LSEG has announced a strategic partnership with Nasdaq to distribute institutional-grade private markets intelligence through LSEG’s Workspace and Datafeeds.
Under the agreement, LSEG will license Nasdaq eVestment™ private markets datasets including Market Lens insights, hedge fund insights and Limited Partner (LP) intelligence.
It will also include limited exclusive distribution of Nasdaq’s private market datasets, private fund benchmarks, and deal-level benchmarks.
Nasdaq’s datasets will be integrated into LSEG’s ecosystem, expanding transparency and decision-making capabilities across the private investment landscape.
The partnership builds on LSEG’s recent launch of the UK’s first Private Securities Market in September 2025, reinforcing its commitment to expanding private market infrastructure and data coverage.
Gianluca Biagini
For Nasdaq, the collaboration reflects its broader strategy to embed transparency and liquidity into private markets, transforming how intelligence is accessed and how data is delivered across the investment ecosystem.
Gianluca Biagini, Group Co-Head, Data & Analytics, LSEG, said: “This partnership underscores our commitment to delivering unparalleled private markets intelligence. By integrating Nasdaq’s datasets with LSEG’s existing capabilities, we are creating a best-in-class solution that serves the entire private market ecosystem. Together, we will provide richer content, deeper data coverage, and tools that empower our clients to make informed decisions.”
Oliver Albers, Executive Vice President and Chief Product Officer, Capital Access Platforms, Nasdaq, said: “Through this integration, we are extending the reach of Nasdaq’s private market data to deliver greater transparency and more actionable intelligence across the global investment landscape. This partnership empowers investors with seamless access to critical insights in existing workflow solutions to drive better-informed decisions and market efficiency.”
The combined offering brings together LSEG’s editorial and transactional data on private companies with Nasdaq’s fund performance and LP insights, creating a comprehensive solution for General Partners (GP), Limited Partners (LP), and advisors.
It streamlines critical workflows across investment targeting, deal execution, fundraising, and portfolio optimisation, enabling more informed decisions and efficient capital deployment.
Crossover Markets, an institutional digital asset trading technology firm, has announced record trading performance in October, with CROSSx matching $4.96 billion in notional trading volume and 1.39 million trades throughout the month.
Nearly 100 participants are live on CROSSx, with over 1,200 independent FIX sessions in production, highlighting the complexity of interactions available on the platform.
CROSSx is the industry’s first ECN and first-ever execution-only trading venue, boasting the fastest matching engine in the cryptocurrency world, with trades matched in single-digit microseconds. CROSSx operates 24/7 and posted 100% uptime in October.
Like traditional financial platforms, CROSSx is hosted in bare metal in Equinix LD4 and Equinix NY4, with Equinix TY3 expected to launch in Q1 2026.
Brandon Mulvihill
“The market events that unfolded on Friday, October 10th highlighted the risks of mixing credit and settlement with liquidity provisioning,” said Brandon Mulvihill, Co-Founder and CEO of Crossover Markets.
“We are extremely proud of the fact that we continue to win market share based on our technical capacity and operating model. Rather than through means of holding clients captive or standing as a counterparty to trades, our operating model positions us for success in all market conditions through technology that works to eradicate market impact and reduce spreads.”
Crossover recently announced the launch of CROSSx 2.0, which delivered a series of new order types, unparalleled performance in order routing, and an architectural framework to perform system releases intra week without disruption.
Participants now have access to post-only, iceberg, and peg-to-mid order types, as well as the capacity for bespoke order types based on client demand.
The system upgrade comes at a time when Crossover is expanding its geographical footprint, having recently announced its expansion into the United States.
“As we continue to expand our global reach, the entry of CROSSx into the United States complements our current presence in Europe. Our planned expansion into bare metal in Asia next year will position us to implement artificial intelligence into our current order routing practice, allowing us to network the industry’s first, truly global liquidity pool,” Mulvihill said.
By Rory Doyle, Principal Regulatory Specialist, Fenergo
The Disconnect Between Compliance Budgets and Rising Fines
Rory Doyle
In an era where financial crime evolves by the day, financial institutions are investing significant amounts to stay one step ahead. According to Fenergo’s research, financial institutions in the US have earmarked 32% of their 2025 operations budget to client and investor lifecycle management. However, Fenergo’s analysis of publicly available data reveals that in the first half of 2025, North American regulators imposed $1.06 billion in fines – a striking 565% increase compared to the same period in 2024.
This sharp increase in fines suggests that solid operations budgets and business as usual is not enough to safeguard financial institutions from sizeable penalties. Financial institutions are operating among geopolitical tensions and global markets that are growing ever more intricate. Globally, regulatory scrutiny is increasing for sanctions compliance, fines issued in this area went from $3.7m in H1 of 2024 to $228.8m in the same period this year. Financial institutions from both buy-side and sell-side organisations, require new ways to pro-actively stay ahead of market and regulatory shifts. Introducing audit-ready AI allows organizations to anticipate compliance challenges rather than simply respond to them.
A Broader and Deeper Regulatory Net
The surge in penalties isn’t a reaction to sudden misconduct; it reflects years of regulatory inquiry and data-driven supervision. Enforcement cycles that began years ago are now maturing, producing a high number of penalties and setting new requirements for accountability.
Amid today’s geopolitical climate, governments are using sanctions as foreign policy and national security tools, which put financial institutions under heightened regulatory scrutiny. Firms that fail to update their sanction controls with speed and precision are exposing themselves to heightened penalties and reputational risk.
A growing wave of enforcement penalties highlights how regulatory expectations for technology and governance are evolving. Regulators now want more than just documentation of systems and policies, they expect tangible proof that these measures are effective. Outdated manual workflows, fragmented data, and reactive compliance approaches are increasingly viewed as critical vulnerabilities.
What This Means for Trading Firms and Investment Managers
For the sell side, exposure often originates in high-volume client onboarding, correspondent relationships, and cross-border trading activity. Fragmented systems or legacy onboarding processes can create blind spots that invite regulatory risk.
For buy side organisations, challenges are concentrated in fund distribution networks, beneficial ownership transparency, and due diligence on counterparties and intermediaries. With a growing regulatory focus on sanctions, and investor suitability, buy-side compliance functions need to be increasingly vigilant, as even indirect exposure to sanctioned individuals or organisations can lead to breaches with the regulators.
Both sides share a common pressure point: the need for real-time, data-driven visibility across the client lifecycle. Without that visibility, firms risk failing to identify high-risk exposures at multiple stages throughout the client lifecycle.
The Added Costs of Poor Compliance Operations
For firms with fragmented compliance operations, exposure to regulatory fines is not the only risks they face. Poorly orchestrated compliance operations also impact the bottom line. Research from Fenergo found that seventy percent of financial institutions worldwide lost clients in the past year due to slow onboarding. Clients now demand a streamlined and seamless onboarding experience, and they are willing to go elsewhere if their first impressions don’t reflect that expectation.
Slow onboarding isn’t simply due to a lack of adequate investment by financial institutions. Annual costs on AML/KYC operations for US firms now stand at an average of $72.2m. Firms are investing significant amounts to try to balance the need for regulatory requirements with client expectations. Yet, the sheer cost of operations coupled with record client abandonment rates show that old approaches are no longer sustainable.
Practical Strategies Exist to Stay Ahead of Scrutiny
Financial institutions can rise to the challenge by rethinking their operating models to proactively seek out compliance risks. Rather than relying on standardized, one-size-fits-all frameworks, institutions must conduct enterprise-wide risk assessments that consider specific business lines, customer segments, and geographic exposures through the lens of today’s regulatory environment. Enhanced due diligence should be applied proportionally to higher-risk relationships, avoiding blanket de-risking that can push away legitimate clients.
Equally critical is the modernization of sanctions compliance. Institutions need dynamic systems that incorporate real-time updates, escalation frameworks, and strong governance structures. Beneficial ownership transparency is also rising on the agenda. Regulators expect firms to capture, validate, and regularly update ownership data, supported by clear audit trails and board-level oversight.
Regulators are increasingly looking for firms to leverage modern compliance solutions to stay ahead of financial crime. AI powered tools can enable real-time transaction monitoring that reduces false positives and can even surface hidden risks. Agentic AI also offers promising results for perpetual KYC (pKYC). Today’s AI tools can deliver continuous reviews and can trigger new checks when risks change. By adopting agentic AI, institutions can transform compliance from a labor-intensive, reactive process into a proactive, scalable, and regulator-ready capability. Crucially, when paired with strong governance and human oversight, agentic AI offers not only efficiency but also a greater level of resilience and responsiveness compared to traditional systems.
Finally, institutions must cultivate a strong compliance culture. Compliance cannot be viewed as the responsibility of a single function. Both buy-side and sell-side professionals can take ownership, when they are supported by clear accountability, adequate resources, and visible leadership commitment. For digital finance institutions who are new to regulatory oversight, the importance of good communication and transparency with the regulators cannot be overstated. To master this roadmap, the industry can partner with technology firms who have experience of working with regulators and traditional financial institutions.
Planning and a Proactive Response is Key
H1 2025 has made one thing undeniable: US regulators are turning guidance into action, and enforcement is reaching record highs. For risk leaders, the choice is to respond defensively and risk falling behind, or embrace innovation, data integrity, and agentic AI to stay ahead. The institutions that will thrive are those that:
· Adopt data-driven compliance frameworks aligned with real-time market operations
· Utilize AI intelligently to streamline onboarding, scale periodic reviews and ensure data is regulatory-ready
· Integrate compliance and business strategy, turning regulatory readiness into competitive differentiation
Proactivity is the new protection. Firms that act now by modernizing controls, unifying data, and demonstrating governance strength will not only avoid penalties but also earn investor and regulatory trust.
Exegy has expanded its Axiom market data platform to include real-time, low-latency Canadian equity data via the TMX Information Processor (TMX IP), a TMX Datalinx product.
This enables global clients to access key Canadian feeds, including CBBO, CDF, and CLS, through their existing cross-connects to Exegy’s New York point of presence, eliminating the need for additional infrastructure.
Axiom is Exegy’s market data-as-a-service solution, providing reliable access to real-time market data from more than 300 venues worldwide.
The addition of Canadian equities support is driven by strong client demand and reflects Exegy’s ongoing investment in reducing cost and operational complexity for global trading firms.
Arnaud Derasse
Arnaud Derasse, CTO of Exegy, said: “By integrating TMX IP into our Axiom platform, we’re removing the barriers to accessing Canadian equities market data.”
“Our clients can now expand their coverage effortlessly, with zero technical lift. With a simple subscription, they can instantly tap into Canadian feeds using infrastructure they already rely on – making this a cost-effective and simple solution.”
The TMX IP integration offers clients flexibility to tailor their subscriptions, with access to one, two, or all three of the following feeds:
CBBO – Canadian Best Bid and Offer
CDF – Consolidated Data Feed
CLS – Consolidated Last Sale
This seamless access eliminates the need for separate, dedicated Canadian infrastructure or co-location – streamlining operations, reducing datacenter footprint, and accelerating time-to-market.
This expansion follows the June 2025 launch of Exegy Nexus, an FPGA-powered market data platform that delivers over 40% in cost savings.
With a career spanning global markets, Lisa Balter Saacks, President of Trillium Surveyor, has developed a leadership approach centered on clarity, curiosity, and collaboration. Her international experience revealed how communication and cultural differences shape teamwork, and how the most effective teams succeed when given both guidance and autonomy. In this Traders Magazine interview, Saacks discusses the experiences that have shaped her leadership, the growing role of AI in trade surveillance and best execution.
Lisa Balter Saacks
What pivotal experiences or decisions most shaped your leadership style?
Early in my career, I worked across several countries where language and culture shaped everything – how teams collaborated and how we presented ideas to clients. It taught me how powerful words can be, and how easily intent can get lost when people hear or interpret things differently. I learned to ask questions, listen more than I spoke, and make sure what I thought was clear actually was.
I also realized that the people who make the biggest impact aren’t always the ones who look the best on paper. They’re the ones who stay curious, adapt quickly, and grow through uncertainty. I’ve learned to spot that early – to give people space to figure things out but also know when it’s time to step in and course-correct.
Over time, I’ve seen that culture drives everything. The best environments give people room to experiment and move fast, but with enough structure to stay focused. That balance – freedom with accountability – is what lets teams innovate and deliver, even when things are changing around them.
As President at Trillium Surveyor, how do you see technology transforming trade surveillance and best execution practices?
We’re seeing a pivotal moment in how firms approach both trade surveillance and best execution. Market volatility and the evolution of market structure, including the expansion of 24/5 trading and evolving asset classes such as digital assets and event contracts, have made it increasingly difficult to manage oversight across fragmented systems. At the same time, AI-driven strategies and sophisticated manipulation techniques are challenging traditional models of detection and analysis.
At Trillium Surveyor, we see technology transforming this space by breaking down silos between surveillance and execution analytics so firms can get more from their trade data. Our focus has been on giving firms a more unified view of the entire trade cycle, from market surveillance to execution quality, all within a single platform. When teams can see that full picture, they make faster, more confident decisions that improve both oversight and performance.
What are the biggest challenges and opportunities when scaling a B2B SaaS platform within the highly regulated financial sector?
In a regulated market, the challenge is building at scale without compromising control. Data integrity, transparency, and auditability are essential. At Trillium Surveyor, we have learned that sustainable growth depends on maintaining that trust while continuing to innovate. Regulated firms cannot afford disruption, so implementation has to be seamless and systems need to work within existing workflows.
The opportunity lies in unifying fragmented systems and helping firms move from reactive oversight to proactive optimization. When teams can access clean, connected data and apply analytics that surface issues faster, they strengthen both compliance and performance. That is where technology adds real value.
How are global regulatory trends influencing the future of trade surveillance and compliance solutions?
Regulators around the world continue to raise expectations for transparency, timeliness, and accountability. Firms are now expected not only to identify potential issues faster but to clearly explain how those conclusions were reached. This has accelerated the industry’s focus on explainable analytics and audit-ready reporting.
In practice, that means a surveillance alert can no longer be a black box. Reviewers need to see which data points, benchmarks, or trading patterns triggered the flag so they can validate the result and document the reasoning. The same applies to execution analysis, where regulators increasingly expect firms to demonstrate how routing decisions and benchmark comparisons were made.
This emphasis on explainability is setting a new standard for compliance technology. Firms that can show both the outcome and the rationale behind it will be better equipped to meet future regulatory expectations with confidence.
With AI playing a larger role in market monitoring and risk management, what ethical or operational considerations should financial institutions prioritize?
I am aligned with the stance that AI should enhance human judgment, not replace it. The goal is to help people see patterns faster and make better decisions, not to hand over major control to a model. Firms need to understand how their systems reach conclusions, what data they rely on, and where bias could creep in.
This comes down to governance and clarity. Teams should be able to explain why a model flagged something, how it weighed the information, and when it might need to be adjusted. When AI is applied thoughtfully, it can make oversight more focused and efficient without losing the human perspective that is essential to sound risk management.
At Trillium Surveyor, we are watching this space closely and designing with those same principles in mind. The future of surveillance and execution analytics will rely on technology that enhances human decision-making while keeping accountability and context in the reviewer’s hands.
As a senior woman leader in finance and technology, what key barriers still exist for women entering and advancing in these industries?
Access and visibility remain the biggest barriers. I have seen how even highly capable women are steered toward support functions rather than the decision-making seats. That is part of why I mentor and teach through programs at NYU Stern and Baruch College. Exposure to real-world examples, leadership paths, and industry challenges helps bridge that gap. It gives women the context and confidence to see themselves in those roles and to ask for opportunities that stretch them.
How have mentorship and professional networks influenced your journey?
I can’t say I’ve had a long list of formal mentors, but I’ve been fortunate to build an incredible “peer board” of women over the years – former colleagues, industry peers and friends from very different fields. They’ve become my sounding board and support system. We share advice, swap lessons on managing up and down, and have honest conversations about what’s working and what’s not. That openness and shared wisdom have shaped me more than any single mentor could. Mentorship, to me, also works both ways. I make a point of staying connected with students, founders, and professionals earlier in their careers because they bring such fresh perspectives. It’s energizing to see how they challenge long-held assumptions and rethink how this industry should work. That exchange – learning from each other, across generations and experiences – keeps me growing too.
What are the tangible benefits organizations see when women hold executive roles in finance and tech sectors?
When women are part of executive teams, the conversation changes. You get a wider mix of experiences and perspectives, which leads to better decisions. People see challenges differently, ask different questions, and often find smarter ways to get to the goal. If everyone comes from the same place or thinks the same way, you tend to move in just one direction. Real progress happens when there are multiple ways to get there – or when someone has the courage to question whether we’re aiming for the right thing in the first place. In fast-moving fields like finance and technology, that range of thinking makes companies more resilient, more innovative, and better equipped to navigate what’s next.
How do you envision the role of women evolving in the next decade of finance and fintech leadership?
I expect to see more women leading in data strategy, market structure, and regulatory innovation. As technology continues to redefine the trade lifecycle, the leaders who can connect compliance, analytics, and performance will drive the industry forward. Women are increasingly at the center of that shift.
What advice would you give to young women aiming to lead in areas like market structure, regulatory tech, or financial analytics?
Get comfortable with data – really understand how to use it to make informed decisions. But don’t rely on it alone. The best leaders know how to balance analytics with intuition. Just like in trade surveillance, you still need a human in the loop. Data will guide you, but judgment, instincts, and emotional intelligence are what bring it to life. The combination of both – sharp analytical skills and a strong EQ – is what allows people to lead effectively, inspire teams, and drive ideas forward with confidence.
Lynn Strongin Dodds looks at ISDA’s blueprint for a safer and more efficient derivatives market
Birthdays are always a time of reflection, and this has certainly been the case for the International Swaps and Derivatives Association which marked its 40th year in May. The trade group has taken the opportunity to consider the challenges and opportunities faced by the global derivatives markets. The result is a whitepaper targeting reforms to safeguard liquidity and risk management.
It certainly has been an eventful four decades with rapid growth, continued innovation, regulatory reform, central clearing, margining, LIBOR transition and a commitment to enhancing the resiliency of markets. The next 40 years will no doubt be equally as eventful but as the paper points out, the need for economic growth and jobs creation is driving a renewed focus on ensuring financial institutions can channel funding to the real economy and productive investments.
This requires strong, deep financial and hedging markets for financial institutions, corporations and governments around the world. The past is a good guide, but new lessons must be learnt to tackle the current environment which has seen spikes in volatility, ongoing geopolitical tensions and political upheavals.
The paper cites notable examples that have raised concerns over the liquidity in the system. This includes the Covid fuelled March 2020 “dash for cash” where investors rapidly sold off a wide range of assets, including even typically safe and liquid assets like government bonds, to obtain immediate, highly liquid cash or short-term government bills.
This was due to the uncertainty and disruption caused by the pandemic and the associated public health measures.
ISDA also highlighted the September 2022 UK gilt crisis which was triggered by the then prime minister Liz Truss’ mini-budget of unfunded tax cuts, which caused a sharp, swift spike in gilt yields and led to a liquidity crisis for pension funds using leveraged liability driven investment (LDI) strategies. The crisis was averted only by an emergency intervention by the Bank of England.
It wasn’t just crises unfolding but the market also saw greater competition as well as great strides in technology that fostered innovation and greater efficiency. Against this backdrop and as part of its mission to foster safe and efficient derivatives markets to facilitate effective risk management, ISDA made four recommendations for policymakers and market participants to consider.
First on the list is ensuring robust, resilient markets to support capital formation and allocation to the real economy. While there will be variations on a theme depending on the region., on a global basis, this involves finalising the Basel III capital rules without increasing capital rules for large banks and implementing consistently across jurisdictions.
It also means addressing issues in the Fundamental Review of the Trading Book, such as the capital treatment of collective investment undertakings and the need for a more uniform and risk-sensitive application of the residual risk add-on with respect to the scope of instruments captured.
The guidance also includes examining and potentially enhancing the flexibility that market participants have in the types of collateral posted/received for cleared and non-cleared derivatives, easing the pressure from collateral demands. Greater transparency is a high priority to ensure regimes are appropriately calibrated to support smooth market functioning, particularly in periods of market stress. In addition, firms need to assess ways to overcome portfolio margining obstacles.
Next on the recommendation list is promoting more effective and efficient risk management to assist market making and hedging. This consists of allowing increased use of internal models for calculating capital requirements, while ensuring the standardized approach is risk sensitive. Flaws should also be addressed in the profit and loss attribution and non-modellable risk factors frameworks.
In addition, a globally consistent and proportionate counterparty credit risk framework will be required to safeguard financial stability while supporting market intermediation. Market participants will also need to facilitate appropriate innovation and links between digital assets/traditional finance while maintaining appropriate safeguards, including when trading outside traditional business hours.
The third piece of advice revolves around mitigating negative impacts of cross-border inconsistencies to help cross-border capital flows and risk hedging. ISDA believes that authorities should establish a structured dialogue to harmonise the implementation of key standards with high capital impact and material divergences that drive competitive disparities and/or market fragmentation. notes the standardised approach for counterparty credit risk (SA-CCR) is a prime example.
Last but not least is reducing redundancies and simplifying regulatory requirements. This translates into making better use of the existing data reported by firms to understand market dynamics and avoid duplicating information. It also consists of improving the quality of existing required data and information flow by harmonising reporting requirements across jurisdictions. Global standards should be adopted, while machine readability and semantic accuracy should be implemented. It also encourages greater use of the Common Domain Model for standardized digital regulatory reporting.
Buy-side demands for cutting-edge front-office technology are spurring investment by trading systems providers in automation, artificial intelligence (AI), and digital assets.
Audrey Costabile
Top providers of order management systems (OMS) and execution management systems (EMS) are prioritizing research and development aimed at meeting their clients’ growing appetite for innovative solutions.
“OMS and EMS providers are working to simultaneously future-proof core functionality of their systems and develop new, modern solutions using AI and other emerging technologies,” said Audrey Costabile, Senior Analyst in Market Structure & Technology at Crisil Coalition Greenwich and author of OMS and EMS innovation: Where providers are investing.
Tracking Innovation in OMS/EMS
To date, R&D efforts by OMS and EMS providers have had the biggest impact in listed and vanilla products, where providers have rolled out enhancements to workflow interoperability and data automation, and are implementing more nascent trading and portfolio management tools using AI/machine learning (ML), generative AI, and low code/no code solutions.
Innovation has been most consistent in OMS, where vendors are working to embed generative AI applications in portfolio research, optimization, and large dataset management and consumption. Some providers are also making the shift from rules-based trading to AI/ML-enabled execution decision support tools.
Continued innovation could open new opportunities for providers who harness emerging technology most successfully.
“Specialized multi-asset class OMS and EMS solutions providers have the potential to gain market share by using advanced technology to delve deep into the nuances of over-the-counter derivatives, and exotic and newer products,” said Costabile.
“We believe these companies will continue to innovate, alongside a few industry namesake providers,” she added.
Leapfrogging Capabilities
Currently, few multi-asset class OMS and EMS providers have added cryptocurrency trading, reporting, and analysis tools to their arsenal. However, providers are working to build out capabilities in these areas. Data in the report reveals that some innovations, such as automated decision support, are more mature in crypto EMS applications than fixed income.
“As investment and trading in cryptocurrency and digital assets evolve, buy-side firms should keep an eye on R&D efforts by systems providers, since we expect architecture built on newer rails to foster some capability leapfrogging,” said Costabile.
OMS and EMS innovation: Where providers are investing presents the results of a recent study in which the firm interviewed professionals at OMS and EMS providers, as well as buy-side end users, about front-office technology solutions.
The report leverages data from that study to analyze the maturity and adoption of innovations in trading, reporting, and analysis tools embedded in OMS and EMS solutions.
New York, New York, November 4, 2025 – From November 19-20, SIFMA will host its Market Structure Conference in New York City. A virtual option will be available for reporters unable to attend in-person.
SIFMA’s Market Structure Conference brings together market participants, experts, technologists, and regulators in New York City to discuss critical issues impacting listed options and the equity markets.
The Conference will feature discussions on how the markets are adapting to technological innovation, regulatory shifts, and new trading paradigms – while upholding the foundational principles that ensure market integrity, transparency, and investor protection.
Featured keynote speakers include Henry Schwartz, Vice President, Market Intelligence at Cboe Global Markets and Jamie Selway, Director, Division of Trading & Markets at the SEC.
First published in 2012, after the Commodity Futures Trading Commission made significant changes to is customer protection rules as part of the agency’s implementation of the Dodd-Frank Act, the FIA Customer Funds FAQ has become a widely used resource for the industry. As updated, the document contains 30 questions and answers addressing the basics of:
FCM segregation of customer funds, collateral management and investments;
minimum financial and other requirements for FCMs and dually registered FCM/broker-dealers;
treatment of customer funds in the event of an FCM insolvency; and
“FIA – and in particular FIA’s Law & Compliance Division – is pleased to offer this resource for members and the broader marketplace. It serves as a primer on the CFTC’s robust customer protection regime for futures and derivatives market participants. It also highlights the critical role played by FCMs in ensuring that customer funds are safe and accounted for and that markets operate as intended,” said Mike Sorrell, FIA’s deputy general counsel.
The updated version reflects key regulatory changes identified by the FIA Law & Compliance Division since the last update in 2014, including: updates to the list of permissible investments for FCMs and clearinghouses consistent with recent amendments to CFTC Rule 1.25, discussion of separate accounts and permissible margin practices under new CFTC Rule 1.44, and explanation of heighted risk profile customer account designations under revised CFTC Rule 39.13. It also includes a new section explaining the protections afforded to customer funds in the unlikely event an FCM bankruptcy under the U.S. bankruptcy code and related CFTC regulations.
The FIA Customer Funds FAQ, as well as other industry resources, is housed in FIA’s US Documentation Library.
Driven by cost pressures, liquidity needs, and a push for greater control, institutional investors are increasingly managing public market assets like equities, bonds, and cash internally. Northern Trust’s latest Asset Owner Peer Study finds cost, customization, and liquidity are driving this trend, signaling a new era in how institutions balance efficiency with control. Traders Magazine sat down with Grant Johnsey, Head of Market Solutions, Americas, at Northern Trust Banking & Markets, to unpack the findings and discuss how insourcing is reshaping the relationship between asset owners and asset managers.
What are the key findings of the report?
Grant Johnsey
When we surveyed institutional asset owners earlier this year, we were surprised by the prevalence of in-sourcing asset management responsibilities. While private market and alternative strategies remain largely outsourced, there is a growing trend to internally manage public market investments, including equities, bonds, and cash. For example, 39% of the institutional investors responding to our survey said they “mostly insourced” management of public equities, which was a larger percentage than I expected and equivalent to the percentage who responded they “mostly outsource” equities. Management of cash was even more lopsided, with 44% responding that they primarily manage cash in-house compared to only 21% who responded that cash management is mostly outsourced to third parties.
What are the key drivers behind the growing trend of institutional asset owners insourcing public market strategies like equities, fixed income, and cash?
Liquidity emerged as a top theme amongst respondents to our survey, another surprise given that markets have not had a major liquidity scare for some time. One driver is ever larger allocations to less liquid investments in private markets. An asset owner with internally managed cash and public market assets can tap their liquidity with immediate effect—even intraday. This immediacy is not available with third-party managed portfolios that may be valued at end of day with a T+2 settlement, or which require advance notification or a reconciliation before liquidating.
Cost efficiency, of course, emerged as a key theme. Our study found that 56% of asset owners listed fees as a top three factor when choosing investment partners. Customization also emerged as a theme, especially for those with ESG goals or tactical views on the market. Cost and customization are also linked: it is usually less costly to implement bespoke portfolio adjustments internally than it is to pay a third party to do so.
How is the shift toward insourcing reshaping the traditional asset owner–asset manager relationship, particularly in public markets?
This question is timely, as the market is adapting as we speak. Many of the asset owners we see adopting in-house management strategies often still work closely with third-party managers, but the nature of the relationship is evolving. For example, I am beginning to see more demand from institutional investors to buy portfolio models, which has more commonly been associated with wealthy clients and RIAs. These model portfolios are then implemented internally, which achieves a number of objectives for the asset owner as previously discussed, including cost efficiency, better control, and customization. Quant-active equity models are a common example in my experience. If this trend of insourcing continues, I suspect asset managers will have to further adapt their business models.
What are some of the biggest operational and technology challenges institutions face when transitioning trading, FX, or middle-office functions in-house?
When an asset owner begins to manage assets internally, they must understand and build the downstream process. The good news is that there are many consultants available to assist as well as outsourced operational providers, such as Northern Trust, that can take on much of the burden. When I advise our clients, I always start with a schematic of the workflow, which maps out the process while highlighting the key decisions to be made. The first gap you’ll see on the schematic is the need for an order management system (OMS), which helps connect investment decisions with execution and operations. Working from there, the operational steps are fairly logical and easy to solve for. The operational and tech framework seems daunting, but it is imminently solvable…otherwise,we probably would not have more than 15,000 SEC-registered investment advisor firms in the US today!
How are leading asset owners balancing the desire for greater control and cost efficiency with the need for scale and resilience in their internal models?
Some asset owners view greater portfolio control as enabling better resiliency. Those goals are not mutually exclusive because when outsourcing, you are simply relying on someone else’s resiliency planning. When managing internally, resiliency can be further enhanced by selecting the right partners and attaining a location-neutral operating environment, whereby normal day-to-day activities can be supported if physical offices are not accessible. Achieving scale can be a problem, especially for smaller asset owners, and that is another reason to partner with a service provider that has global expertise and scale.
Do you see this trend toward insourcing continuing across all segments of asset owners, or is it more concentrated among larger, more sophisticated institutions?
I would suggest that larger asset owners – those with $50 billion or more in assets — are driving this trend thus far. Smaller asset owners can also benefit from insourcing, especially given their lack of pricing leverage compared with larger firms. However, with fewer staff and perhaps more shared duties among investment professionals, there may be fears that insourcing some investment management functions is not achievable because of operational challenges, lack of scale, or worries on resiliency. But as already discussed, these hurdles are less daunting than they appear, and partners are available to help navigate this path. And we are starting to witness smaller to mid-sized asset owners beginning to insource investments.
As investment models evolve, how are asset owners rethinking partnerships—with custodians, technology providers, and trading platforms—to support internalization without overextending resources?
Broader partnerships are likely to continue to proliferate. And by broader partnership, I mean fewer but deeper relationships between an asset owner and the partners they choose to support their business. The increasing importance of partnerships reflects a strategic move towards more complex investment management strategies broadly—managed internally or by third-party firms—while partnering with service providers to handle operational complexity.
