Electronic Trading Commentary From The Industry

Mark Goodmann is Head of Electronic Services – Europe at Société Générale Corporate & Investment Banking and has his fingers very much on the pulse when it comes to the latest financial regulatory reforms.

One of the latest ones to make the pink papers is EMIR (European Market Infrastructure Regulation) so we at TradeTech DACH set some questions to Mr. Goodman to find out what the possible – if not intended – outcomes of EMIR may be.

Watch the full 15 minute video with Mark Goodmann - Head of Electronic Services – Europe at Société Générale Corporate & Investment Banking 

One of the latest regulatory reforms to make the pink papers is EMIR (European Market Infrastructure Regulation), but there seems to be just as many questions created since it’s debut as there are answers. So we at TradeTech DACH set some questions to Markus Specht, Head of Equity-Trading at Deka Investment, to find out what the possible – if not intended – outcomes of EMIR may be.

Still, we Europeans must be careful not to miss the boat. The nations of Europe have understood that they must bundle their strengths and join together to represent their common interests. To this end, Frankfurt can contribute its in-depth expertise in risk management and regulatory issues. The ostensible stabilization should not blind us to the need for an objective analysis of the crisis and revision of our financial architecture. Moreover, what counts for Europe in particular is internal and external re-regulation so that regulation arbitrage is permanently prevented. And the initially positive news must be seen in relation to competitors outside Europe. After all, the financial centres in Asia and Oceania are currently experiencing a far more dynamic upturn than that in “old Europe.”

If you look at volumes over the last couple of months, they have actually been stronger, particularly in relation to the apst two years. Admittedly they did fall off in the fourth quarter of last year but usage is back up where it was at this time in 2010. These were the trends before the recent activity around the Japanese situation. One of the main reasons behind those trends was the rebalancing activity we saw from several fund managers, rotating into European equities and out of emerging markets and fixed income.

Investors and traders have been careful about where they tread ever since MF Global filed for bankruptcy on October 31st. Do they continue to operate like it never happened or has the fall led them to take fewer risks?

MF Global, a once-leading derivatives broker that delivered trading and hedging solutions across all major markets, went into liquidation in October with a shortfall in customer accounts of around $1.2 billion (£765 million).

The world of regulation is poised for many changes in the upcoming years, from MiFID II/MiFIR to EMIR and even the US-Centric Dodd Frank, the'Alphabet Soup' as it's been dubbed means that governments across the world will need to be ready to adapt quickly.

Firstly, as part of this onslaught of regulation, central counterparties (CCPs) must offer non-discriminatory treatment with regard to how contracts traded on its platforms are treated, while considering collateral requirements and netting of economically equivalent contracts and cross-maligning with "correlated contracts cleared by the same CCP". 

As a raft of new regulations is poised to affect people in the finance industry, companies must be aware of how the alterations will affect clearing.

New laws will alter how post-trading, pre-settlement credit exposures will be managed, pertaining to processes such as reporting/monitoring, risk margining, tax handling and failure handling. 

IT costs will be increasingly important for firms in the future, as more technologies are used in the progressively more regulated trading sector.

The uptake of such systems will also be supported by the perpetual need for improvements in trading, with firms constantly looking to find ways to reduce costs while maintaining their efficiency. 

The move has widely been welcomed by the City, but if it does make its way into EU law – and indeed in the US as well – what will its impact be on trading?

There are many challenges that will face Europe's high-frequency trading (HFT) market in the next year, meaning that companies will need to keep abreast of developments in the industry.