It is an interesting question because there is a broad spectrum of approaches across organisations. It fluctuates between those organisations that are leaning in and are on the front foot and those that are watching carefully and are engaged but they have not yet put all of their chips on the table. There are also organisations that are unsure of how to start and how to enable themselves and I think there’s a humility that comes with that. 

There is an interesting dynamic within AI where it is accessible to all of us, but challenging to implement within financial services. As much as there are some really exciting things that we can do with AI, in financial services we have a lot of regulation and compliance that we need to think about.

Culture within firms is also a significant factor. AI is not one team’s problem to solve, you have to get a community really working together for a truly holistic approach. 

We are starting to see a change in terms of the demands of the end users and in their actual way of working, which is impacting the character of these previously very tightly defined personas. I think that is going to have a really interesting effect in financial services.

How feasible is AI use when it comes to trading?

One of my rules with AI is that if you have to explain it and you have to repeat it, maybe don’t use it. The problem with AI is that it is a probabilistic model so if you ask the same question twice, you’re potentially going to get a different response.

That of course doesn’t mean it’s not valuable, but it means that you have to think very carefully about which use case you are solving for. So, when it comes to traders, this is really fascinating because it comes down to trust – if a trader was like a magic box and every time you shook it came out with a different answer, would you trust it?

Traders are essentially accountable, so the idea that people are going to use AI and potentially get different outcomes that they can’t fully explain in these high-risk tasks seems implausible.

Furthermore, the idea that regulators are ever going to get comfortable with AI giving the best answer only “most of the time” is highly unlikely. For that reason, I think traders are going to be around for a while.

What is meant in practice when the industry says we must adopt AI in a responsible way?

When it comes to responsible AI, the key is trust. One has to delve into what it actually means to be responsible – essentially, if you’re using AI enabled processes, can you trust it and what does it mean to trust something?

One aspect is knowing where the data has come from, another is checking for biases and establishing the ethics of models, and another is choosing the right model for the right task and taking responsibility for that selection.

At the end of the day, we are now responsible for products that are AI enabled, so a big part of that responsibility is reinforcing it, through a secondary model and maybe a tertiary model. In the event that something catastrophic happens, we must have that ability to say, ‘not a problem, we have a back-up, we’re going to switch to something else that is more suitable and continue to uphold the status quo’.

How important is that holistic approach to AI?

What’s important to note – aside from teams coming together to approach this at the same time – is the fact that AI came from outside of financial services and is now being imported into financial services. We are seeing examples in other regulated industries of how people are implementing AI which has the potential to be hugely transportable and relevant when we think about financial services.

I believe that this is going to have a dramatic effect on the way that financial services operate because in the past we’ve seen financial services very much segregated from everything else and tightly defined. That is now starting to change, and we are starting to see cross industry collaboration. 

Interestingly, we are not only focused on the research and investment in AI within financial services. As a community, we are beginning to see the potential relevance of AI investment within other industries. A part of this is greater mobility of  talent from non-finance industries, bringing relevant new perspectives and skills.

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The transaction remains subject to closing conditions and is expected to complete in the fourth quarter.

Amongst the new technology acquired by LSEG is Axoni’s Veris network, a post-trade lifecycle and reconciliation management platform for equity swaps that launched in 2020.

Veris streamlines the post-trade data reconciliation process and prevents cash flow breaks by enabling counterparties to share data associated with equity swap deals, positions, trades, and related cash flows, Axoni said.

Following the transaction, LSEG will own and operate the Veris network after a transition period.

“This acquisition represents a significant step forward in our efforts to modernise OTC derivative post-trade infrastructure,” said Greg Schvey, chief executive at Axoni.

“In recent years, we’ve partnered closely with LSEG to develop our trade processing applications and are confident they are the right party to help realise its growth potential.”

The deal follows LSEG’s acquisition of Acadia in 2022 in a bid to build out its multi-asset post-trade capabilities. Acadia provides risk management, margining and collateral services for the uncleared derivatives markets. LSEG had held a minority stake in the firm since 2018.

In the same year, the exchange group also received regulatory approval for its Quantile acquisition, also building out its post-trade division.

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“We have finished the first half strongly, maintaining our momentum in Q2 with every business line contributing to revenue growth,” said LSEG chief executive David Schwimmer.

“This reflects the strength of our proposition, the improvements we have made to our products and the depth of our relationships with customers.”

Total revenue for capital markets grew by just over 17% to £880 million on the back of fixed income and derivatives, among other things.

Equities revenue reached £120 million, driven by improving market conditions while average daily trading volume (ADV) was up 10% in comparison with the prior period.

Revenue for ‘fixed income, derivatives and other’ – accounted for Tradeweb activities – rose by 26.5% to £635 million

The division saw a record ADV of just under $2 trillion which the exchange group confirmed represented a “strong market activity” across Tradeweb’s asset classes.

In April, Tradeweb announced the acquisition of ICD, a cash management platform for corporate treasurers. The transaction is due to close imminently.

FX revenue increased by just under 1% to £125 million on the back of growth in LSEG’s dealer-to-client FXall platform.

The exchange also saw the same growth story in its data and analytics division which saw revenues rise to just over £2 billion on the back of growth in its ‘data and feeds’ products.

Data and analytics has been a key area of product expansion for LSEG in the last six months, in particular its Workspace platform.

The exchange has extended its cloud-based services to offer a full tick feed, offering full depth-of-book data.

“We are also expanding the reach of our low-latency feeds portfolio, built on the MayStreet acquisition, adding over 70 feeds during the first half,” said the exchange in its update.

In July, LSEG announced a multi-year data partnership with Dow Jones which will see its data used to power analysis across all of Dow Jones’ publications. LSEG will also be a principal deals data source.

Elsewhere, total post-trade revenue reached £462 million in H1 while total income, including net treasury income, reached £596 million.

In April, LSEG received regulatory approval to clear cash-settled Bitcoin index futures and options contracts traded on the UK Financial Conduct Authority (FCA) regulated digital asset derivatives trading venue, GFO-X.

LCH will act as clearing house to a new venue for US Treasury and SOFR contracts, FMX Futures, due to launch in September.

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Through utilising the technology, FXall hopes to streamline the setup of funds to drastically reduce settlement times, ensuring clients are settlement and trade ready within a 24-hour timeframe.

Gabino Roche, CEO and founder at Saphyre, said: “Saphyre is further demonstrating that it’s a comprehensive solution for finance and its operations. Not only does Saphyre set up your funds quickly and seamlessly, but it also provides trading and post-trade benefits; especially in addressing the plethora of concerns that come with the T+1 deadline.”  

Users who are setting up new funds through FXall will now benefit from a ‘single entry’ process, allowing them to set-up their funds for all their liquidity providers at one time and share necessary legal documents more efficiently. Plus, clients will now have full visibility into each bank’s onboarding progress.

“This benefit will remove the unnecessary delays related to the KYC processes occurring in post-trade today,” added Stephen Roche, president of Saphyre.

Banks will now be able to gain benefit from utilising Saphyre’s API to consume account onboarding data and approve those accounts methodically in FXall, allowing them to be ready to trade in 24 hours. Also, FX liquidity providers can now complete their KYC for these accounts to trade FX, equities and fixed income.

“We are committed to improving and evolving the way our clients experience FXall,” said Jill Sigelbaum, head of FX strategic development and partnerships, LSEG. “Incorporating Saphyre’s innovative technology solution into the platform enables us to offer our clients a new systematic and effective onboarding process. We’re very excited about our partnership with Saphyre as we roll out this new solution to our clients.”  

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The role of the exchange group has shifted significantly over the last few years, evolving from simply providing platforms to facilitate buying and selling to become ever-expanding data and platform universes that span the lifecycle of a trade. Exchanges must now offer a diversified toolbox to remain competitive in an increasingly complex marketplace.

Among the key players in this competitive landscape, The TRADE has selected Cboe Global Markets, London Stock Exchange Group (LSEG), Nasdaq and SIX Swiss Exchange for our 2023 shortlist, following various individual achievements by these exchanges over the past year.  

Cboe Global Markets

Cboe Global Markets makes another appearance in this award category shortlist for 2023, following its win at last year’s Leaders in Trading awards gala. The exchange has continued to drive innovation within financial markets by extending its remit through various product launches. In March, Cboe Global Markets launched a new real-time US options market data solution named Cboe One Options Feed, with the offering utilising a single market data feed to provide a real-time view of US options pricing derived from Cboe. The trading venue also launched its Cboe 1-Day Volatility Index (VIX1D) in April, which seeks to measure single trading day volatility. Developed by the firm’s in-house innovation hub, Cboe Labs, the VIX1D Index measure the expected volatility of the S&P 500 Index over the current trading day. In the same month, Cboe selected Broadway Technology to become the infrastructure service provider for its interdealer US treasuries trading platform, Cboe Fixed Income, which became the exchange group’s first move into fixed income.

Meanwhile, Cboe expanded the trading period for its high yield and investment grade corporate bond futures to 23 hours per weekday, in June, to help investors manage their credit portfolios. Elsewhere, in July, Cboe introduced a new periodic auction book (PAB) to lit sweep order types, which allows participants to sweep the local Cboe PAB or dark book, before sweeping the local Cboe lit book – in an effort to improve liquidity targeting for users. The exchange also made multiple senior appointments to support growth strategies within the business. Most recently, Catherine Clay was promoted to the role of global head of derivatives.

The London Stock Exchange Group (LSEG)

LSEG re-joins this award category – after also being nominated at Leaders in Trading 2022 – following the announcement of several new initiatives and expanded partnerships in 2023. Among these was the exchange group’s push into retail trading in April with the launch of Turquoise Retail Max. The new service is aimed at supporting European retail brokers in meeting best execution obligations and delivering price improvement and is accessible through LSEG’s Turquoise Plato Lit Auctions order book. Hudson River Trading and Stifel became the first liquidity providers to use the service.

Later announced in May were two expanded partnerships, including an initiative with OpenFin to deliver its flagship Workspace platform to clients and a multi-year strategic partnership with Barclays in the same month spanning the “full ecosystem of the business”. LSEG’s FXall also partnered with Tradeweb in August to launch a new FX swap workflow solution for local currency emerging markets. This followed a strategic alliance with Saphyre to digitise client onboarding for the buy- and sell-side.

Over the last year, the London Stock Exchange Group (LSEG) has made a number of key appointments to help steer strategic growth initiatives. Most recently, The TRADE revealed that Richard Worrell will join the exchange group as head of secondary markets sales and business development in January 2024.

Nasdaq

Following a busy year of new solutions and technology announcements, Nasdaq also joins the roster for Outstanding Exchange Group for 2023. Most recently, the exchange announced the launch of a new Custom Basket Forwards solution in a bid to address the market’s demand for more simple and efficient methods to handle equity exposures. Looking outwards, Nasdaq’s technology has been employed several times throughout the year by third parties looking to expand their remits.

The Dhaka Stock Exchange extended its technology partnership with Nasdaq in January to support its expansion into new market areas. The Stock Exchange of Thailand (SET) launched a new trading system, alongside market data distribution and market surveillance systems, based on Nasdaq technology, in June. This was followed by Brazilian stock exchange group B3 and Nasdaq jointly developing  a new clearing platform for the Brazilian stock exchange in July in a bid to innovate operations as the market continues to expand. Elsewhere, Bolsa Electrónica de Chile (BEC) revealed that it would move its operations to the cloud by the end of 2024, initially by upgrading its current on-premise Nasdaq technology to Nasdaq’s SaaS-based Marketplace Services Platform.

SIX Swiss Exchange

Over the past year, SIX Swiss Exchange has continued to drive innovation through initiatives designed to make navigating fragmented markets and liquidity more efficient – leading to another nomination in this category for the exchange. Late last year, Redburn (Europe) joined SIX Swiss Exchange as its newest trading participant, making it the sixth new entrant to join the venue in 2022. This followed the addition of Virtu ITG Europe (a subsidiary of the New York-based market maker Virtu Financial), Grammont Finance, CLSA (UK), China International Capital Corporate (UK) and Hardcastle Trading.

SIX Digital Exchange received regulatory approval from the Swiss Financial Market Supervisory Authority (FINMA) in January to support the issuance, trading and settlement of bonds denominated in EUR. The exchange expanded its closing auction offering in April to protect the buy-side when executing large orders. The new functionality, Closing Auction Volume Discovery (AVD), helps asset managers reduce their impact by giving them the option to execute orders without being visible to the wider market. Among the exchange’s other key new initiatives was the expansion of its closing auction offering. The new functionality which went live in May, named Auction Volume Discovery, was made in consultation with both the buy- and sell-side. The order type was designed to unlock the latent liquidity sitting on the side-lines during scheduled auction periods due to participation cap constraints. In the same month, SIX integrated with FlexTrade’s Spark EMS to bolster streaming of real-time global market data. The offering provides access to global market data across various outputs as well as an off-the-shelf trading solution that can help reduce time-to-market for new fund launches.

Earlier this month, SIX launched SIX Connect, an expansion of its cloud connectivity offering which leverages network-as-a-service provider, Megaport’s reach. The new expansion is set to cover more than 100 cloud regions as well as several hundred data centres globally.

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He will join the exchange group as head of secondary markets sales and business development in January 2024, sources have confirmed.

LSEG and Janus Henderson could not be reached for comment.

The change marks a move away from the buy-side for Worrell who has an extensive equity trading career. He began his most recent spell at Janus Henderson in 2017 after a six-and-a-half-year tenure at Redburn as an equity sales trader.

Previously in his career, he also spent almost a decade at the asset manager in an equity trading role until 2006 and later spent nearly four years at SEB.

In his new role, he will be responsible for boosting the  exchange’s rankings and driving its next stage of growth after a series of senior leadership changes from within its capital markets business.

LSEG has reshuffled its capital markets top brass significantly in recent years in a bid to simplify its leadership across its expanding asset class remit. As part of the changes, the group said goodbye to some of its well-known  industry figures former chief executive officer of Turquoise, Robert Barnes, and former head of sales and platform distribution for securities trading, Scott Bradley, in November last year.

The exchange appointed internal candidate Lida Eslami to replace Bradley in an expanded role as head of equities and exchange trade products (ETPs) sales and relationship management in January. However, Eslami later left the exchange in May to join rival venue Cboe.

In his new role, Worrell will be responsible for sales and business development in its secondary markets business, taking up the responsibilities of Eslami and reporting to Sally Francis-Cole, The TRADE understands.

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LSEG confirmed Eslami’s departure but declined to comment further. Her next role is not yet known.

Eslami had been with LSEG for 12 and a half years, joining as an ETF product specialist in 2011. She later served in various business development roles across listed and exchange traded products. Prior to joining LSEG, she spent a year at Deutsche Bank in an ETF-focused role and a year at AllianceBernstein as a fixed income investment analyst.

Read more – LSEG capital markets leadership structure revealed with two new senior equities and trading appointments

She took up her new role as head of sales and relationship management for equities and ETPs at LSEG in January as part of a wider restructure of the exchange’s capital markets business.

The make over was first announced at the end of last year, with changes that were designed to ensure the exchange’s leadership reflected its newly expanded asset class universe – the exchange acquired an FX business through its landmark Refinitiv deal in 2021 and digital assets through its TORA acquisition completed last year.

As part of the restructure, the exchange said goodbye to long standing executives Dr Robert Barnes – formerly chief executive officer of the exchange’s MTF Turquoise – and Scott Bradley – former head of securities trading sales and platform distribution.

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The partnership will see LSEG leverage OpenFin’s zero-install delivery model and container technology to improve and simplify the distribution of LSEG’s data and analytics to clients.

The LSEG Workspace platform offers traders, wealth advisors, research analysts, portfolio managers and investment bankers with access to financial data, news, analytics and productivity tools in what the firm describes as an intuitive end-user experience.

“LSEG’s Workspace product built and deployed on OpenFin’s OS will create a more unified, UX focused solution that delivers on LSEG’s digital transformation strategy to rationalise their application space, deliver the best technology to end users and drive better engagement with end clients through interoperability,” Adam Toms, chief executive of OpenFin, told The TRADE.

“This flagship partnership is part of our continued investment in providing the largest and most diverse Capital Markets ecosystem in Finance.”

OpenFin provides Chromium container and workspace technology to the financial industry and has deployed to over 3,800 banks and buy-side firms.

As part of the partnership, LSEG will migrate LSEG Workspace to leverage OpenFin’s technology, with the aim to make its platform more easily deployable and interoperable with internal apps developed by banks and buy-side customers.

“As technologists we greatly appreciate OpenFin’s commitment to open web standards and their rigorous process for keeping up with Google Chromium,” said Borre Wessel, head of desktop platform technology at LSEG.

“We will leverage their technology to deliver LSEG Workspace cross-platform to both Windows and Mac devices.”

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The partnership will see Barclays use LSEG products and services across investment banking, capital markets, wealth and private banking and retail.

Barclays will also utilise the partnership to support its digitalisation journey and cloud adoption.

The pair confirmed in a statement that Barclays is also in discussions to join LSEG and Microsoft’s Design Partner Programme which kicked off when the pair confirmed their strategic partnership in December last year.

“LSEG is a long-term client and partner to Barclays and this engagement will see us working together to enhance existing offerings and develop new and innovative products and services,” said Paul Compton, global head of corporate and investment bank (CIB) and president of Barclays Bank.

“Continuing this relationship will maximise how we deliver results for clients globally, accelerate our digital transformation and advance our goals of consolidating relationships with a smaller number of global strategic market data vendors.”

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The increase is off the back of growth in LSEG’s data and analytics division which reported earnings of £1.3 billion, up 15% year-on-year. Within the division, trading and banking solutions saw an increase in earnings by 12%, totalling £425 million.

Amid the positive results in the division, the exchange group has confirmed it is seeking shareholder approval for the buyback of shares from the Blackstone/Thomson Reuters consortium. LSEG bought data and analytics giant Refinitiv for $27 billion from the consortium in January 2021.

“In data and analytics, we saw a further acceleration in annual subscription value growth, reflecting the investments we have made in our services and stronger customer engagement,” said David Schwimmer, chief executive of LSEG.

The trading venue’s capital markets division saw figures rise by 15% compared to the same period last year, totalling £394 million.

Capital markets earnings were slightly offset by a slowdown in equities, which saw a decline by 12% year-on-year to £59 million.

The decline in equities echoes similar results seen across Wall Street banks, with Goldman Sachs, Bank of America, Morgan Stanley, Citi and UBS all reporting declines within the sector.

Read more: Goldman Sachs, Bank of America and Morgan Stanley latest to report decline in equities

Elsewhere in the division, foreign exchange was up by 10% year-on-year, reaching £66 million. Similarly, fixed income and derivatives totalled £269 million, an increase by 16% compared to Q1 2022.

“Our strategy continues to deliver, with all divisions contributing to growth. Our performance in the first quarter demonstrated the strength of our business model, the improving quality of our revenue and our critical role in the resilience of financial markets,” added Schwimer.

“As we continue our shift from integration to transformation, we are confident of making further progress through the rest of the year.”

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