Davis Polk's Annette Nazareth and Jeffrey Dinwoodie review Reg SCI, its implications, costs and how the rulemaking may be an interesting window into the SEC's future steps in market structure.
Program Trading Channel
Not only is quant trading in its infancy, the quants are just as lost as traditional traders.
High-frequency traders facilitate the majority of U.S. equity transactions, where computerized firms have ample opportunity to profit from fleeting price discrepancies because transactions take place on more than 50 venues. Singapore isnt as fragmented, which keeps computer traders away.
Retail brokerage LPL Financial has introduced program trading technology for its financial advisors. It allows them to eliminate block trading and the time it takes to update portfolios.
Knight Capital Group, which recently expanded its global program trading effort, is eyeing an expansion into the capital commitment game and moving in the direction of the blind-risk business. After launching a global program trading business in April, the next step will be moving out along the risk curve with regard to committing capital, said Jenkins Marshall, a managing director at Knight who co-heads the new division.
Equities trading volume in the first quarter disappointed many industry pros. However, they see several bright spots that could juice volumes the rest of the year. First, the bad news. On March 28, just 5.973 billion shares traded. It was the slowest day in the markets this year. It also wrapped up a quarter that saw a 7 percent drop in volume last year.
Trading in Europe will get more expensive and difficult if reforms to the Markets in Financial Instruments Directive pass as proposed, according to a panel at a recent industry conference. Panelists on a regulatory session at TradeTech USA said proposed changes to current European regulation-MiFID-will hurt their businesses by raising their costs and making them less competitive.
Program trading is in again. Its volumes have been rising. Its technology is becoming more sophisticated. And the buyside is warming to its capabilities, so much so that program trading now represents roughly 15 percent of U.S. equities volume.
Over the past five years or so, mid-tier trading desks have been reorienting their roles in the market.
The electronic trading tools for program trading that most brokers and technology vendors offer their clients have not kept up with their single-stock offerings.