December 2, 2013

10 Trends that Shook the Trading Desk

Glitches, order sizes, mergers, dark pools and a more powerful buyside. Our editors take a look at the top stories that had the biggest impact in a non-stop, ever-changing year.

By By Phil Albinus, Peter Chapman and John D'Antona

While 2013 did not see the roiling turmoil of 2012, with its elections, Occupy Wall Street protests and cascade of bad news, this was far from a boring year. In fact, 2013 was a year of contrasts. For every bit of good news-the Dow rebounded to its highest levels during the late summer and fall, and unemployment numbers continued to inch up-there was also a near-constant stream of worrying reports.

During a steady if muted economic recovery, Republicans in Congress decided to shut down the U.S. government for nearly a week and at a cost of $24 billion. Investment firms saw major profits and boasted record amounts of cash on hand, but still refused to hire back a portion of the workers they laid off in 2008. The Securities and Exchange Commission welcomed a new leader in Mary Jo White, and not only has she proved herself adept at handing out unprecedented fines, she is also forcing the guilty parties to admit their wrongdoing. Look no further than J.P. Morgan's jaw-dropping $900 million in fines for the extravagances of a wayward trader known as the London Whale.

The buyside saw its power shift in its favor-but at a cost. While they are demanding more from their sellside counterparts, traders are keeping a tighter grip on their commission dollars in exchange for greater transparency and better research and services. With multiple markets, brokers and third-party firms providing the services that once only came from the sellside, the buyside is calling more of the shots. In fact, they even have their own dark pool, IEX.

Although 2012 introduced us to the term "trading glitch" with the spectacular meltdown of Knight Capital, those trading glitches quickly lost their exclusivity and became almost commonplace. Disruptive, certainly, but not nearly as unique as they once were. On the plus side, regulators are mulling new rules that will force investment firms and exchanges to test their systems and software. Even the players that drag their feet at every new regulatory proposal realize that their typical protests of vague and costly guidelines may not be heard. The fines are too high these days, as is the reputational risk.

In the following pages, the editors of Traders Magazine look back at the 10 trends and stories that shook the trading world. We examine the impact they had on the past 12 months and what role they may play in the coming year. This isn't a trip through memory lane, but more of a look at the road ahead for the men and women on the trading floor. Enjoy.

One-Touch Trading Gains Momentum

By John D'Antona Jr. 

The institutional equities business is moving to a one-touch coverage model, but the buyside's participation is optional.