” said Osi Lilian, IMC Strategic Investments co-lead.

The venue added that it looks forward to announcing additional partnerships with leading financial institutions in the immediate future.

Read more: M&G Investments leads $30 million Series B funding round for GFO-X

“We are excited to partner with GFO-X, the UKs first regulated and centrally cleared trading venue dedicated to digital asset derivatives,” said Barry Polak, lead product commerce at ABN ARO Clearing.

“This strategic collaboration underscores our shared commitment to advancing the institutional digital asset futures and options market.”

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James Osborne

Named Switcher, the new “algorithm of algorithms” as so-called by Virtu is designed to allow clients greater optionality for an order throughout its lifecycle depending on changing conditions.

“Clients have been asking for a more dynamic approach to algo wheel implementations that solves the constraint of only using one algo strategy for each order,” James Osborne, global head of algorithmic development at Virtu Financial told The TRADE.

“Switcher multiplies the power of an algo wheel by dynamically switching between multiple algo strategies as conditions change – the same way a human trader would trade orders if they had time to monitor and trade everything themselves.”

The new capability acts as a co-pilot for traders, helping them to manage low or no touch flow. The algorithm helps traders to select the most appropriate algorithms based on trader constraints, market conditions and the order’s characteristics such as size of order, the level of urgency set by the trader, and available liquidity.

However, the defining factor of the algorithm and the inspiration for its name is a capability that allows it to switch strategies mid-flight.

Switcher continuously consumes real-time market inputs and if required can switch between Virtu’s algos – such as Opportunistic, Flex POV, Catch, Oasis – autonomously as market conditions change.

Virtu confirmed the new offering would allow traders to focus more of their attentions on high touch flow and would address time consuming challenges around selecting a strategy in light of changing flow profiles.

The new offering will allow traders to be more flexible instead of being chained to one single algo strategy that could lead to sub-optimal outcomes.

Virtu confirmed that the new algorithm has been rolled out to a handful of clients in the US, EMEA and APAC over the past few months.

“We continue to receive strong client interest in the Switcher not only for traditional algo wheel implementations but also for discretionary trading strategies,” added Osborne. “The beauty of the Switcher framework is that it makes it very easy to build new strategies targeting other benchmarks or types of flow, allowing us to expand our partnership with clients to other segments of their trading flow in the future.”

“Future areas of research include using index/sector-relative trading signals to increase the model’s conviction when making algorithm strategy changes. Another interesting idea we are exploring is whether there are times when Switcher should stop trading – i.e. the decision of which algo to use is no algo at all. Historically execution algorithms were not designed with this in mind but stepping out of the market for a period of time is a perfectly valid trading decision that humans make all the time.”

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The firm has also added Virtu Financial as an executing broker for client flows negotiated on Appital’s BookBuilder platform, offering buy-side participants improved options for executing large orders. 

Virtu Financial offers execution, liquidity sourcing, analytics, and workflow technology for institutional clients, including POSIT MTF, its dark multilateral trading facility in Europe and the UK. 

This latest development follows the integration of Virtu Financial’s Triton Valor EMS with Appital’s BookBuilder platform in April last year.

“Our collaboration with Virtu Financial was driven by client demand and provides asset managers with price discovery and execution capabilities in outsized equity positions, within a seamless workflow,” said Brian Guckian, chief business development officer at Appital.

The collaborations with Virtu Financial’s POSIT MTF and its execution services complement existing integrations with Turquoise MTF and executing brokers Instinet and Bernstein, the firm said in a statement.

“We aim to help institutional clients discover quality liquidity while maintaining anonymity and minimising market impact,” said Rob Boardman, chief executive at Virtu Execution Service, EMEA.

“We do this by leveraging cutting-edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to our clients.”

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These innovations have attracted a wide range of investors – from institutional to retail – who seek to increase returns and manage risks in an ever-shifting market environment. However, huge disparities exist between trading volumes in the US and Pan-European markets. 

Looking at the data, iShares by BlackRock reported that in the first quarter of 2024, trading volumes for US ETFs were at $10.6 trillion. In Europe, ETFs accounted for $782.9 billion in the same period. This can be attributed to differing ways in which active ETFs are adopted, fragmentation in Europe, differing levels of retail engagement, as well as the presence of an established consolidated data source in the US. 

A key theme linked to the evolution of ETFs globally has been the increase in scope of products offered to the market. Product type enhancements have led to a wider range of prospective investors. As a result of this increased demand and competition, costs have risen, which have ultimately led to ETFs attracting more attention from investors. Assets under management (AUM) and trading volumes for this asset class have experienced a significant rise over the last few years. 

“Consequently, ETF trading techniques have evolved to source new pricing opportunities either via electronic request for quote (RFQ) platforms and/or ETF algos and to take advantage of ETF trading provision at the exchanges themselves,” says Tim Miller, senior trader at Fidelity International. “We have also seen traditional ETF liquidity provision firms moving into forming bilateral relationships with buy-side dealing desks which has further strengthened ETF pricing.”

Active ETFs

Actively managed ETFs have introduced a new dimension to the ETF landscape. The instruments combine traditional active management with the liquidity and transparency of ETFs, while providing access to specific investment processes such as index outperformance and income generation, alongside maintaining the key characteristics of ETF structures. 

“Active is a game changer and it’s going to broaden the audience yet again for the product set. It’s going to disrupt the traditional mutual fund market and I truly believe it’s going to position ETFs as the wrapper of choice for managers,” says Chris Gooch, head of ETF/index sales and business development, EMEA at Citi. 

“What’s particularly notable is the willingness of big asset managers to launch their latest active strategies in an ETF wrapper. And for me that means that every asset manager is going to need to have a clear strategy of how they’re going to respond.”

The US market is undeniably ahead of Europe in its adoption of active ETFs thanks to the Securities and Exchange Commission’s (SEC) relaxation of its regulation in 2019, which resulted in more discretion in ETFs.

The relaxation meant that ETFs would no longer have to make their holdings public on a daily basis, which became more attractive to active fund managers who view their stock picking abilities as intellectual property. Within Europe, disclosure on portfolio holdings is still required on a daily basis, and has previously stifled adoption in the region. However, with time, adoption of active ETFs is becoming more apparent. 

“The impact of there being more acceptance of active ETFs within Europe means that when you look at trading costs like spreads or the creation redemption costs, you’re starting to see them narrow and become more like passive traded ETFs,” notes David Smith, head of ETF sales at SIX Swiss Exchange.

“There’s less difference between the two and we’ve seen the popularity certainly increase in active ETFs. All that being said, active is a small part of the European ETF industry, accounting for approximately 2% of AUM according to ETFGI as of April 2024.”

Active ETFs have been released across different asset classes and have appealed to new and old ETF investors alike as they provide middle ground between passive and active investing, emphasises Miller. 

“Through active ETFs, managers are able to offer access to internal intellectual property and house expertise such as bottom-up stock research, allocation weightings etc that not only differentiate their product but can help investors generate alpha for a portfolio alongside core passive holdings,” he says. 

Disparities in trading volumes 

Despite continued evolution for the asset class in a broader sense across the globe, it can’t be ignored that trading volumes for ETFs in the US far exceed those in Europe and the UK. This reflects a more mature and established market present in the US, with greater investor adoption and noticeable liquidity.

“At the broadest level, the US ETF market benefits from having launched the first funds around 10 years ahead of Europe and therefore is much more embedded in the investment psyche, particularly among retail investors,” highlights Miller. 

“Although the US ETF market is undoubtedly larger than Europe, the top 100 US-listed ETFs account for around two-thirds of both the entire US ETF assets and trading volumes, demonstrating that the US is characterised by a relatively small number of mega AUM ETFs and mega-liquid ETFs. Outside of the top 100 or so it starts to look a lot more like Europe.”

Several factors exist which contribute towards greater ETF volumes in the US. Europe and the UK have noticeably less AUM linked to the segment, but also, various jurisdictions, venues and clearing houses which contribute to the disparities in trading volumes. 

“In Europe, there are about 11,000 different trading lines of ETFs. That liquidity can be spread across the different countries and different listings,” highlights Smith. “There’s multiple listings of the same ETF, whereas the US doesn’t face that same problem and that can mean that liquidity is more concentrated in a fewer number of ETFs.”

ETFs in the US typically experience more favourable liquidity compared to their European counterparts, resulting in narrower bid-ask spreads and more efficient trading. Contrastingly, European ETFs often experience lower trading volumes, which can lead to wider spreads and less favourable execution for investors.

“The US has many immensely liquid, mega-sized ETFs that trade colossal amounts. Europe just doesn’t have the liquidity that the US does,” emphasises Simon Barriball, ETP and portfolio trading Europe at Virtu Financial. “We don’t have ETFs with that scale of AUM in them or anything like the daily turnover on screen in the US and that’s a huge differentiator.”

Fragmentation 

With ETFs increasingly becoming more popular in Europe, fragmentation and regulation have been pegged as two key pain points that need to be addressed going forward to boost growth in the region – a viewpoint that has been echoed at various panels at conferences in recent months. 

“The most obvious impact of fragmentation has been on the perception of an absence of secondary-market liquidity,” highlights Miller. “This has mostly likely held back some adoption of ETFs from investors but has also led to increased innovation from all market participants to source, aggregate and efficiently price ETFs.”

Echoing this sentiment, Citi’s Gooch notes that European fragmentation makes it hard for investors to get a true representation of what the actual liquidity is for ETFs in the European market. 

“That [fragmentation] has led to the perception, I would argue incorrectly, that the European market is not liquid,” argues Gooch. “This has stopped new clients adopting ETFs and has led some clients to trade ETFs listed in the US, rather than ETFs listed in Europe, even with the structural benefits that European ETFs can present to certain investors.”

Fragmentation does, however, provide some benefits, in the sense that it gives investors increased choice when considering their different objectives, where to trade and settle, as well as the types of currency they would like to execute in. It is, nevertheless, more complicated to navigate a fragmented environment, especially if liquidity does not always appear to be there across the different lines of ETFs. 

“The fragmentation in Europe extends to the fragmentation of how orders are executed. Probably only about 20% of trading is on exchange, 50% of trading is in RFQs and the remaining 30% are over SIs and other MTF type venues,” notes Barriball. “There’s also the fragmentation of trading and I think that in itself, affects the perception of liquidity as well, because you need to have a broker who can help you find where the liquidity is.”

Retail

Another key driver that leads to the disparities in trading volumes when comparing the US with the UK and Europe is the region’s differing levels of retail participation – with retail activity making up 5-7% of total trading in Europe compared to over 25% in the US . As a historically more passive instrument, ETFs have proved popular with retail investors who don’t want to take on too much risk. 

“Already, it’s a bigger market, but the split of that market is much more evenly institutional and retail,” says Gooch. “There’s much more of a trading mindset in how they’re using the products, whereas the institutional client base, particularly in Europe, is much more around strategic asset allocation and tactical asset allocation, which doesn’t have the same trading velocity.”

Retail adoption of ETFs in the US is more prevalent than in Europe largely because of a more widespread investment culture among individuals, backed by more favourable regulatory conditions. The US also has a larger variety of ETFs available and when paired with better investor education and greater access, this encourages more participation from retail investors. 

“Increasing adoption of ETFs from the retail community combined with improved connectivity from platforms to exchanges creates opportunities for buy-side dealers to interact with these improved volumes on exchange as professional and retail volumes create a better dynamic for orderbook trading,” notes Miller. 

Technology firms, in this context, are able to help platform providers simplify ETF procedures, ultimately removing complexity linked to legacy systems, to enable clients to have improved ETF trading experiences on said platforms. 

Elsewhere, looking forward, Citi’s Gooch suggests that the EU’s retail investment strategy also has potential to help boost ETF participation in the region. “Some of this was watered down from what many in the ETF industry were hoping for, but it is, at the heart of it, pushing for retail investors to be treated much more fairly,” he says. “The ETF as a cost-efficient vehicle can only win from that statement of intent.” 

Consolidated tape

Looking at potential innovations to boost ETF adoption in the UK and Europe, it comes as no surprise that one of the first things that comes to mind is a consolidated tape. A consolidated tape in Europe will enhance transparency and price discovery in the ETF market, simplifying investors’ access to real-time data across different venues. 

As a result, the improved visibility could lead to a boost in market liquidity and efficiency, which would be beneficial for all market participants. It could also lead to a boost in retail volumes if individual investors had access to a clearer view of the market, alongside more participation from institutions.

“If you understand what the aggregate volume is and the true volume, it’s a real benefit to issuers trying to get people to invest in ETFs in the first place, because you realise just how liquid they are in aggregate. The absence of that information means you have to go looking for it – and many people don’t,” argues Barriball. “A consolidated tape would have huge benefits to ETF issuers trying to get more money into ETFs, improving people’s understanding of aggregate liquidity and also for making meaningful pre- and post-trade calculations.”

Such benefits have already been observed in the US, which has had an established consolidated data source in place for years. This creates enhanced market transparency by providing real-time, consolidated trade and quote data across all major exchanges, helping improve price discovery, market efficiency, and investor confidence through the presentation of key market information.

“In the US, where we do have a consolidated tape, that has allowed for the asset class to grow at a much bigger rate from a distribution standpoint when liquidity is easily accessible, easily visible and the execution quality that comes on the back of that is just better. It’s allowed many different firms to launch ETFs and grow AUM by going out to the investor community and selling those ETFs confidently,” says Brian Gilman, ETF & FI liquidity sales at Virtu Financial.

“In the States, you’re already starting with this head start of investor confidence because of execution quality and the consolidated tape. From a distribution standpoint it’s an easier arena for sure.”

Regulators within Europe and the UK appear to be geared towards ensuring greater transparency, which is manifesting itself through a consolidated tape. However, how this will materialise when considering ETFs specifically has not yet been finalised. Regardless, it’s expected that it will help with frustrations associated with fragmentation as discussed before. 

Lessons from the US

When comparing these two regions, it’s worth considering what could be learned from the US and translated into European markets to help improve the ETF landscape. The US has a handful of very dominant exchanges, one dominant clearer and a key currency. However, such characteristics cannot directly be translated into a European context.

“There is a lot around the US that simply are structural advantages of that market which we cannot emulate,” emphasises Gooch. “However, we’ve got the innovation that’s currently happening around retail and is appealing to the next generation of investors, which is great because that’s where there’s going to be this huge passing of wealth.”

Moving forward, there are number of things that can be adopted from across the pond to help boost trading volumes within the UK and Europe. Namely, boosting active ETFs through the relaxation of regulations linked to disclosures, a promotion of retail engagement, and greater transparency in the form of a consolidated market data source, which will ultimately contribute to more liquidity. Can Europe eventually match or compete with the US when considering trading volumes for this specific asset class? Only time will tell – following in the US’ footsteps might not be such a bad idea.

The post Lessons to be learned from the US to boost European ETF growth appeared first on The TRADE.

Formerly a compliance box ticking exercise, firms are now leveraging TCA as a tool throughout the execution process to achieve better results. Today, trades are not solely measured by outcome in isolation, but instead, the focus has shifted towards understanding the holistic impact of every transaction on portfolio performance, risk management, and overall market dynamics. TCA offers a sophisticated methodology designed to scrutinise an entire trade journey, from inception to completion, unravelling the hidden costs and opportunities along the way.

Evolution

From its nascent beginnings as a rudimentary tool for post-trade evaluation, TCA has evolved into a more sophisticated device, in some cases utilising advanced analytics and real-time data to assess and bolster trade execution. However, reservations about its usage still exist among users.

“There’s still this mistrust of TCA [among traders] because who’s to say whether I’ve done a good job or not? There are so many different components that answer that question and you can’t capture it all in data,” argues Paul Squires, head of trading, EMEA and APAC equities at Invesco.

“There’s often that initial resistance but we’re moving to a place where traders are now, for the most part, much more engaged with it. Traders look at data and deploy it in a much more meaningful way in terms of their day-to-day job, rather than a monthly compliance check that you need to complete – TCA is becoming something that is much more embedded in trading decisions.”

TCA is evolving towards something more proactive, utilising predictive analytics that enable market participants to anticipate and mitigate execution risks, optimise trading strategies, and help to generate alpha. The data is increasingly being used as more than a simple measurement, but instead is being applied to make better informed trading decisions.

“Some of this has been regulatory driven, of course, but there remains the quest – and rightly so – to utilise TCA for actionable insight and additional alpha, with the users getting smarter and smarter in how they approach this,” says Michael Richter, global head of trading analytics at S&P Global Market Intelligence. “[…] There seems to be more synchronisation around the analysis internally than there ever was.”

Instead of simply being a report on outcomes, TCA is now using real-time data to provide organisations with methods to achieve better outcomes. Back testing with historical data is also being used to identify where a trading decision could’ve been changed to reduce costs while still achieving trading objectives. And these reports are being shared at investor level.

“We’ve gone from providing TCA because it’s a need and a requirement for a regulatory purpose, to actually looking at the TCA to drive future trading decisions and to drive an improvement in the overall outcomes of trading using the data as the insight for that process,” states Victoria Bryan, vice president, lead data analyst for capital markets at Northern Trust.

Value

When it comes to TCA, we’re talking about measuring a theoretical and implicit cost of trading which affects performance. By being able to measure that and then – in the best case – improve on that, a real measurable value linked to TCA is established.

“The value of TCA is you’re spending time thinking about your investment process, how to clean and capture that data, how to communicate that data back to end users in a way to help them understand markets better, understand their counterparties better, and understand their trading workflows better,” says Kevin O’Connor, head of analytics and workflow technology at Virtu Financial.

TCA is only as valuable as the output, and it needs to be incredibly accurate. The interpretation of TCA requires people to know exactly what it is that they’re looking at and ensure it is reliable and robust.

Adding to that, performance can be improved overtime by using post-trade analysis and plugging that back in at a pre-trade level, which can then potentially shift decision making and trading processes.

“As a TCA vendor, we can provide best-in-class proprietary metrics, but it all comes down to how the firms are using the data. TCA and trading analytics are at their most powerful when the output is used in a way to actually tell a clear story,” emphasises Richter.

“TCA was built in the first instance to provide users with benchmark measurement of their trading activity and to provide actionable insight into their trading, the compliance use case was always secondary.”

As much as TCA can provide valuable insights to make data analytics more actionable for traders, Invesco’s Squires reveals a much more practical level in which TCA can be used, particularly in a managerial position.

“If you put data in front of a trader and say, without any agenda, without any bias, your trading data looks a little bit better/worse this month than last – whether those results are authentic and representative or not, what you will get is a response,” he says.

“The benefit of TCA is not from forensically analysing the data – and there is an argument that we have become perhaps a bit too forensic about it – but simply the fact that it creates a discussion with your traders about their performance and why they have behaved in certain ways.”

Usage depending on asset classes

TCA varies across asset classes due to differences in market structure, liquidity and execution dynamics, requiring tailored methodologies and metrics for more meaningful insights and accurate evaluation.

More mature asset classes such as equities tend to be able to extract the most value from TCA, but increasingly other asset classes are becoming more advanced in their use of data and analytics in parallel with increased electronification and on-venue trading in some markets.

Equity TCA is the most robust out of all the asset classes because it has the most market data associated with it, argues Northern Trust’s Bryan. “The other asset classes are more challenging because there is less data available for the comparison,” she says.

Generally speaking, it can be argued that if you’re trading algorithmically or trading on- exchange, you can be pretty granular and precise with the analysis that you’re doing. Something that doesn’t extend to all corners of the markets.

Mark Montgomery

“In fixed income, you’ve got things that are exchange listed, you’ve got very liquid bonds that trade as freely as equities and they’re somewhat easier to measure. However, 90% of bonds don’t trade from issuance to maturity. So how do you even know what the right benchmark could be for something that doesn’t trade if you were forced into that execution?” questions Mark Montgomery, head of strategy and business development at big xyt.

“The more regulated the market and the more exchange driven it is, the more effective I believe the TCA can be.”

Over the years, TCA within asset classes such as fixed income has grown into a more mainstream product, being used by investment institutions worldwide.

However, “each asset class has to be taken on its own merits, as they have unique market microstructures and nuances which have to be taken into account,” argues Richter. “We see much more of a compliance use case in these asset classes as opposed to the preferred actionable insight approach.”

Similarly, foreign exchange (FX) TCA can be argued to be less developed when compared to equities. However, it has grown from simply defining what was being measured, to now determining if there is something that can be applied differently to improve trading outcomes.

“The principles are generally the same across asset classes – measure first, decide if there’s some way to compare it to an alternative and decide if it’s worthwhile to change the process to actually lower costs,” says O’Connor.

Making trade analytics more actionable

With growing amounts of available data, it brings into question how this is applied. Having data is only useful if it is then used to better inform trading decisions. TCA culminates knowledge of past outcomes and pushes it towards making a recommendation for how one can trade a specific order when a similar scenario comes about.

“There are some benchmarking elements which are based on normal market conditions or our own historic trading data,” says Invesco’s Squires. “Then there’s a sense of what’s actually happening in the market at the particular moment, where trader instinct can override the data-driven, backward-looking recommendation. The point being that the signal in an EMS to make that recommendation, is looking at historic TCA. TCA is really gauging whether the previous way you traded it worked well or not.”

Building on this, TCA is able to provide insights into who has been traded with, how it was traded, and the costs associated with that trade, while also providing potential new techniques to tackle that trade in the future.

“It’s actionable in the sense that I’ve analysed data, drawn conclusions from that and then used it to perhaps make a change in how I’m segmenting orders, how I’m routing orders and who I’m giving those orders to,” says O’Connor.

Ultimately, it comes down to how firms are using the data. “Gone are the days of people just looking at implementation shortfall and VWAP,” emphasises Richter. “There is a need to understand direct market impact, reversions, liquidity vs aggressiveness, adverse tick activity etc. Using these smarter metrics where necessary, provides a much more valuable analyses.”

To make trade analytics more actionable, we see increasing collaboration between traders and data scientists and/or research analysts. The core benefit of the these typically separate teams communicating with one another is helping shift data into something that is more substantial and useful in the grand scheme of trading.

Victoria Bryan

“If you look at equity TCA and you look at all of the data points that are available, it can be overwhelming to look at and you’re not really sure how to get those actionable insights out of that analysis. If you have an analyst or data scientist, a team of people that are able to disseminate that information, what they can do is they can find what those post-trade insights are,” says Bryan. “By putting it into some sort of pre-trade

philosophy or mechanism, you’re able to test if those actionable insights were valuable and then that gives you more data to support getting closer and closer to the best results over time.”

Collaboration is key

Increased collaboration between traders and data scientists is proving beneficial in helping improve future execution strategies. It is worth noting, however, that a huge level of trust needs to exist between the two.

Collaboration needs to be impartial. If traders don’t have the confidence in the underlying data, or the people presenting that data, it is not going to be as valuable. In the same breath, it has to be understood that the role of the trader is still paramount.

“Once people realise that you can’t exclusively do this from a data science view, you need to pair it with someone who is living and breathing in this environment, that’s when you start to really get some of these experiments that are successful, where you actually start to see cost savings or optimised trading,” argues Erin Stanton, global head of portfolio and trading analytic client support at Virtu Financial.

“We’re starting to think about how we can summarise down the metrics to two or three really easy to consume pieces of information and present those to the trader as a co-pilot scenario. It’s not autopilot – I’m not bypassing the trader – I’m instead enabling the trader with better information than they had previously.”

Collaboration is essential, however, trader intuition is still incredibly important given the varying nature of financial markets on a daily basis.

“The trading research team can do much better analysis on smaller orders, partly because liquidity profiles are easier to understand and are more predictable. As soon as you get an order that’s more than about 30% of average daily volume – i.e. spans more than a single day – a lot of those metrics go out the window,” argues Squires.

Kevin O’Connor

“We let the research team run with their testing on systematic orders but we definitely apply a liquidity profile above which we need to be more circumspect about pure quantitative analysis and that’s where traders can apply their own experience, instinct and dynamic knowledge of the market and reading of the market.”

With increased trust and an understanding of the roles played by the trader and data scientist, once the value of TCA is established, the data can help free up time for traders to focus on more important, higher value trades.

“It frees up the trading desk to carry out their primary function of trading knowing that the performance numbers and TCA data are being scrutinised by an expert who will highlight patterns and trends which feedback to the trading desk and ultimately add significant alpha to the way orders are traded,” says Richter. “It’s not so much a luxury anymore but more of a necessity to have this type of resource.”

Moving forward

As with anything related to technology, improvements can still be made, with the same applying for TCA. Although improvements within this function can appear to be incremental, it is still worth acknowledging that progress is being made – be it through more actionable data insights or improved usage of TCA in asset classes apart from equities.

“Thinking about things like consolidated tape as an industry, that’s being worked on in fixed income and progress is being made – that’s the type of thing that would improve the value of a fixed income TCA report and the output of that report,” suggests Bryan.

“Trying to get to the state that we’re at with equities with the other asset classes may be somewhat of an impossible dream, but if people aim for that to be the golden standard, the closer we get to that, the more valuable TCA is going to be for the other asset classes.”

As TCA progresses and improves, the hope is that trade analytics can become more actionable, resulting in improved trading outcomes for its users. The advancement shouldn’t be viewed as an attack on a traders’ abilities, but instead something that aids processes.

Erin Stanton

“One thing that I think people forget is traders have ears, having the communication through our eyes and mouths is one thing, but what you hear around on a trading desk is harder to bring to bear,” says Montgomery. “The interpretation of market movement at the moment in time and the ability to filter out the noise as well is important.”

As previously noted, collaboration between traders and data scientists is essential as it has the ability to merge domain expertise with quantitative rigor, ensuring that insights derived from data actually align with the reality of current markets.

“To turn even comprehensive data analysis into a decision about how you trade differently is really difficult – but our aspiration – as you can end up being a bit too swamped with data and unable to draw any clear conclusions. Where this can evolve is drawing on reliable, pre-trade and proprietary data in your EMS which is smart enough to make a trading recommendation based on an expected trading cost vs an execution outcome that is ‘guaranteed’. It should be easier than it currently is – the concept is simple – but getting trustworthy data is really, really challenging. That’s where we aim to get to,” concludes Squires.

The post Conscious usage of TCA: Making trade analytics more actionable appeared first on The TRADE.

Robbert Booij is set to take over as chief executive of Eurex Frankfurt AG, effective from 1 July 2024, succeeding Michael Peters in the role. Booij, who is joining the Eurex executive board in May, most recently served as chief executive of ABN AMRO Clearing, having been appointed in 2018. He has also previously held senior positions at: ICE Clear Netherlands, AFN, and the FCA. Booij is also currently chair of the European Advisory Board and member of the Global Board at FIA, as well as having previously served as chair of the Eurex exchange council. 

Abhay Kumar Sinha was named co-head of credit trading, Asia Pacific at Barclays, set to lead the credit business alongside James Roberts. Sinha has held numerous senior positions during his 25 years in the credit industry, having most recently served at Deutsche Bank for seven years, including as managing director and head of special situations – Asia. He also led Deutsche Bank’s corporate financing business in India and contributed heavily to the development of the bank’s structured finance business across south and southeast Asia. 

Mark Burgess joined commodities specialist Marex as equities trader following a 14-year stint at Winterflood Securities. Burgess joined market maker Winterflood back in 2009 and has served as European equities trader, head of European market making, and most recently UK equities trader. Burgess’ appointment follows two other traders, Ben Ralph-Davies and Joel Russell, who left Winterflood’s London business last year to join rival market maker Shore Capital, according to sources. 

Virtu Financial appointed Simon McGhee in an exchange-traded product (ETP) and fixed income sales role. McGhee joined Virtu Financial after a career break, which followed a nearly eight-year stint at Bluefin Europe. While at Bluefin, McGhee most recently served as a partner – a position he held for 10 months. Prior to that, he was director, head of ETF business development at the firm. Before joining Bluefin, McGhee held an iShares capital markets role at BlackRock for three years. His previous roles include stints as a portfolio/ETF execution trader at Barclays Capital; pan European sales trader at Blue Oak Capital; stockbroker at Compagnie Financial Tradition; equity dealer at City Equities.

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McGhee joins Virtu Financial after a career break, which followed a nearly eight-year stint at Bluefin Europe.

While at Bluefin, McGhee most recently served as a partner – a position he held for 10 months. Prior to that, he was director, head of ETF business development at the firm.

Before joining Bluefin, McGhee held an iShares capital markets role at BlackRock for three years.

His previous roles also include stints as a portfolio/ETF execution trader at Barclays Capital; pan European sales trader at Blue Oak Capital; stockbroker at Compagnie Financial Tradition; and equity dealer at City Equities.

Read more: The Future of ETF Trading & Virtu’s ETF Algo

McGhee announced his appointment in a social media post, asserting: “[…] very much looking forward to reconnecting with people and working with Simon Barriball and Tim Harman.”

Barriball and Harman hold ETF and portfolio trading, and ETF sales and trading roles at Virtu Financial, respectively.

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As Virtu extends its offering to the 360T client base, users will be able to leverage the trading analytics in a fully integrated manner.

“At 360T we are strongly committed to enable transparent and efficient FX trading workflows for our clients. Having direct access to trading data and the ability to analyse that data dynamically is a key component of our client trading experience. By partnering with Virtu, we were able to offer our clients access to best-in-class analytics in a seamless way,” said Simon Bajec, head of market data product at 360T.

Through the partnership, 360T clients will be able to monitor and analyse trading activities by leveraging Virtu’s trading analytics. Both the FX trading offering, and TCA offering provide data-driven insights for both asset managers and corporate treasurers.

Read more: Union Investment executes first FX futures trade through Deutsche Börse’s 360T and will implement its EMS

Kevin O’Connor, global head of analytics at Virtu, said: “The FX market is highly electronic, and most market participants will benefit from using data analytics and TCA. Virtu Analytics offers a full solution for both institutional investors and corporate treasurers looking to improve their FX execution. In this partnership, we were able to closely integrate our analytics offering with the 360T platform, providing clients a seamless FX TCA experience.”

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Over the last year, the liquidity landscape has continued to develop, with players continually innovating their offerings and growing their teams to better meet client needs.

Among the key players in this competitive landscape, The TRADE has selected Citadel Securities, Optiver, Virtu Financial, and XTX Markets for the 2023 shortlist, following various individual achievements by these businesses over the past year. 

Citadel Securities 

Needing little introduction, Citadel Securities, is one of the largest market makers in US Treasuries and USD interest rate swaps globally, and serves an extensive list of financial institutions, including: banks, asset managers, pension funds, hedge funds, central banks, and sovereign wealth fund. Its focus is to provide investors with the liquidity needed to trade equity and fixed-income products in any market condition.

Over the summer, Citadel Securities entered into the credit sphere amidst technological advancements, offering US investment-grade bond trading to clients as of June. Speaking at the time, head of fixed income ETF trading, Bob Cariste, highlighted that the initial focus for the business was on investment-grade (credit) due to the fact that that is where the greatest overlap exists with Citadel’s existing fixed income business.

The firm is active across more than 55 markets, with $440 billion in trades executed per day. Last August, the business opened its Tokyo office, continuing its global expansion in the region – offering US fixed income products to Japanese institutional investors. The firm’s growing global footprint now includes 15 offices across North America, Europe, and Asia Pacific.

Optiver

Optiver has gone from strength to strength in recent years, developing a unique European cash-equity franchise thanks to its expertise in options and ETF market making. Over the last 12 months, the business has grown its client roster, establishing cash-equity trading relationships with various entities including: asset managers, sovereign wealth funds and private banks. Optiver’s approach is to give institutional asset managers access to liquidity from its central risk book.

Optiver’s net trading income in 2022 saw a 42% year-on-year increase, with a total equity of €3.6 billion compared to € 2.8 billion the previous year. Optiver’s market structure team actively monitors developments among exchanges, custodians, industry groups, and policy makers in order to formulate the business’ stances. The firm also regularly publishes whitepapers and shares insights on market structure and regulation, recently sharing insights around: T+1, IFR/D, key options considerations, EU and US policy, and venue functions.

In March, Optiver was the lead investor in the equity funding round for the launch of the MEMX Options exchange. As part of its commitment, the business confirmed it would assume a MEMX board seat, as well as chairmanship of a newly-created Options Market Structure Committee. In September, the electronic market maker selected Philippe Rizzo to join its institutional sales team, with his role focused on cash equity sales in France, Belgium, Luxembourg and Switzerland. Rizzo joined from Instinet, where he previously served as a global equity sales trader. The same month, Optiver took a further step in its US expansion plans with the opening of a new Chicago office, an increase of over one-third from the firm’s previous footprint in the city. 

Virtu Financial

Global market maker Virtu Financial has had a stellar performance over the last 12 months with a high number of business updates across various areas as it enhanced its offering aimed at creating more efficient global markets. Virtu’s product suite includes offerings in execution, liquidity sourcing, analytics and broker- neutral, multi-dealer platforms in workflow technology. It operates across Asia Pacific, Canada, EMEA, and the US.

In August, Virtu entered into a strategic alliance with InvestorLink to integrate order management and AI-based matching platform with Virtu’s infrastructure to offer retail investors better access to the primary markets. In June, Virtu upgraded its POSIT Alert block trading capabilities to include automated dark liquidity seeking in a bid to tackle fragmentation in the non-displayed markets. Named Alert+, the solution aims to give traders an increased opportunity to execute any residual and reduce execution risk by sourcing incremental dark liquidity and completing orders more quickly. The upgraded workflow solution allows users to immediately elect to route residual share quantities not filled on POSIT Alert to be executed in the dark via Virtu’s Covert algorithm.

Back in April, the business’ Triton execution management system (EMS), Triton Valor, was integrated with the bookbuilding platform offered by equity markets technology solution, Appital. Named Appital Turquoise BookBuilder, the solution is an algorithmic bookbuilding platform which brings a typically manual and opaque process into an automated, electronic offering. More recently, in September, Triton Valor was integrated by Sumitomo Mitsui Trust AM. Triton Valor supports trading across: Munis, MBSs, global corporate and sovereign bonds, fixed income ETFs, EM debt, futures and CMOs, aiming to allow users to utilise a single dashboard across asset classes. Last March, Virtu added Liquidnet alumnus Leon Mouzourakis to its execution services team in an electronic trading role. 

XTX Markets 

London-based algorithmic market maker XTX Markets continues to impress as its operations develop. The business partners with counterparties, exchanges and e-trading venues globally and provides liquidity in the equity, foreign exchange, fixed income and commodity markets. XTX Markets’ clients range from regional banks to institutional investors – including macro, systematic funds and real money. The business hit record profits of £1.095 billion from its UK entities in 2022, up 64% from the previous year.

Following solid results, the business continues to be at the forefront of making financial markets more efficient for all participants. Its focus is on reducing the cost of trading for clients through its analytical tools and data-driven insights. The quantitative trading firm opened its new office in New York earlier this year, and also has bases in London, Mumbai, Paris, Singapore, and Yerevan.

The team is made up of more than 200 people across the globe, speaking 26 languages. Last October, XTX Markets appointed Zar Amrolia as chair, replacing Niki Beattie who held the position for five years. Amrolia’s appointment came as part of XTX Markets’ leadership transition. The business is focused on growing its equities franchise in the US going forward. In March, XTX Markets appointed Credit Suisse alumnus Charlie Whitlock as head of Americas distribution, leveraging his 25 years of experience in financial markets. Based in XTX’s New York office, Whitlock is responsible for growing XTX’s single dealer platform business in the US.

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Named Appital Turquoise BookBuilder, the solution is an algorithmic bookbuilding platform which brings a typically manual and opaque process into an automated, electronic offering.

Launched in August last year, the platform gives buy-side clients greater exposure to previously inaccessible, cross-border deal flow opportunities, alongside allowing like-minded market participants to interact in the liquidity discovery and price formation process.

The integration of Virtu Financial’s Valor EMS will allow buy-side firms to receive Appital liquidity opportunities directly into their workflows and trading infrastructure.

“Part of the investment process is to be able to access and proactively drive liquidity in the market. In the current electronic environment there are liquidity opportunities. But because the average order size is smaller than in Appital, it does not spark internal conversations between PM and trader,” Mark Badyra, chief executive of Appital, told The TRADE.

“In Appital, the opportunity is much larger, multiple days ADV. This drives active conversations between PM and trader that directly impact the investment decisions. In other words, price formation takes place. Finding the right price for the right order size is what Appital is for.” 

Virtu Financial’s Triton integration becomes the latest development from Appital which has seen similar moves from other EMS providers. Last year, both TS Imagine and FactSet’s Portware EMS integrated with Appital ahead of its official launch in August.

“Our clients are always looking for new and innovative ways to seek out liquidity. Appital allows them to interact with like-minded institutions in a market for size,” said Melissa Ellis, head of European workflow sales at Virtu Financial.

“By integrating with Appital, asset managers are now able to access liquidity that would otherwise be latent and initiate a bookbuilding process, adding value to their overall investment processes.” 

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