The digital asset infrastructure provider will use its technology to connect qualified custodians on the Fireblocks Network with clients.
Fireblocks, the institutional-grade digital infrastructure provider, has announced the launch of the Fireblocks Global Custodian Partner Program, a first-of-its-kind global network of licensed digital asset custodians to support its customers at meeting rapidly rising regulatory standards.
Built on the Fireblocks Network, the Global Custodian Partner Program will launch this quarter with an initial group of licensed custodians based in the United States, the United Arab Emirates, the United Kingdom, Singapore, Thailand, and Australia. Once live, Fireblocks customers will be able to connect to licensed providers securely while seamlessly managing their digital asset operations on the Fireblocks platform.
The move comes amid growing institutional demand for qualified custodians in the digital assets space as asset managers, registered investment advisors and other major financial market participants accumulate exposure through tokenization, ETFs, allocation or advisory.
It’s also in response to rising regulatory requirements, including the proposal from the US Securities and Exchanges Commission for more stringent asset safeguarding requirements for registered investment advisors in February last year.
Adam Levine
To facilitate client access to asset safeguarding services, Fireblocks is also announcing its intention to launch a limited-purpose trust company that is under the regulation of the New York Department of Financial Services (NYDFS). Pending final regulatory approval, the Fireblocks Trust Company will offer cold storage custody solutions to US clients.
“The global custodian landscape is evolving quickly, and the launch of the Global Custodian Partner Program is a big step toward meeting the growing demand for a diverse network of solutions,” said Adam Levine, SVP of Corporate Development & Partnerships at Fireblocks.
“We are proud to continue accelerating our technology and ecosystem to serve the growing needs of digital asset businesses, and this represents a major step forward.”
Since the launch of bitcoin spot ETFs, the need for segregated functions and professional grade safeguards for assets has become a key priority. As a result, Fireblocks is leveraging its technology to enable clients and RIAs to comply with new rules by making custody arrangements easily accessible.
Clients will be able to use the Fireblocks infrastructure as a single point of access to licensed custodians as well as liquidity pools, exchanges, on/off ramps, and staking, among other services built on the Fireblocks Network. More custodians are expected to join the Program over the coming months.
The addition reinforces Fireblocks’ commitment to providing self-managed technology solutions to clients with the goal of significantly reducing counterparty risk.
Broadridge Financial Solutions has announced that it will acquire Kyndryl’s Securities Industry Services (SIS) wealth and capital markets technology platform.
SIS solutions include clearing and settlement, account record keeping, tax and regulatory reporting, and integrated order management activities for Canadian financial services firms.
Kyndryl intends to partner with Broadridge Canada by providing managed services and capabilities to SIS.
Karin Kirkwood
“The partnership with Kyndryl and the acquisition of the SIS business further underscore Broadridge’s long-standing commitment to being a leading technology provider to Canadian financial services firms,” said Karin Kirkwood, President of Broadridge Canada.
“The combination of the SIS technology business and Kyndryl managed services with our industry-leading Broadridge Wealth Platform will further accelerate our ability to bring innovation to Canada and meet the increasingly complex needs of Canadian firms.”
“Broadridge has been a long-standing partner and this latest collaboration is a win-win for our Canadian clients,” said Farhaz Thobani, President of Kyndryl Canada.
“Broadridge shares our commitment to drive technology innovation at scale, making them the right acquirer for the SIS business and bringing additional innovation to our clients.”
The transaction is not expected to have a material impact on Broadridge’s financial results and is expected to close in the coming months subject to customary closing conditions, including regulatory approvals.
RBC Capital Markets acted as the exclusive financial advisor to Broadridge on this transaction.
Jonathan Yam has recently transitioned from his role as CTO at Nasdaq Private Market to embrace a new challenge as Head of Trading Technology at FalconX. “It’s a return to crypto and digital assets for me since 2021 when I headed up the Coinbase exchange engineering teams,” he told Traders Magazine. In this new role, Yam will be leading the FinTech engineering teams at the largest crypto prime brokerage to build high-performance trading systems that will power the next generation of digital asset markets for the world’s leading institutions.
Tom Holmes
KeyBanc Capital Markets, the corporate and investment banking arm of Cleveland-based KeyCorp, has appointed Brendan Grady and Tom Holmes to co-heads of Institutional Sales and Trading reporting to Doug Preiser, KBCM Chief Operating Officer. In these new roles, Holmes and Grady will share management of the equity sales and trading teams and overall strategy with the goal of continuing to grow clients and market share. Tahira Afzal, director of equity research will report to Doug Preiser. In addition to her existing responsibilities, Tahira will join Brendan and Tom to form the leadership group charged with developing strategies to advance the equities platform. Kevin Kruszenski, head of KBCM’s Institutional Equities organization, retired at the end of April after more than 20 years of service.
Rob Kaplan
The Goldman Sachs Group has announced that Rob Kaplan will rejoin the firm as Vice Chairman of Goldman Sachs and a member of the Management Committee. He will be a member of the Executive Office and will be based in Dallas. Most recently, Kaplan served as President and CEO of the Federal Reserve Bank of Dallas from 2015 to 2021. Before serving at the Federal Reserve, he was the Martin Marshall Professor of Management Practice and a Senior Associate Dean at Harvard Business School. Prior to that, he had a distinguished career at Goldman Sachs over the course of more than two decades.
Wells Fargo & Company has named Fernando Rivas as SEVP and Co-CEO of Corporate & Investment Banking (CIB), reporting to Wells Fargo CEO Charlie Scharf and joining the company’s Operating Committee. Rivas and Jon Weiss, who has been CIB’s CEO since February 2020, will lead the business together. Rivas joins Wells Fargo after a nearly 30-year career at JP Morgan Chase & Company (JPMC). He was most recently JPMC’s Head of North American Investment Banking. Prior to that, he was Co-Head of JPMC’s Global Financial Institutions Group.
Jeffrey Haller has joined Evercore as a senior managing director in the financial institutions group based in New York. Haller has more than 20 years of experience working with financial institutions clients. Prior to joining Evercore, he was a managing director in the financial institutions investment banking group at Goldman Sachs, where he helped lead coverage of the wealth and traditional asset management sectors. Prior to that Haller was at RBC Capital Markets in New York and focused on building out investment banking coverage of the U.S. asset management sector.
If you have a new job or promotion to report, let me know at alyudvig@marketsmedia.com
“Money never sleeps pal” – remember that infamous line from the 80’s classic Wall Street? Who would have thought this saying would become a literal reality. For over three decades since Michael Dougals graced our screens as go getter Gordon Gekko, making money in cash equity markets has been at the mercy of speed – as the pinstriped Gekko’s have been replaced by high-speed hoodie geeks. Milliseconds may have made the next generation of Gekko’s, but they have also broken fortunes of others – all at the click of a button. It is therefore intriguing to see the New York Stock Exchange (NYSE) contemplating what would be, frankly, a seismic shift to trading stocks around the clock, 24/7.
Equity investors have the rise of cryptocurrency trading to thank, or not thank depending on your preference. Operating 24/7, crypto has set a precedent for round-the-clock market activity. Stock exchanges, traditionally confined by time zones, could now find themselves playing catch-up in a world where trading knows no bounds. As other major markets, from U.S Treasuries to leading stock index futures embrace continuous trading, the pressure on traditional stock exchanges mounts.
The issue is that sustaining high-speed trading operations in a 24/7 cash equities market would require underlying infrastructure capable of handling constant information streams, executing trades rapidly, not to mention responding to unforeseen market changes. Maintaining such infrastructure could become more costly than a Gordon Gekko stop loss. Particularly when one considers the cold hard commercial reality of trading around the clock. It essentially means encountering a diverse range of market conditions, including overnight news about wars breaking out. As regulators continue to assess the implications and market participants weigh in too, one thing becomes abundantly clear – the quality of algos deployed by financial institutions will be paramount in navigating this potentially brave new trading world. But why? Well, unlike humans who need their sleep, algos operate around the clock.
For financial institutions eyeing opportunities beyond U.S. hours, trading in the dead of night requires the need to navigate potentially volatile markets with precision and extreme quickness. The likes of Nvidia or Apple may be up for grabs between 8pm and 4am Eastern time, but seizing these opportunities demands algos that can operate effectively in the absence of human intervention. Outside of regular trading hours, liquidity tends to be thinner, meaning there are likely to be fewer buyers and sellers in the market at 2am (who would have thought). Thin liquidity can result in wider bid-ask spreads and increased price slippage, making it more challenging for high-speed traders to execute trades at desired prices. Only algos capable of analysing vast volumes of data, detecting patterns, and executing trades with split-second precision will separate the winners from the losers. Moreover, with regulators scrutinizing every move, ensuring the integrity and reliability of these algorithms is key.
The transition to a 24/7 stock exchange is not without its challenges. Yet, it presents a wealth of opportunities for those equipped to navigate its complexities. While the allure is undeniable, the risks are equally substantial. As the NYSE contemplates the future of trading, one thing is clear – in the 24/7 era, the quality of algorithms reigns supreme. Failure to adopt the right algo risks consigning them to irrelevance in a market that never sleeps.
Intercontinental Exchange, a leading global provider of technology and data, announced that Royal Bank of Canada (RBC), Canada’s largest bank by capitalization and designated as one of the global systemically important banks, has become a clearing member at ICE Clear Credit LLC, the leading global clearinghouse for credit default swaps.
Santosh Sateesh
ICE Clear Credit provides a comprehensive product offering, robust mark-to-market services and state-of-the-art risk management approach. As a clearing member, RBC will have access to industry-leading solutions for clearing Single Name and Index CDS instruments, as well as CDS Index Option instruments referencing the major North American and European corporate indices.
“Our ability to access central clearing for the full range of our actively traded CDS products enables RBC to achieve significant capital and operational efficiencies across our CDS portfolios,” said Santosh Sateesh, MD, Global Head of Credit Derivatives Trading at RBC.
“RBC is one of the largest banks in North America and globally, and we’re very pleased to have them join ICE Clear Credit as a clearing member,” said Stan Ivanov, President of ICE Clear Credit. “The addition of RBC to our world-class roster of clearing members brings an important participant to our ecosystem and builds on the leading liquidity we offer for global CDS markets.”
Launched in 2009, ICE Clear Credit clearing solutions offer clearing for more than 500 Single Name and Index CDS instruments referencing corporate and sovereign debt and have reduced counterparty risk exposure by clearing over $330 trillion in two-sided notional amount, with open interest of approximately $1.75 trillion.
FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
The future of asset management is a hot topic as both Boston Consulting Group and Northern Trust have published reports on how the industry needs to change as costs have been rising faster than revenues.
Assets under management in the global fund management industry increased by 12% in 2023 to nearly $120 trillion, but costs rose far more than revenues, according to Boston Consulting Group. The 22nd edition of the consultancy’s global asset management report, AI and the Next Wave of Transformation, released this month, said the industry’s revenues increased by 0.2% in 2023. However, costs rose by 4.3% leading to an 8.1% decline in profitability. In addition almost all, 90%, of the industry’s revenue growth has come from market appreciation since 2005.
Dean Frankle, BCG
Dean Frankle, partner at BCG and co-author of the report, said in a statement that structural challenges facing asset management will continue to grow. He said: “To remain competitive, asset managers will need to seize the opportunities offered by artificial intelligence and double down on investing in enhanced productivity, product personalization, and the opportunity of private markets.”
BCG, in partnership with the Investment Company Institute (ICI) and the CFA Institute, conducted a global survey of asset managers in the first quarter of this year on the adoption of generative artificial intelligence (GenAI). Nearly three quarters, 72% think that GenAI will have a significant or transformative impact on their organization within the next three to five years and two thirds, 66% have made GenAI a strategic priority for their business.
Peter Czerepak, senior partner at BCG and co-author of the report, said in a statement: “Generative AI opens up tremendous potential for innovation within the asset management industry. Achieving results will require strategic thinking and the ability to execute at scale.”
For example, AI can support investment teams by accelerating investment research through quickly gathering, synthesizing, and analyzing both proprietary data or alternative data sources including public filings, macroeconomic statistics, and geospatial reports. AI tools can also facilitate effective knowledge management and data sharing by organizing reports, data sets, and research developed by investment teams. BGC said; “As a result, AI can break down silos and minimize redundant analyses, which occur frequently when investment teams managing different funds or products are exploring similar themes.”
Investment managers are prioritizing the quality and accuracy of their products to enhance the investor experience and grow their distribution in the next two years, according to a survey of 300 global asset management firms sponsored by Northern Trust.
Northern Trust has also issued a white paper, The Next Chapter in Driving Growth in Asset Management 2024, which found that nearly three quarters, 72%, of fund managers said enhancing quality and accuracy of data was their top strategic priority in the next two years. Northern Trust said the results marked a shift from manager priorities in the prior survey in 2022, when just 45% of managers identified enhancing quality and accuracy as the top priority, behind efficiency and cost controls.
The survey, conducted for Northern Trust by WBR Insights, highlighted that 83% of respondents plan to change their product strategy in the next two years, with a focus on meeting diverse investor needs.
Clive Bellows, Northern Trust
Clive Bellows, incoming president of Northern Trust in Europe, Middle East, Africa, said in a statement: “Many of the challenges we’re seeing today come back to the same core issue: data. As a result, managers are looking to leverage new technology, and the survey found that many managers are looking to enhance their data management strategies by engaging their custodians for outsourced solutions.”
Data management was overwhelmingly identified as the area where asset managers are considering outsourcing (83%), and almost half (42%) of respondents identified their biggest challenge with data management as ensuring that the data is easily understandable/consumable and insightful.
As financial institutions approach the T+1 settlement change, determining the right affirmations model will be critical in getting the most out of the new deadline, according to Derek Coyle, European Custody Product Manager at Brown Brothers Harriman.
Derek Coyle
When it comes to how trades can be affirmed, there are two main options to consider, Coyle said: 1) the custodian supported confirm matching model and 2) direct affirmations, also known as self-affirmations.
He explained that for confirm matching, custodians will align the trade instructions against the broker-dealer confirmations to complete the affirmation steps ahead of the DTCC deadlines on Trade Date.
“The result of the affirmation is then communicated to Trade Suite and the trade becomes eligible to settle as an affirmed transaction,” he said.
Coyle added that Confirm Matching means that the custodian will be responsible for completing.
“Depending on the custodian, they can have a slightly earlier instruction deadline (ahead of the DTCC 9PM EST affirmation deadline) to give some buffer in case of any operational support being needed,” he said.
With Direct Affirmations, firms can choose to perform the matching steps themselves by aligning their instructions against the broker-dealers confirmation, Coyle said.
The affirmation is then completed in the DTCC systems, after which the custodian will receive the result of the affirmation that can act as a trade instruction for the custodian or be matched to a secondary trade instruction sent via standard means form the client to the custodian for further processing and settlement in the market, he said.
According to Coyle, direct affirmations can provide more control over the affirmation process, which can be “beneficial where firms have end-to-end oversight over reconciliations and so on”.
“Direct affirmations also give direct access to the visibility and reporting of successful affirmation and related timestamps,” he said, adding that this can be valuable for those Registered Investment Advisors (RIAs) who need to provide affirmation timestamp reporting.
Coyle told Traders Magazine that Registered Investment Advisor (RIA) firms with regulatory oversight from the SEC will need to be prepared to provide evidence of their activity in successful affirmations, with date and timestamp records of instruction activity needed to show efforts at meeting the DTCC 9PM EST affirmation deadlines on Trade Date.
He noted that the reporting requirements do not differ between the direct affirmation and custodian supported affirmation models – both require the date and timestamps to show actions taken and the responsibility to comply with the requirement under both models will remain with the RIA.
According to Coyle, timestamps showing date and time of the trade execution steps (allocation, confirmation and affirmation) leading to successful settlement are required.
“Firms can maintain this internally or ask a third party to support the recordkeeping requirement,” he said.
DTCC are also preparing a Trade Archival tool, which can be used to source SEC required timestamps, he added.
Coyle stressed that having a Tradesuite ID (TSID) in place to correctly be identified as a trading party is key.
“DTCC have been supporting requests to provide such IDs in the past weeks and months,” he said.
“After that – the main focus would be on adjusting the timing of trade instructions to be completed before 9PM EST on Trade Date, and then engaging with counterparties to understand their alignment to be ready to affirm and settle with you according to the new requirements from the end of May,” he said.
ACS Holdings/Global Liquidity Partners has formally announced the successful acquisition of Coda Markets Inc., an agency broker-dealer specializing in proprietary routing technology and auction market platforms.
With an esteemed team and a diverse client base, Coda has firmly established itself as a leader in its sector.
The acquisition brings with it new opportunities for growth and collaboration.
“We are confident that by combining Coda’s competencies with ACS Execution Services’ robust algorithmic capabilities and Comhar Capital Markets’ (COHR) market-making expertise we can further enhance the services available to our clients,” said Peter Cocuzza, Business Development – Client Relationships at ACS Execution Services – Global Liquidity Partners.
“At Global Liquidity Partners, we take great pride in our unique ability to provide solutions spanning a wide spectrum of equity execution, and this latest addition further enhances our capacity to address our clients’ needs.Coda will continue to operate as an independent company under ACS Holdings/Global Liquidity Partners,” he added.
About Coda Markets
Coda Markets is an agency broker-dealer specializing in proprietary routing technology and auction market platforms. Coda operates an innovative auction based alternative trading system (ATS) and smart order router that aims to optimize liquidity aggregation for all market participants. Additionally, Coda builds and deploys customized routing strategies to meet the needs and demands of subscribers and traders.
About ACS Global Holdings
ACS Global Holdings wholly owns ACS Execution Services, Comhar Capital Markets, and Global Liquidity Partners. ACS Execution Services is a FINRA regulated broker-dealer that provides execution services to other broker-dealers in U.S. listed equities. Their focus is on the algorithmic-based execution of larger, not-held orders where the client desires performance related to a common metric such as Arrival Price, VWAP, PWP, or custom logic. Comhar Capital Markets is a FINRA regulated broker-dealer that conducts business as a registered market-maker providing liquidity exclusively to other broker-dealers, with a focus on fulfilling IOC order flow. Global Liquidity Partners is a technology company that provides trading systems and support to its broker-dealer affiliates through the use of internally developed proprietary software.
James Kostulias, Head of Trading Services at Charles Schwab, speaks with Traders Magazine about the firm’s trading capabilities, challenges for retail brokers and the evolution of trading technology.
James Kostulias
Please tell us about Charles Schwab and its trading desk. What are your average daily trading volumes?
Schwab has an incredibly active and lively trading desk, and each day we facilitate about 6 million trades. Over the past few years we’ve seen – as has the whole industry – a tremendous growth in retail trading, particularly spurred by the flood of entrants who gravitated to the markets during the Covid-19 pandemic, and that has really changed the game.
What trading capabilities do you offer?
With Schwab, clients can trade stocks and ETFs, options (index and equity) futures, and forex. They can also invest in bonds and fixed income products, money market funds, mutual funds, index funds, international equities, and gain indirect access to cryptocurrency via related funds, crypto coin trusts, stocks, futures and spot Bitcoin ETFs.
Schwab offers its trading experience under the brand “Schwab Trading Powered by Ameritrade™,” which reflects its unique heritage. Schwab announced its intention to purchase Ameritrade in 2019, and we’ve spent the better part of the last four years combining the best of the Schwab and Ameritrade to create something exceptional. With Schwab Trading Powered by Ameritrade, we’ve tied together the award-winning thinkorswim trading platforms with Schwab’s trading capabilities on Schwab.com and Schwab Mobile, alongside extensive trading education and specialized service.
What retail trading trends/themes do you see?
Right now, we’re seeing strong retail engagement with the markets; as of our Q1 ’24 earnings, trading volumes and margin balances were up 15% and 9%, respectively, from the previous quarter.
One way we keep a pulse on retail trading trends is through our monthly Schwab Trading Activity Index™, or STAX, report. What sets the STAX apart from other indicators is that it’s based on behavior; each month, we analyze retail investor portfolios and trading activity from Schwab’s millions of client accounts to illuminate what investors were actually doing and how they were positioned in the markets. From that analysis, we come up with a score for the month, and the up-or-down movement in that behavioral score serves as a gauge for retail investor sentiment.
For example, in our April STAX report, the score fell into the moderate-low range compared to historical averages. Schwab clients net bought equities, but they were discerning with the names they bought, gravitating towards companies with strong fundamentals and especially those with compelling generative AI solutions. AI-related names continue to rank near the top of our client buy lists.
Finally, a trend that we’ve seen (as has the industry in general) over the past few years is the rise in derivatives among retail traders. People turn to derivatives for a number of reasons – increasing leverage, controlling their risk, etc. But derivatives can also be an avenue for providing strategic exposure, particularly for accounts that can benefit from the capital efficiency these products offer. Because derivatives come with unique risks, we have made them a significant area of focus within our education offer. Between the improvements in platforms and education that surround options, there’s never been more to support the retail trader.
What are the current challenges for retail brokers?
We all live in the information age, and the impact of the internet and social media on our daily lives can’t be over-stated. The same can be said for investing. But while there’s a glut of information and guidance out there when it comes to investing and the financial markets, it’s not all created equal, and finding trustworthy information from expert sources has never been more important.
So, for brokers, it’s critical for us and for the financial well-being of our clients that we serve that role and help investors cut through the noise. I am immensely proud of Schwab’s education offer, which is beyond extensive. In addition to exclusive market commentary from our experts at the Schwab Center for Financial Research (SCFR), we offer a wide array of articles, videos, client-exclusive courses and learning pathways, coaching, live and virtual events, podcasts, email newsletters and even the Schwab Network, our media affiliate offering broadcast market commentary, analysis, and insights from industry professionals.
This rich education ecosystem empowers our clients to learn about the topics they want to know more about, in the ways and via the channels that suit them best.
What is your view on the evolution of trading technology and the impact of AI? / How does your team adapt to new technologies?
AI is something we are keeping a careful eye on. There are various ways AI may be useful for our clients and we are already doing some testing-and-learning to see what might be possible.
For example, AI may be able to help answer questions like: How can we enable our front-line associates to serve clients faster? Or better yet, how can we answer clients’ questions proactively, so they don’t have to call in at all? The answers would be informed by factors like current market activity or real-time insights into what are clients calling in about. Armed with that kind of knowledge, we could probably serve up relevant content within the hour.
Another example is education. Based on what we see clients searching for or trading, we can eventually help guide clients to the best next steps in their investing by serving up educational resources on trading strategies or by making service recommendations.
But the benefit of these projects won’t just be the content we serve up, the revolutionary piece will be the speed of delivery – how quickly can we serve up relevant information that leads to insightful trade ideas. For example, most market commentary happens ahead of the market of after, can we identify trends during the day? That’s the kind of thing that will make a big difference for our clients when the time comes.
What is you view on the electronification of the markets? / What trends do you see emerging or advancing?
The more we can democratize investing and educate investors to take control of their financial futures, the better, and electronification plays a big role in that. It is better for our clients – and better for the marketplace – when there are more participants.
We’re seeing younger participants in the market these days, which is a great thing. Trading and market education is becoming much more common in universities. It’s also easier to open and fund an account than ever before. All of this is helping younger folks learn their way into participating in the market, where more learning and education awaits them.
With the evolution of technology, market structure, and pricing I fully believe there has never been a better time to be an individual trader and/or investor.
What automation themes are you seeing, and what could drive more electronic trading?
At Schwab, we offer our Trader API, which allows developers to access market data and trade electronically without having to engage with the thinkorswim application every day. We love thinkorswim and feel it’s the best platform out there for traders, but we’re big supporters of choice. And we know it takes time to log in everyday, load a trade ticket, click send etc. Schwab’s Trader API allows clients to back-test strategies, set their own alerts, and execute trades based on the signals they identify as meaningful. We also offer a Schwab Developer Portal that anyone can sign up for.
Looking ahead to the future of electronic trading, the developments of your teams and how they look to enhance their skill sets. What work is being done to prepare the trading desk of the future from a sell-side perspective?
Our guiding principle is “through clients’ eyes,” which means we always frame our thinking around what the client needs, what will they need to grow their investments and how they can protect them. We are focused on adding capabilities to our apps without disrupting their current experience. We are looking to simplify processes, reduce the noise, and serve up information faster in a way that any investor or trader, from novice to expert, can consume. With the largest brokerage firm integration in history nearly behind us, we on the Trading Services side of the business are focused on innovating for clients in ways that reflect traders’ needs – which are far from one-dimensional. Traders are investors, too. They also engage in long-term investing with things like managed accounts and 401Ks. We want to serve the whole client, ALL their needs.
Is there anything else you would like to add?
In many ways, there’s never been a better time to be a retail trader. With the array of access, education, tools, ease, and low or eliminated barriers to entry that shape the trading experience now, we’ve come such a long way since I began my career two decades ago. Schwab was founded around the philosophy of creating greater access to investing and trading, so it’s exciting to see where we are today.
And you can expect Schwab to continue to be a leader in the trading space, especially coming out of the historic integration with Ameritrade and our ability to deliver the best features and functionality from both the Schwab and Ameritrade platforms to meet the needs of all kinds of traders, from very experienced and sophisticated to those just starting out.
Money Never Sleeps: Why Algos are the Beating Heart of 24/7 Equities
By Sylvain Thieullent, CEO of Horizon Trading Solutions
“Money never sleeps pal” – remember that infamous line from the 80’s classic Wall Street? Who would have thought this saying would become a literal reality. For over three decades since Michael Dougals graced our screens as go getter Gordon Gekko, making money in cash equity markets has been at the mercy of speed – as the pinstriped Gekko’s have been replaced by high-speed hoodie geeks. Milliseconds may have made the next generation of Gekko’s, but they have also broken fortunes of others – all at the click of a button. It is therefore intriguing to see the New York Stock Exchange (NYSE) contemplating what would be, frankly, a seismic shift to trading stocks around the clock, 24/7.
Equity investors have the rise of cryptocurrency trading to thank, or not thank depending on your preference. Operating 24/7, crypto has set a precedent for round-the-clock market activity. Stock exchanges, traditionally confined by time zones, could now find themselves playing catch-up in a world where trading knows no bounds. As other major markets, from U.S Treasuries to leading stock index futures embrace continuous trading, the pressure on traditional stock exchanges mounts.
The issue is that sustaining high-speed trading operations in a 24/7 cash equities market would require underlying infrastructure capable of handling constant information streams, executing trades rapidly, not to mention responding to unforeseen market changes. Maintaining such infrastructure could become more costly than a Gordon Gekko stop loss. Particularly when one considers the cold hard commercial reality of trading around the clock. It essentially means encountering a diverse range of market conditions, including overnight news about wars breaking out. As regulators continue to assess the implications and market participants weigh in too, one thing becomes abundantly clear – the quality of algos deployed by financial institutions will be paramount in navigating this potentially brave new trading world. But why? Well, unlike humans who need their sleep, algos operate around the clock.
For financial institutions eyeing opportunities beyond U.S. hours, trading in the dead of night requires the need to navigate potentially volatile markets with precision and extreme quickness. The likes of Nvidia or Apple may be up for grabs between 8pm and 4am Eastern time, but seizing these opportunities demands algos that can operate effectively in the absence of human intervention. Outside of regular trading hours, liquidity tends to be thinner, meaning there are likely to be fewer buyers and sellers in the market at 2am (who would have thought). Thin liquidity can result in wider bid-ask spreads and increased price slippage, making it more challenging for high-speed traders to execute trades at desired prices. Only algos capable of analysing vast volumes of data, detecting patterns, and executing trades with split-second precision will separate the winners from the losers. Moreover, with regulators scrutinizing every move, ensuring the integrity and reliability of these algorithms is key.
The transition to a 24/7 stock exchange is not without its challenges. Yet, it presents a wealth of opportunities for those equipped to navigate its complexities. While the allure is undeniable, the risks are equally substantial. As the NYSE contemplates the future of trading, one thing is clear – in the 24/7 era, the quality of algorithms reigns supreme. Failure to adopt the right algo risks consigning them to irrelevance in a market that never sleeps.