Electronic Trading Commentary From The Industry

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.

As discussions continue in Europe and the US over whether or not to regulate technology trading, businesses could now be looking further afield towards BRIC countries to see what they might offer in this industry.

While the biggest economies around the world continue to suffer from an economic downturn, observing activity in emerging markets is more than just a failsafe option. Brazil, Russia, India and China all offer unique opportunities and are becoming stronger financial markets in their own right.

The Dodd Frank rule will have a significant effect on the European swaps and derivatives market, alongside other regulation that will cause many businesses to alter their operations.

Originally signed into law in the US in July 2010, the act was conceived as a means of tackling the recession that spread across the globe in previous years, helping to protect the financial industry from future debt and potential financial instability. 

Brian Schwieger, head of EMEA algorithmic execution for Bank of America Merrill Lynch explains that trading in these markets is anything but smooth sailing.

High Frequency Trading seems to be a catchphrase for all and sundry but John Greenan explains why HFT is so hard to define.