Market consolidation versus liquidity fragmentation will be a point of discussion into next year. The Swiss Exchange Group acquisition of Aquis will be an obvious one to watch, while in contrast, there are a slew of new liquidity opportunities expected to go live in 2025. However, the jury’s out on whether further fragmentation is needed given the continued squeeze in order book liquidity and/or whether the market has the capacity to connect as internalisation continues to take priority for many.   

Next year could see the re-emerging debate around shorter trading hours ratchet up, which contrasts to the 24-hour trading agenda in the US. Separately, conversations are likely to continue in support of single regulatory framework for Europe. 

The selection procedure for the European equities tape starts next June, with a decision made by the end of 2025. Hopefully the UK will also announce their views on an equities tape next year. September will see Europe ban payment for order flow and introduce a new 7% single volume cap for dark trading. Otherwise, focus must be on making equities markets more transparent and less bilateral to attract international investment and prevent further primary issuance leaving these shores.

Joe Collery, head of trading, Comgest 

I feel the biggest trend in 2025 will be redefinition of the roles of ELPs [electronic liquidity providers]. Market participants continue to lament the inadequacy of liquidity in continuous market trading which will lead to shift in how ELPs provide their liquidity to fill this perceived gap.

Jo Burnham, risk and margining SME, OpenGamma

Predictions are a tricky business. Three years ago, would many people have predicted that Donald Trump would be returning to the Presidency in early 2025, with long-term wars raging in both Europe and the Middle East? Investors have learnt that they need to expect the unexpected, which is why liquidity risk management practices are now so important.

I see this being a big theme for market participants next year – ensuring that they are operationally resilient. Being able to navigate margin requirements and optimise the ways that they are met is so important in a volatile geopolitical environment, which inevitably permeates through to financial markets.

Bjorn Sibbern, global head of exchanges, SIX Swiss Exchange 

In 2025, the challenge for European primary markets will be creating an investment environment that fosters innovation while attracting global IPOs, not just competing for regional dominance. On the secondary markets front, liquidity fragmentation remains a pressing issue. 

By the end of next year, exchanges will need to have made significant strides in venue innovation, not only to retain institutional flow but also to foster greater retail participation. Short and sharp bouts of market volatility, as we saw this year with the global equity sell-off in August, could also shape the trading landscape. This is why exchanges must evolve with smarter tools and deeper liquidity to remain the trusted platforms for price discovery. 

Matt Clarke, head of distribution and liquidity management for EMEA, XTX Markets 

In 2025, we expect five or more ELPs [electronic liquidity providers] to offer actionable liquidity directly into the major EMS platforms and the Reactive Markets network across EU and US equities. It is entirely possible we’ll see one or more banks extend similar offerings to select clients. Our preferred approach involves a broker in the middle, allowing buy-side firms to outsource ELP onboarding and benefit from aggregated prices in competition. This model enables liquidity providers to offer tailored liquidity and collaborate with end-clients. 

The exact form of this workflow is still developing with the buy-side playing a key role in shaping it. Successful solutions will have low onboarding friction, work for both automated and click trading, and aggregate all liquidity sources in one place. This aggregation of liquidity will drive fierce price competition, leading to better trading outcomes.  The potential rewards of this workflow are increased size and mid presence, resulting in measurably better execution quality. As always, results are what will drive long-term adoption.

Keep an eye out for further predictions unpacking all corners of the market published by The TRADE in the coming weeks!

The post The TRADE predictions series 2025: The liquidity landscape appeared first on The TRADE.

Bobbie Port

Following the launch, clients can execute orders using algorithms in Australia, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Singapore, and Thailand.

Kepler said the development marked a significant step forward in its “global execution strategy” in an update on social media.

“KCx has long established its presence in both high-touch and program trading, and to continue driving innovation and disruption, it is essential to offer a full suite of services globally,” Bobbie Port, head of electronic distribution at KCx told The TRADE.

“Today, we are proud to announce that we have achieved this milestone by successfully deploying algorithms in the APAC region.”

Port assumed his role as head of electronic distribution in 2022 after joining Kepler in 2011. He has had an extensive career in electronic trading sales, with his most recent role previously to Kepler focusing specifically on direct market access and algo execution sales at Instinet.

The post Kepler Cheuvreux launches Asia-Pacific direct market access appeared first on The TRADE.

According BMLL Technologies data, bilateral trading accounted for 35% of overall notional traded as of November 2024, including request for quote (RFQ), off-book on-exchange, over the counter (OTC) and SI volumes both above and below the large in scale (LiS) threshold. This marks a 12% increase since January 2021.

Defining what falls into the bilateral sphere is important. Regulators in the last few months have been attempting to clean up reporting flags in a bid to offer greater transparency to participants looking to better understand the landscape.

One of the most notable bilateral growth stories, however, is that of the off-book on-exchange segment. This umbrella term again accounts for a whole host of things including retail flow and high touch agency crosses. Cboe and Aquis’ new VWAP offerings will also print their flow as off-book on-exchange for example.

Central to the growth of the off-book segment and perhaps responsible for ruffling the most feathers is a relatively new workflow whereby non-bank liquidity providers quote directly to the buy-side via their execution management systems (EMS) leveraging actionable indications of interest (IOIs). It’s this new growth among other areas that has attracted notable attention from the industry and sparked new offerings from the more traditional players looking to preserve their market share.

The benefits of streamlined buy-side workflows are clear: offering better price improvement, reduced market impact and time to market and greater flexibility around liquidity access. What’s more, with volumes on the lit market continuing to decline, one can hardly blame traders for exploring alternatives to traditional workflows.

That being said, the bilateral segment is becoming increasingly meaningful with both alternative and now traditional players exploring new workflows, and some participants are now beginning to question whether such a level of bilateral trading exists that could be detrimental to the market’s long term health. Some participants have even begun suggesting that the European equities market could find itself on track to adopting an almost completely off-exchange foreign exchange model in the next few years if it continues on its current path. However, this eventuality is highly unlikely. Said bilateral workflows rely heavily on a reference price from the lit markets. Ironically, the thing that stands to be damaged if too many volumes move off-exchange.

For buy-side traders, the appeal of executing without going out to market is – understandably – hard to resist, but the question as to whose job it is to now moderate the level of bilateral liquidity in the market is now somewhat continuously being asked.

“I can understand the appeal to a buy-side trader thinking ‘I can clear my entire blotter with one click of a button so why don’t I do that and not have to worry about direct market impact?’,” explains T. Rowe Price’s equity trader and market structure analyst, Evan Canwell.

“There’s definitely a place for bilateral liquidity, but it’s incumbent on us as the buy-side to understand what we’re interacting with and think about the balance. It’s like fast food, it might feel good in the short term but there could be unintended consequences for the longer term health of the trading ecosystem.”

Non-bank providers

One of the most spoken about names in this context is, of course, Optiver. While the firm is not solely responsible for the growth of off-book on-exchange, the market maker’s model of connecting directly to the buy-side via EMS has taken the market by a storm. The firm’s model is risk filling but without acting as a systematic internaliser (SI).

“It [bilateral trading for blocks] never really took off as a product whereas the way I look at the more recent developments in bilateral liquidity, it’s for a lower liquidity demand which does feel more sustainable,” says Legal & General Investment Management’s global head of trading, Ed Wicks.

While historical bilateral connections with other alternative providers – namely XTX Markets – have historically been more focused on smaller flow, Optiver’s model offers the opportunity to trade blocks of 5-20% of average daily volume (ADV), The TRADE understands. And it’s this element that has piqued buy-side interest. It’s easy ‘fill or kill’ model means traders don’t have to go out to market in order to execute, simplifying workflows and reducing market impact.

“The liquidity provision workflow can be a useful tool, especially given the recent record lows of lit liquidity. If you can get done and risk filled, there’s an efficiency to that,” says Hayley McDowell, EU equity electronic sales trader and EU market structure Consultant at RBC Capital Markets.

It’s this efficiency that has seen the buy-side continue to use this model of trading to execute flow. According to BMLL Technologies data, as of November 2024, off-book on-exchange constituted 58% of all bilateral trading activity – around €376bn – evidencing how attractive this model is to firms in comparison with multilateral venues and platforms in the lit markets.

“If I see a workflow solution that is potentially saving costs for funds and ultimately delivering good outcomes for clients then we have to evaluate it,” adds Wicks.

“For us, it’s [bilateral] more of an efficiency workflow tool for the lower liquidity demand orders or baskets we have. We consume the feed into our EMS so when an order hits our desk we can see straight away whether the whole order can be fulfilled by the bilateral liquidity. Not having to declare anything is an asymmetric benefit to us because we can see whether that liquidity can be fully filled on a fill or kill basis.

“If we were to go into the secondary markets utilising a liquidity seeking algorithm that would have a cost relative to trading at midpoint on the bilateral feed. For a subset of our flow from a cost perspective and an efficiency perspective it makes a lot of sense to us to utilise that bilateral liquidity.”

In light of the growing bilateral sphere, agency brokers such as BTIG and Redburn Atlantic have also been busy launching services that aggregate and streamline liquidity from alternative and electronic liquidity providers (ELPs) and connect the buy-side with them via an EMS or via a custom algorithmic strategy, all with the aim of easing the strain on the buy-side by channelling liquidity to them via one location.

“Traditional liquidity aggregation is not an option when trading bilaterally, but connecting clients to multiple competing quotes – on a fill-or-kill basis – via a single access point saves them time, limits selection bias and increases overall hit rates,” head of trading and algorithmic solutions at Redburn Atlantic, Phil Risley, tells The TRADE.

“The challenge in optimising the approach to principal liquidity, is to balance the ELP’s need to understand the profile of the flow with which they interact and the requirement to minimise information leakage.

“Ultimately, the goal is to create a virtuous cycle, with high quality flow incentivising larger and more consistent quotes – aligning interests and ensuring everyone wins.”

Redburn’s offering claims to tackle issues around market impact by operating under a fill or kill basis. Each client order is matched immediately in its entirety with a single ELP or not at all. It is directly available to the buy-side with qualifying flow via their EMS as a custom algo strategy. A spokesperson confirmed that the firm is speaking with all of the major non-bank SIs regarding onboarding. The ELP liquidity is not aggregated but available from a single point of access.

BTIG’s offering currently takes in live streams from three ELPs. Based on client preferences, it streams the best quote into the buy-side client’s EMS. A source has confirmed that the number of provider partners used by BTIG is growing.

Said quote can be anything from mid to far point liquidity in different shapes. If the client wants to interact they click to instantly execute or use OMS automation. The client then faces BTIG for settlement so there is no additional onboarding required.

The client has the choice whether to remain anonymous or allow ELP to profile them which may result in tighter pricing. This offering is also available via BTIG algos which for some buy-side clients may fit workflow better with wheels.

Traditional banks strike back

Given the growth of market share seen by these alternatives, the market has also seen a wave of new interest in this area by the traditional banks as they look to maintain their market share and retain commissions.

Major sell-side have offered systematic bilateral liquidity for years now but the practice hasn’t seen mainstream adoption for several reasons. Historically connecting bilaterally to a CRB for example has always been seen as a bit of a blind play as you don’t necessarily know what else is in there. The services for blocks have typically also only been on an ad hoc basis for banks’ larger clients.

“The evolution of IOIs being sent directly to client EMS’ is a net positive and opens up further trading opportunities and importantly enhances workflows, particularly when offered alongside a robust TCA process to help manage the challenges of longer term parent level impact,” explains Goldman Sachs’ managing director and head EMEA electronic and program trading, Alex Harman.

“This year we have been working with the major EMS’ to utilise actionables to deliver liquidity in several products; blocks, IS and close benchmarks. Expect to see a lot more from us here in the future.

“Our systematic GMOC product was the first of its kind and remains a heavily used product as part of our close benchmark offering. More recently we launched our DTC Stealth product, which is a tactic within our SOR that leverages dedicated liquidity from our systemic internaliser, plus other non-displayed liquidity with the aim to fully fill parent orders.”

With alternative players now targeting larger flow, major sell-side are looking to create their own direct connections via EMS providers in order to compete in a second wave of the bilateral evolution.

“I know several [big banks] are building aggregators and liquidity workflows that try and mimic some of the bilateral features. Whether we see a pure bilateral product from the investment bank similar to what we see from the alternatives I still don’t know if that will be the case,” adds Wicks.

“More traditional liquidity providers like the investment banks are now looking at it with some degree of urgency to try and insert themselves into that workflow. I don’t know how many more [bilateral offerings] we would need frankly but we will look at them when they come.”

Fast food?

With both electronic and alternative players cementing their workflows and major sell-side looking to follow suit, the bilateral segment is becoming extremely meaningful for both the buy-side and the wider market. And this meaningfulness is what’s raising some eyebrows. With the proposition now irresistibly attractive to the buy-side, the longer term impacts are now being assessed.

“The issue comes if too much of your flow goes that way,” says McDowell. “It can also impact on-venue liquidity. If has a trader has a large order on the pad, they might go to an ELP first, then maybe an SI, before going to the order book last.”

Given the existing decline of lit, this natural evolution – and it is a natural evolution – has the potential to become a bit of a self-fulling prophecy as spreads and toxicity increase in the lit market.

“Most buy-side firms and a lot of market participants would recognise that it’s in most people’s interests to make sure that lit markets remain a functioning viable part of the market,” concurs Wicks.

Traditional sell-side bring with them whole swathes of other auxiliary services that are bundled with their services across settlement, payments and research to name a few. Electronic and alternative liquidity providers do not provide these extensively and their services are usually limited to the execution side of things.

“Longer term, if we end up with a large part of the market trading bilaterally then we may start seeing impacts elsewhere – for example, will traditional brokers start reducing resources in other areas to focus more on liquidity provision?” Asks Canwell. “Will we see reduced price formation and greater toxicity on-exchange if smaller orders end up in bilateral mechanisms?”

The role of the regulator

The question now being asked by many is: what is the role of the regulator? Some participants are asking whether it is fair that some market makers should be able to risk fill clients without operating as an SI and the associated pre-trade transparency.

Ultimately, given this is the natural evolution of where the market is heading, it’s hard to see an eventuality where regulators would step in to prevent it. Famously, regulators tried to tackle decreasing exchange traded volumes with caps on dark trading in Europe during the Mifid II Review and the multi-year tug-of-war esque saga that achieved an arbitrary result of deleting the 4% and 8% double volume caps (DVCs) in favour of a single cap of 7% has largely been criticised as a waste of time.

“If they [regulators] think too much is being done off-exchange and there’s not enough price formation on-exchange, potentially I could see them stepping in,” says Canwell. “One area where there might be more regulatory scrutiny is around the closing auction because there’s a lot more being done off the primary closing auction in recent years.”

One area regulators should and are looking to change is around transparency. Reporting flags were one such area that was focused on by both UK and European regulators in April in order to simplify the regime and try to understand a bit better where volumes are being executed within the market. The concept of what is addressable and what is not is something now being explored by participants and regulators and could result in further probing from watchdogs.

“Reporting changes had a profound impact on the liquidity landscape. It was confusing before and a lot of the flags didn’t necessarily make sense. There was a lot of repetition and noise,” says McDowell. “Traders are looking for more transparency in the off-book space. Some participants are using “off-book” as a means of printing activity, but peers and clients are unclear about exactly what off-book on-exchange is.”

All roads lead back to the consolidated tape. And there is, of course, the likelihood that we will have a consolidated data source in the next decade (fingers crossed). This will also bring with it extensive transparency that will help both participants and regulators alike to better understand and interpret the market picture around percentages of liquidity accounted for by different segments. Given how participants and regulators alike are turning their attention to the addressability of flow, it may even be a worthwhile venture to do an independent analysis of how stable pricing is in Europe.  

“The market structure needs to respond to this change in dynamics and central to this is the delivery of a consolidated tape in both the UK and EU so all market participants can understand what liquidity is available where,” said Eleanor Beasley, EMEA equities COO and head of market structure at Goldman Sachs. “Understanding the different mechanisms leveraged to deploy bilateral liquidity is important as is understanding where this volume is printing.”

The growth of various different trading workflows that fall under the bilateral umbrella is undeniable and certainly something that participants and regulators alike should be keeping tabs on. Whether or not it’s something watchdogs should intervene with is another matter. Bilateral liquidity only works to a certain size. There will always be a portion of the market that requires public markets and going out to find the other side.

The market’s natural evolution is what it is. If these providers are offering buy-side traders an attractive service, who’s to say it is wrong or right? Perhaps as Canwell noted earlier the onus is on the buy-side to steer the market in the “right” direction.

However, when an order hits the pad, it’s rare for a trader to sit back and think about the wider long term market implications instead of whether a workflow will achieve the desired best outcome for their trades and subsequently their clients. On the current trajectory, our markets are likely set to look fairly different in the next five years. Whether that’s wrong is one for the philosophers that walk among us.

The post Liquidity, it’s a two-way street appeared first on The TRADE.

As part of the development, Northern Trust will provide outsourced trading primarily for Avanza Fonder’s global, emerging market, European and US equity market index funds.

Founded in 2006, Avanza Fonder is a wholly owned subsidiary of Avanza Bank Holding which provides services for private clients.

The fund company manages funds in-house and in collaboration with other managers.

Read more: Fireside Friday with… Northern Trust’s Amy Thorne

 “After opting to bring the management of our index funds in-house, we aimed to find a solution that would streamline our trading processes so we could concentrate on what matters most, which is to achieve outstanding results for our clients,” said Jesper Bonnivier, chief executive at Avanza Fonder.

“By collaborating with Northern Trust and utilising their ITS platform, we’ve gained access to greater liquidity and scale, enabling us to drive growth and consistently surpass client expectations.”

The past year has seen multiple investment managers outsource their trading to Northern Trust.

Most recently, UK-based asset manager Artemis selected Northern Trust to provide outsourced trading services for its equities and derivatives activity, effective January 2025.

In August, Northern Trust was also selected to provide outsourced trading to global asset manager Nedgroup Investments via its Integrated Trading Solutions (ITS). Specifically, Northern Trust will support Nedgroup with its new in-house multi-boutique fixed income platform.

Read more: Northern Trust tapped by True Potential for outsourced trading solutions

“We are delighted to be working with Avanza Fonder, a leading fund manager in the Nordic region, to support them across the trading spectrum through an integrated middle-and back-office solution,” said Gerard Walsh, global head of client solutions banking and markets at Northern Trust.

“Our customised services will help Avanza Fonder navigate ongoing global market challenges, allowing them to focus on managing the assets entrusted to them, whilst we work with them to effectively manage the trade and post-trade lifecycle.”

The post Avanza Fonder outsources trading to Northern Trust appeared first on The TRADE.

“We are thrilled to be joining LCH CDSClear’s FCM member base for US participants,” said Jason Swankoski, global head of strategy and product, derivatives clearing, at Morgan Stanley & Co in a statement on Wednesday.

“We look forward to this collaboration as we continue to invest in our services and expand our product offering.”

LCH said the move will enable Morgan Stanley’s clients to benefit from margin offsets and operational efficiencies by accessing a broader range of cleared CDS products.

“We are delighted to welcome Morgan Stanley to LCH CDSClear as a new FCM,” said Marcus Robinson, head of LCH CDSClear, part of LSEG Post-Trade, in a statement.

“This will provide the bank and its clients with new opportunities to achieve significant capital, margin and operational efficiencies. As we extend LCH CDSClear’s clearing capabilities to even more market participants, we are committed to creating a truly global service with a single pool of liquidity for the cleared CDS market with client access either via FCMs or the EMIR clearing model. This is just the next step on an exciting journey, as we expand our support worldwide.”

BNP Paribas Securities Corporation became the first US futures commission merchant to join the LCH CDSClear service in February as part of the clearing house’s expansion into US credit derivatives.

The post Morgan Stanley joins LCH’s CDSClear as part of US credit derivatives clearing expansion appeared first on The TRADE.

Galina Dimitrova

Specifically, the trade body is calling for cooperation on the automation of IPOs and block trades as the market seeks increasingly efficient and competitive processes through modernised infrastructure.

The IA paper includes a call to action for both sides for a projected smooth and successful transition to automation.

Galina Dimitrova, director, investment and capital markets at the IA, explained: “[…] IPO and secondary market placements remain one of the few areas in modern capital markets that are still reliant on manual processing to communicate demand. It’s high time that this process is modernised. We are therefore calling for buy- and sell-side collaboration to embrace technological advancements and automate the IPO process.

“Streamlining the process with electric orders would enhance efficiency, reduce risk and provide greater transparency for end investors.” 

When it came to solutions, the IA pointed to both the buy- and sell-side moving away from in-house building of systems and more subscribing to service vendors that provide electronic new deals allocation platforms. 

The paper also highlighted the relevance of a unified approach, pinpointing the FIX Trading Community protocol specifically when it came to automation – providing a standardised communication system. 

Read more: Fireside Friday with… FIX Trading Community’s Jim Kaye

Jim Kaye, Executive Director at the FIX Trading Community, added: “This is an area that is ripe for electronification – we welcome this initiative and stand ready to leverage the expertise of our member base. 

“Our history of designing standards to automate trading shows what’s possible and we believe automation of the IPO process is achievable when you have the right people behind it.”

The post Buy- and sell-side cooperation on IPOs and block trades key to modernising UK capital market says Investment Association appeared first on The TRADE.

There has been a shift in the size and scale in the types of managers that we’re talking to. My new favourite saying is that I don’t think this is a recessionary product any longer, but rather a future state. The way that people are thinking about it has changed dramatically over the last couple of years and a lot of that is driven through how customisable the product is through the whole life cycle of trading. Obviously, execution is a key piece of it, but just looking at all the different parts and how that can come under one commission rate is completely different. We did a survey on about 300 global asset managers and one of the main themes that came out of that was around outsourcing. Around 30% of them said that they would look at outsourcing trading, which demonstrates how much momentum there is in this space. It’s driving that capital light variable cost operating model that you can no longer ignore.

The other really key area for us as a product has been fixed income. We’ve seen a 98% growth in the last three years in our fixed income space and we actually launched a fixed income desk from Sydney in September. That is bolstering the 24/6 offering that we have around that asset class. It helps to have people on the ground that can help support firms based in the UK or in the US from that perspective. Another factor that’s key and won’t be that much of a surprise is the trading technology and infrastructure itself. It’s critical that you remain on top of that and it’s really expensive. If you can leverage somebody else’s expertise and infrastructure from that perspective it is instant cost saving.

What is driving these trends on the client side?

A lot of it goes back to pressure on managers. Everyone knows that there are costs and performance pressures, but it comes down to where can you gain operational efficiencies, regulatory reporting help or instant access to new products – whether it’s a different asset class or region. Co-sourcing in particular has been a big theme this year. The expense of setting up in a new market for a new product is high, you’ve got to get through a hiring process and everyone knows that that alone can take months. We’ve seen quite a few clients diversify into different asset classes over the last 12-18 months with interest rates changing and things like that. There’s also access to liquidity which is becoming more and more difficult. We’ve now got more than 500 different brokers for equities and fixed income.

T+1 was also a really big driver for us – we’ve seen quite a few managers who were looking to solve for different positions around that. Northern Trust has got offices in Chicago, New York, London and Sydney covering different asset classes and from that side of it, you’ve got the security. To some extent we’ve seen quite a lot of managers look at us for BCP purposes. They’ll have a line open and they have the infrastructure there but if something was disastrously to go wrong, whether it’s on a regional basis or macro or something internal they’ve got us as a backup.

What is driving change in the outsourced trading provider landscape?

We’ve noticed quite a lot of M&A activity. The underlying aim of that is achieving scalability of growth, access to liquidity, the governance structure, and basically whole product. The industry is really viewing outsourced trading as a high quality product now and with that comes a really high standard, high expectations of what you can deliver. Execution is key but it’s the scalability, the operational efficiencies, the support around regulatory reporting, the data analytics, the number of broker and venues that you can get to, and the advanced technology that’s wrapped around it.

Where the competitive landscape side of it is growing it’s great because it’s giving more optionality to everyone, it’s validating what we’ve been doing for a really long time now. If you’re active or passive and you’re looking at it from a fully outsourcing perspective or from a co-sourcing perspective, we see it as the future and it’s going to become a really imperative part of your operating model regardless of who it is. There are too many pros now for it to be ignored.

What would you say to those who remain anti-outsourced trading?

We always talk about the journey. It’s got to be the right time. There are going to be certain trigger points, whether that’s a new member on your C-Suite or additional cost pressures or access to liquidity or a new asset class or market. There are so many individual trigger points that happen at all of these firms at different times. This is becoming increasingly difficult to ignore and avoid. The route that we take is it’s a partnership for us -it’s not about taking jobs.

We have some clients who were still doing the trading themselves and their response has been ‘I can go back to doing what I’m meant to be doing, which is picking stocks, not deciding how to trade them’. That helps bolster their infrastructure too. We’re at a really exciting point in the life cycle of outsource trading, there’s massive momentum around it. You can’t ignore it, but also don’t be afraid of it. It’s not about putting people out of work, it’s about creating opportunity.

The post Fireside Friday with… Northern Trust’s Amy Thorne appeared first on The TRADE.

As one of the most anticipated awards of the year, the recognition is designed to celebrate those individuals who have made a significant impact on their own organisation and, equally, the industry externally, with a commitment to bettering and future proofing the markets for years to come. 

Shortlisted individuals are repeated contributors to discussion whether that be through panels, associations or schemes to support the next generation joining the financial services industry. 

Last year, Goldman Sachs’ chief operating officer for EMEA equity execution services Eleanor Beasley took home the Industry Person of the Year Award in a landslide victory. 

The winner will be decided by a live industry vote at The TRADE’s Leaders in Trading gala awards night on 7 November at The Savoy. Congratulations to this year’s shortlisted nominees! 

Industry Person of the Year 2024 shortlist: 

James Baugh, managing director, head of European market structure, TD Cowen

James Baugh is an industry stalwart, having worked in the financial markets for over 25 years. Over the course of his career, Baugh has become renowned as a trusted partner to clients and for leading positive change in the European equities marketplace. He is an active participant in discussions on key topics impacting the industry. His team provides opinions and insights into shifting regulation and market structure, illustrating how these changes directly affect day-to-day business. 

Baugh currently serves as managing director, head of European market structure at TD Cowen; a position he has held since August 2021. Since joining the firm, Baugh has been a key driving force behind the growth of the firm’s European agency equities execution business. He has also helped shape the firm’s liquidity strategy by guiding clients through the complexities of European equity markets.  

Before joining TD Cowen, Baugh spent five years at Citi as European head of market structure. This followed 11 years at London Stock Exchange as head of equity sales, where he led initiatives like Turquoise Plato Block Discovery.  

A graduate of Newcastle University, Baugh began his career as a commodity analyst before taking on various roles at Dow Jones, including managing their European power index business. 

During the span of his career, Baugh has also represented several top financial organisations both across various industry forums including AFME, Q15 and Sustainable Trading, and on the board of Turquoise as a non-executive director.

Kate Finlayson, managing director, FICC market structure and liquidity strategy, JP Morgan

Kate Finlayson has considerable experience in financial markets, boasting a 25-year career that spans equities, fixed income, currencies and commodities.  

She currently serves as global head of FICC market structure and liquidity strategy at JP Morgan, having joined the firm in 2017. As part of her role, Finlayson has helped establish the FICC market structure function at JP Morgan, which she has developed into a global business with an extensive scope and reach.  

Before joining JP Morgan, Finlayson spent 14 years at UBS, holding a variety of senior positions including her most recent stint as head of market structure and liquidity strategy. Prior to UBS, Finlayson worked at Goldman Sachs in equity capital markets and prime brokerage.  

At JP Morgan, Finlayson engages with clients on the impact of market structural developments and drivers of change. Finlayson and her team also provide critical insights on emerging execution trends, microstructural dynamics and policy initiatives shaping liquidity across global markets. Widely considered to be a thought leader in the industry and a market structure expert, her insights are increasingly in demand. 

Alongside her role at JP Morgan, Finlayson is a trustee on the board of directors for JP Morgan Chase Pension Plan Trustee Limited. She also has external roles on industry advisory committees, including the UK FCA’s Secondary Markets Advisory Committee as well as the EMEA and US Quorum 15 Fixed Income advisory boards.

Bianca Gould, head of equities and fixed income EMEA, markets, BNY

Bianca Gould has extensive experience spanning 20 years in the industry, holding several senior roles throughout her tenure. She is particularly dedicated to supporting junior talent across the market.  

Currently, she is head of fixed income and equities EMEA within the BNY Global Markets Trading division and also sits on the executive committee for Pershing Limited. 

As part of her role, Gould is also responsible for expanding BNY’s execution footprint across EMEA.  A critical part of this strategy includes the recent launch of the firm’s new EU desk, based in Dublin Ireland. The aim is to deliver integrated execution serviced to its clients and facilitate more efficient trading for EU-based clients across both fixed income and equity markets globally.

Prior to joining BNY, she was the co-head of equities electronic sales and trading EMEA for RBC Capital Markets. Before that, she worked at Redburn for 15 years, having made partner in 2009 and remained the youngest partner appointed to date until the removal of the programme after her departure.   

In recent times, Gould has taken part in the Moonwalk initiative – walking a marathon during the night – to raise money for Breast Cancer, a charity close to her heart.

Stéphane Malrait, managing director and global head of market structure and innovation for financial markets, ING Bank

Stéphane Malrait is a market structure oracle. As a familiar face at some of the most important industry events, he works closely with advocacy groups, policy makers and regulators to make real change across financial markets.

Malrait works tirelessly to drive positive change in trading and market structure in the capital market space, understanding the important role of continued technological developments. At present he is working on the implementation of financial regulations that will impact the clients trading activity and transform how trading floors operate.  

Currently he serves as managing director and global head of market structure and innovation for financial markets at ING Bank, leading the financial market innovation strategies within the firm and contributing to industry working groups as a representative of the bank.

Before joining ING in 2015, Malrait spent eight years at Société Générale, most recently working as global head of FIC eCommerce. He also previously worked at JP Morgan Chase for ten years, serving in different roles in global FX eCommerce business management and cross-asset eCommerce technology, based in London and New York.

Since 2005, he has been an active member of the ACI Financial Market Association and is also a key part of the ECB FX contact group and a board member of ICMA.

Simon McQuoid-Mason, head of equity product and quant research, SIX Swiss Exchange

Simon McQuoid-Mason is a consistent thought leader across the trading landscape, continually unpacking the latest industry trends and sharing key insight on industry panels, important forums, and via insightful interviews.

McQuoid-Mason is currently head of equity product and quant research at SIX Swiss Exchange, having joined in 2020 as head of equity product for UK and Ireland. In his role, he is responsible for driving the evolution of SIX’s equity markets offering, including SwissAtMid and is also the lead author of SIX’s Trading InfoSnack series, a thought-provoking analytics series on market micro-structure and trading dynamics.   

He also serves as the current non-executive chair of the assets for the Te Aupōuri iwi, a Māori tribe from the far north of New Zealand, from who he descends. 

In addition, his past roles include stints at Bank of Queensland, the London Stock Exchange, Morgan Stanley and Emerge Capital Partners.   

A proponent of a pragmatic approach to the various trading areas, McQuoid-Mason consistently advocates for a rethink in terms of how key industry challenges are addressed, with a particular focus on ensuring policy makers and the wider public understand the benefits of thriving equity markets and overall reducing market complexity.

The post Leaders in Trading 2024: Industry Person of the Year shortlist revealed appeared first on The TRADE.

Not that the seemingly never-ending list of aforementioned market occurrences had noticeably hindered the prime business. The ‘one thing after another’ era was a thorn in the side for a segment that is particularly sensitive to market forces impacting its clients’ appetites for lending and other prime services. But the headwinds have subsided, and the tailwinds have finally arrived in the form of new fund launches, a rise in allocations and increasing returns for funds, not to mention the continuing emergence of multi-strategy hedge funds. Prime brokerage is an industry which thrives off its clients’ growth, and that’s exactly what we’re seeing now.

“Year-to-date, we’re seeing for the first time in many years a notable uptick in new fund launches and spin outs from bigger places,” says Jack Seibald, managing director, co-head of Marex prime services and outsourced trading. “Within that, there’s more billion-dollar and above launches in the last twelve months than there were in the preceding several years. That’s adding a level of interest in the sector again by allocators. From our cap intro team, we’re certainly seeing from the allocator community renewed interest in hedge funds.”

According to Coalition Greenwich, the top dozen investment banks offering prime services saw revenues rise to a record $20.4 billion in 2023. Meanwhile, with regards to equities, revenue deriving from prime brokerage compared to trading shifted from a 30% versus 70% ratio a decade ago, to 40% to 60% in 2023.

Dominic Rieb-Smith, managing director, international head, prime services sales, JP Morgan, refers to the past year as “a standout”. Meanwhile, Patrick Travers, head of distribution at Clear Street, says he agrees with the sentiment around it being a good 12 months for prime brokers: “From our perspective, the markets have remained strong with pockets of volatility which tend to allow for investment opportunities and increased balance activities which are key drivers across the equity finance landscape.”

In addition to the billion dollar-plus launches, CIBC Mellon also points out to us the noteworthy increase in scheduled fund launches with assets under management of $500 million or greater – up almost two-fold on what was observed in 2023.

Penny Novick, global co-head of prime brokerage at Morgan Stanley, picks up on this point, stating: “With heightened dispersion across equity markets, hedge funds continue to see strong opportunities to generate alpha globally, which has led to increased levels of gross exposure being deployed across the fundamental long/short universe. 

“Additionally, multi-manager hedge funds have continued to win the lion’s share of the new capital coming into the industry as they have been rewarded for their ability to mitigate risk while still delivering positive alpha to their investors. The positive performance combined with markets trading at all-time highs and elevated gross leverage across the hedge fund client base has meant prime brokerage balances have reached peak levels.

“Views from the allocator universe towards the broader hedge fund industry also remain positive, and while this hasn’t necessarily led to net inflows to the industry as a whole up to this point, the forward-looking expectations based on our recent Investor Survey would point to increased allocations to hedge funds in the next 6-12 months, which we expect will also have a positive impact on the prime brokerage business.”

We spoke to around a dozen primes across this feature, and anecdotally, there were also countless examples of growth, including – but not limited to – an uptick in growth in Europe, something backed up by a recent IFR article titled ‘Europe’s hedge fund industry is taking off after lost decade’, while there was also positive news out of APAC and opportunities highlighted in the Middle East and Australia.

And the purple patch isn’t confined solely to the largest players, the chasing pack, or the plucky young upstarts – the overall PB pie is growing, meaning everyone’s slice is now more lucrative than ever before. 

Bigger and better

Just five years ago when JP Morgan surpassed $500 billion in prime brokerage balances, the bank’s head of global head of prime finance, Jonathan Cossey, quipped: “Next stop, one trillion!”. Well, fast forward to 2024 and the PB behemoth and its counterparts in the ‘big three’ are all reportedly around that coveted milestone.

Data from Convergence tracking the top 25 prime brokers showed their market share grew from 83.3% in April 2023, to 92% in 2024. Goldman Sachs, Morgan Stanley and JP Morgan all increased their market share substantially, despite the former two seeing drops in the number of funds they have relationships with. According to Convergence data, JP Morgan saw both new client additions and a double-digit market share percentage growth.

“I think the last 12 months for us in particular have been standout,” says Rieb-Smith, which has logged its best score in our sister title Global Custodian’s Prime Brokerage Survey since at least 2016. “In terms of client demand and what we have to offer, I think we’re really unique and we have benefited from that.”

Part of this has been down to the continuing rise of multi-strategy (multi-strat) funds which have very sophisticated and specific demands which can only be met by certain service providers with scale and a broad offering covering a range of asset classes.

On the topic, Rieb-Smith adds: “We’re in an environment where you’ve seen the macro community morph into multi-strats (because they’ve gone into equity strategies whether that be volume, capital markets and ultimately quant). Then you’ve got the quants who have started to look at fixed income products. These could be systematic, macro, or systematic credit funds, but you’ve seen more and more of those firms evolve into what look like multi-strat strategies. There are also the multi manager platforms that, in order to be fully diversified and attract the capital that they’re after, have become multi asset and therefore could be bucketed as multi-strat.

“If you look at what those firms need in terms of prime-related services, well, cash PB and synthetics are just the basics. Those are the relatively commoditised parts of the business. There aren’t many banks that are organised the same way as JP Morgan, whereby my team in prime financial services sales are responsible for marketing not only all those prime finance related products, but all our clearing products as well.”

“When you go through these really volatile periods of time, if the multi-managers that are really well diversified do come out stronger than monoline hedge funds, then there is an argument for investors. That’s why the money’s with them and they will probably attract even more capital. They are now trading in all these other asset classes. They need a financing platform to support all of that. We’re one of the only providers that can do all of that for them. So you can see how this growth and momentum just starts to really build over time.”

JP Morgan’s rival Morgan Stanley have been serial outperformers in the aforementioned Prime Brokerage Survey for some years now – picking up the Best Prime Broker accolade in 2022 and an Overall Excellence Honour in 2023 – and 2024 was no different, beating the global average by 44 basis points. 

The bank also highlights to us how “as a global multi-asset class prime broker, we are structured to deliver the widest range of services regardless of strategy type or product complexity”.

“At Morgan Stanley prime brokerage, we continue to be focused on growing our market share with existing clients by leveraging our unique integrated investment bank and firm strategy to deliver holistically across advisory, financing and sales and trading as well as our ability to tap into wealth and asset management channels to provide solutions to our hedge fund clients,” explains Novick. 

“Additionally, we remain vigilant in working with emerging talent early and providing them differentiated resources across consulting capital introductions, talent management, technology and client service to help these new entrants launch their businesses successfully.”

The big three can sometimes be passed over when it comes to media coverage of the prime brokerage sector, simply because of how far out in front they are with regards to market share – believed to be somewhere between 40-60% depending on metrics and who you talk to – but their capabilities and service levels are not dropping and there are still billions of dollars being invested between them into the technology underpinning these units. 

The challengers

But the growth of the overall pie is also benefitting players outside of the top three, as the headline of this piece suggests.

Ever since the exits of Credit Suisse and Nomura from the business – along with Deutsche Bank’s sale to BNP Paribas back in 2019 – the prime brokerage landscape has been dramatically shaken up to the benefit of those remaining in the business.

Over the past year, each of the top 25 primes have increased their market share – according to Convergence – with 16 of those experiencing double-digit percentage growth.

Some of the larger funds who were contemplating their next move following an exit of their previous provider moved up the table to the big three – which they likely already had relationships with already – while others switched to some of the ascending players in the industry.

In addition to this – and somewhat because of these new funds – there has been a trend of the biggest prime brokers offboarding clients or limiting access for numerous funds, leading to many mid-tier PBs looking to move upstream and ambitiously add clients who have either fallen foul of exiting primes or been offboarded. 

“You had a flurry at the time, and then it slowed down, but we’re still seeing trickles of that business two years later,” explains Seibald, referring to the exits of other primes. 

On the topic of offboarded clients, he adds: “Emerging and mid-sized managers continue to be, for the most part, ignored/shunned by the bulge bracket prime brokers as the largest participants have been able to build their books with more desirable, larger revenue producing funds that found themselves in need of alternative banks following the demise/exit from the business of several of the largest players. 

“This has created an ongoing opportunity for mid-tier prime brokers, particularly those with broad asset class and geographical capabilities comparable to those of the bulge bracket banks. This is an ongoing pattern that we suspect will continue for some time.”

Some of the aspiring players are present in the Prime Brokerage Survey, with outperforming scores set by players including Pershing, CIBC Mellon, Marex, Cantor and TD Securities. Clear Street is also continuing to make waves, despite being a much newer player on the scene.

For Marex – previously TD Cowen – a new chapter has begun under a new owner, and the transaction has been relatively seamless with the prime broker retaining its team members, and even adding talent. Seibald added that under Marex, the prime brokerage unit is starting to explore opportunities in segments of the market it previously had little to no exposure to, but where Marex is a prominent participant, specifically, commodities and futures.

Seibald’s team is joining in the upstream movers by some of the players named above, along with the likes of BTIG, Interactive Brokers, JonesTrading, and near to a dozen of the largest banks. 

It should be noted that in a market which has experienced provider exits, the shedding of less profitable clients and with looming increased capital requirements – don’t underestimate the lure of staying power and commitment to the business.

Multi-strat growth

Along with the opportunities from wanting clients, it’s really been the rise of multi-strategy hedge funds which continues to benefit the industry, particularly players with diversified capabilities across all of the asset classes and securities, as well as in the futures and commodity space. This trend, and shift away from an equity-centric sector, has cemented these prime brokerage divisions as the jewel in the investment banking crown for many of the largest players in financial services.

“A lot of the really big funds have taken in a lot of the assets that are coming into the marketplace,” says Aaron Steinberg, head of prime services at BNY Pershing, “A lot of that money from the institutional allocators, has been funnelled to a number of very large multi strategy and or multi manager platforms that those investors are just more comfortable with. There’s been a consolidation of where the assets are in the marketplace, and the biggest of the funds have gotten bigger. 

“We started to see a little bit of what I imagined was going to be the evolution of that market, which is a number of strong portfolio managers from those multi manager platforms coming out, launching their own funds. And we’ve seen some significant launches this year in that space. We’ll probably continue to see that trend.”

With two fewer major players in the space, the competition has been heating up and requires significant investment. Some of the banks behind the big three have been aggressively looking to capitalise on the continuing trend, with lots of positive noise around Bank of America, Citi, BNP Paribas and Barclays. It’s no easy thing to service these funds though, with significant investments, talent and scale required.

Outside of competing on capabilities, tech and the ability to service a range of strategies, one thing that shouldn’t be underestimated is the importance of client service. It’s for this reason that the category is such an important mainstay of the Prime Brokerage Survey and while not the ‘sexiest’ attribute of a prime broker to talk about in this fast-moving world, it is critical none-the-less.

“If you read some of the more recent Global Custodian surveys over the past few years, specifically as it relates to our business, one of the things that is stood out is the high level of client service,” adds Steinberg. “As all firms are looking to create more automation and create a stronger technological base and frankly, reduce overhead costs, something that’s gotten lost in that is that prime brokerage has traditionally been a high level of touch client service model. 

“That’s what drives clients’ ability to get the services they need, not only from the prime broker, but from the broader bank itself. A lot of the clients that we’re talking to – again, the big multi-platform, multi strategy funds – they want to have enough counterparties where they can invest how they want to when changes happen in regulation – whether it’s around RWA or whether balance sheet changes for a specific bank or there’s buying opportunities, but they also want to be really valuable to those counterparties as a whole and in total. And so, they want to be more to their counterparties, and we want to be more for our clients.”

Travers concurs: “With regards to the sell-side and prime brokerage specifically, we are all in client service on a daily basis,” he says. “The premise of what we do day in day out is to facilitate our clients’ needs and enhance their business every day. Regarding the client service team, we find that the best way to differentiate our technology offering is to have best in class client service personnel.”

Challenges ahead?

It’s not all sunshine and rainbows in the prime brokerage world, however. Looming regulatory issues and the ever-increasing complexities of the business have led to constantly evolving risk management systems.

Among the major changes is the Basel III ‘endgame’ update, the widely anticipated capital requirements hike for Global Systemically Important Banks (G-SIBs). Last year, US regulators unveiled the new capital rules for lenders, with G-SIBs seeing an increase by an aggregate of 16%.

The requirements align the US with Basel III standards which were agreed following the 2008 crisis with capital, leverage and liquidity requirements rolled out in the ensuing years, as the latest reforms look to end the reliance on internal models in the US for estimating risk and introduce standardised frameworks. 

While there is no exact timeline on the final ruleset being published and implemented, banks are preparing now and certain prime brokers have become increasingly sensitive to strategies with more punitive RWA and capital treatment. 

Additionally, in February, the Federal Reserve Board released four new hypothetical elements as a means to analyse different risks within the banking system. Two of these scenarios include two sets of market shocks which observe the hypothetical failure of each bank’s five largest hedge fund exposures under unique market conditions. This analysis will bring to light the results of a hypothetical major market disruption and the implications of it. 

Most recently, Bloomberg reported that the Bank of England is also reviewing lenders’ practices within their prime brokerage business as part of a long-running review into their exposure to hedge funds and other non-banks.

The arrival on the radars of various regulators stems from the fallout of the collapse of Archegos Capital in 2021, where its various prime brokers – of which there were many – were not fully aware of the size of the fund’s positions with other banks, and as the Bank of International Settlements put it, they thereby underestimated its overall leverage and impact on the markets in which it was active.

The silver lining was a complete reassessment of client relationships within the prime businesses of the biggest players and a wake-up call which was spun as ‘good’. 

However, the downside has been increased regulatory scrutiny.

“We’ve seen many of our competitors adjust and ‘revisit’ both their counterparty credit and risk policies following past events in the marketplace,” says Travers, though Clear Street had no involvement in the Archegos saga. “We believe that a robust risk and credit policy coupled with a stringent KYC policy will be key to avoiding another market event specifically within the prime brokerage space.”

ABN Amro adds: “The post-Archegos stabilisation trend is also evident with central clearing of OTC products, increased capital requirements and introduction of UMR. This has led the business scope for prime brokers to expand to full collateral management optimisation across multiple industry areas, with the largest benefit to UMR impacted clients. In addition, there is also interest in more efficient financing solutions, such as repo paired with custody.”

Of course, there are multiple other market structure developments and regulations for prime brokers to contend with from markets moving to reduced settlement cycles to new cyber security requirements.

 Ultimately, in 2024, the headwinds should only be a footnote to the main story – and that is around an industry reaping the rewards of a patient approach through some frankly wild years post-Covid. 

There was a phrase used throughout our outreach that the biggest are getting bigger – with regards to hedge funds – but that growth also relates to the entirety of the prime brokerage business. What this means is a likely increased investment and focus on these units from the largest players as this lucrative business begins to grow as an increasingly prominent part of each organisation. But they aren’t the only benefactors – it’s been a big year for primes of all shapes and sizes, and all those left in the market have lofty ambitions for the future.

The post The prime brokerage pie is growing, which means bigger slices for everyone appeared first on The TRADE.

Anand Goyal has been appointed head of FX institutional sales for Japan, Asia North, Australia and Asia South, based in Singapore.

He will report to Cécile Gambardella, head of sales for markets for Japan, Asia North and Australia and Sam Hewson, global head of FX sales.

“As we look to build on our market leading position across the region, Anand’s appointment is a significant move that aligns with our strategy. His expertise will enhance our ability to deliver tailored FX Solutions and foster stronger partnerships with our institutional clients,” said Hewson.

Goyal joins from JP Morgan where he had been serving as head of macro FX and real money sales for Asia Pacific.

Alongside him, Hooi Wan Ng has been appointed head of markets for Malaysia. She will report to Sue Lee, head of markets for Asia South and Vikram Singh, Citi country officer and banking head for Malaysia.

She also joins from JP Morgan where she had been serving as head of local corporate sales and private side sales.

“With Hooi Wan’s extensive experience and deep understanding of the local market, we are well positioned to grow our Malaysian franchise further,” asserted Lee.

“She will lead the markets business in Malaysia with a client centric approach, leveraging our global footprint and solution structuring capabilities.”

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