In recent years, exchange-traded funds (ETFs) have undergone significant evolution, shifting from simple passive investment instruments to more versatile tools that help reinforce a range of strategies. Initially known to track broad market indices, today’s ETFs cover niche sectors and even include thematic investments. These innovations have attracted a wide range of investors – from institutional to retail – who seek to increase returns and manage risks in an ever-shifting market environment. However, huge disparities exist between trading volumes in the US and Pan-European markets. Looking at the data, iShares by BlackRock reported that in the first quarter of 2024, trading volumes for US ETFs were at $10.6 trillion. In Europe, ETFs accounted for $782.9 billion in the same period. This can be attributed to differing ways in which active ETFs are adopted, fragmentation in Europe, differing levels of retail engagement, as well as the presence of an established consolidated data source in the US. A key theme linked to the evolution of ETFs globally has been the increase in scope of products offered to the market. Product type enhancements have led to a wider range of prospective investors. As a result of this increased demand and competition, costs have risen, which have ultimately led to ETFs attracting more attention from investors. Assets under management (AUM) and trading volumes for this asset class have experienced a significant rise over the last few years. “Consequently, ETF trading techniques have evolved to source new pricing opportunities either via electronic request for quote (RFQ) platforms and/or ETF algos and to take advantage of ETF trading provision at the exchanges themselves,” says Tim Miller, senior trader at Fidelity International. “We have also seen traditional ETF liquidity provision firms moving into forming bilateral relationships with buy-side dealing desks which has further strengthened ETF pricing.”Active ETFsActively managed ETFs have introduced a new dimension to the ETF landscape. The instruments combine traditional active management with the liquidity and transparency of ETFs, while providing access to specific investment processes such as index outperformance and income generation, alongside maintaining the key characteristics of ETF structures. “Active is a game changer and it’s going to broaden the audience yet again for the product set. It’s going to disrupt the traditional mutual fund market and I truly believe it’s going to position ETFs as the wrapper of choice for managers,” says Chris Gooch, head of ETF/index sales and business development, EMEA at Citi. “What’s particularly notable is the willingness of big asset managers to launch their latest active strategies in an ETF wrapper. And for me that means that every asset manager is going to need to have a clear strategy of how they’re going to respond.”The US market is undeniably ahead of Europe in its adoption of active ETFs thanks to the Securities and Exchange Commission’s (SEC) relaxation of its regulation in 2019, which resulted in more discretion in ETFs.The relaxation meant that ETFs would no longer have to make their holdings public on a daily basis, which became more attractive to active fund managers who view their stock picking abilities as intellectual property. Within Europe, disclosure on portfolio holdings is still required on a daily basis, and has previously stifled adoption in the region. However, with time, adoption of active ETFs is becoming more apparent. “The impact of there being more acceptance of active ETFs within Europe means that when you look at trading costs like spreads or the creation redemption costs, you’re starting to see them narrow and become more like passive traded ETFs,” notes David Smith, head of ETF sales at SIX Swiss Exchange.“There’s less difference between the two and we’ve seen the popularity certainly increase in active ETFs. All that being said, active is a small part of the European ETF industry, accounting for approximately 2% of AUM according to ETFGI as of April 2024.”Active ETFs have been released across different asset classes and have appealed to new and old ETF investors alike as they provide middle ground between passive and active investing, emphasises Miller. “Through active ETFs, managers are able to offer access to internal intellectual property and house expertise such as bottom-up stock research, allocation weightings etc that not only differentiate their product but can help investors generate alpha for a portfolio alongside core passive holdings,” he says. Disparities in trading volumes Despite continued evolution for the asset class in a broader sense across the globe, it can’t be ignored that trading volumes for ETFs in the US far exceed those in Europe and the UK. This reflects a more mature and established market present in the US, with greater investor adoption and noticeable liquidity.“At the broadest level, the US ETF market benefits from having launched the first funds around 10 years ahead of Europe and therefore is much more embedded in the investment psyche, particularly among retail investors,” highlights Miller. “Although the US ETF market is undoubtedly larger than Europe, the top 100 US-listed ETFs account for around two-thirds of both the entire US ETF assets and trading volumes, demonstrating that the US is characterised by a relatively small number of mega AUM ETFs and mega-liquid ETFs. Outside of the top 100 or so it starts to look a lot more like Europe.”Several factors exist which contribute towards greater ETF volumes in the US. Europe and the UK have noticeably less AUM linked to the segment, but also, various jurisdictions, venues and clearing houses which contribute to the disparities in trading volumes. “In Europe, there are about 11,000 different trading lines of ETFs. That liquidity can be spread across the different countries and different listings,” highlights Smith. “There’s multiple listings of the same ETF, whereas the US doesn’t face that same problem and that can mean that liquidity is more concentrated in a fewer number of ETFs.”ETFs in the US typically experience more favourable liquidity compared to their European counterparts, resulting in narrower bid-ask spreads and more efficient trading. Contrastingly, European ETFs often experience lower trading volumes, which can lead to wider spreads and less favourable execution for investors.“The US has many immensely liquid, mega-sized ETFs that trade colossal amounts. Europe just doesn’t have the liquidity that the US does,” emphasises Simon Barriball, ETP and portfolio trading Europe at Virtu Financial. “We don’t have ETFs with that scale of AUM in them or anything like the daily turnover on screen in the US and that’s a huge differentiator.”Fragmentation With ETFs increasingly becoming more popular in Europe, fragmentation and regulation have been pegged as two key pain points that need to be addressed going forward to boost growth in the region – a viewpoint that has been echoed at various panels at conferences in recent months. “The most obvious impact of fragmentation has been on the perception of an absence of secondary-market liquidity,” highlights Miller. “This has mostly likely held back some adoption of ETFs from investors but has also led to increased innovation from all market participants to source, aggregate and efficiently price ETFs.”Echoing this sentiment, Citi’s Gooch notes that European fragmentation makes it hard for investors to get a true representation of what the actual liquidity is for ETFs in the European market. “That [fragmentation] has led to the perception, I would argue incorrectly, that the European market is not liquid,” argues Gooch. “This has stopped new clients adopting ETFs and has led some clients to trade ETFs listed in the US, rather than ETFs listed in Europe, even with the structural benefits that European ETFs can present to certain investors.”Fragmentation does, however, provide some benefits, in the sense that it gives investors increased choice when considering their different objectives, where to trade and settle, as well as the types of currency they would like to execute in. It is, nevertheless, more complicated to navigate a fragmented environment, especially if liquidity does not always appear to be there across the different lines of ETFs. “The fragmentation in Europe extends to the fragmentation of how orders are executed. Probably only about 20% of trading is on exchange, 50% of trading is in RFQs and the remaining 30% are over SIs and other MTF type venues,” notes Barriball. “There’s also the fragmentation of trading and I think that in itself, affects the perception of liquidity as well, because you need to have a broker who can help you find where the liquidity is.”RetailAnother key driver that leads to the disparities in trading volumes when comparing the US with the UK and Europe is the region’s differing levels of retail participation – with retail activity making up 5-7% of total trading in Europe compared to over 25% in the US . As a historically more passive instrument, ETFs have proved popular with retail investors who don’t want to take on too much risk. “Already, it’s a bigger market, but the split of that market is much more evenly institutional and retail,” says Gooch. “There’s much more of a trading mindset in how they’re using the products, whereas the institutional client base, particularly in Europe, is much more around strategic asset allocation and tactical asset allocation, which doesn’t have the same trading velocity.”Retail adoption of ETFs in the US is more prevalent than in Europe largely because of a more widespread investment culture among individuals, backed by more favourable regulatory conditions. The US also has a larger variety of ETFs available and when paired with better investor education and greater access, this encourages more participation from retail investors. “Increasing adoption of ETFs from the retail community combined with improved connectivity from platforms to exchanges creates opportunities for buy-side dealers to interact with these improved volumes on exchange as professional and retail volumes create a better dynamic for orderbook trading,” notes Miller. Technology firms, in this context, are able to help platform providers simplify ETF procedures, ultimately removing complexity linked to legacy systems, to enable clients to have improved ETF trading experiences on said platforms. Elsewhere, looking forward, Citi’s Gooch suggests that the EU’s retail investment strategy also has potential to help boost ETF participation in the region. “Some of this was watered down from what many in the ETF industry were hoping for, but it is, at the heart of it, pushing for retail investors to be treated much more fairly,” he says. “The ETF as a cost-efficient vehicle can only win from that statement of intent.” Consolidated tapeLooking at potential innovations to boost ETF adoption in the UK and Europe, it comes as no surprise that one of the first things that comes to mind is a consolidated tape. A consolidated tape in Europe will enhance transparency and price discovery in the ETF market, simplifying investors’ access to real-time data across different venues. As a result, the improved visibility could lead to a boost in market liquidity and efficiency, which would be beneficial for all market participants. It could also lead to a boost in retail volumes if individual investors had access to a clearer view of the market, alongside more participation from institutions.“If you understand what the aggregate volume is and the true volume, it’s a real benefit to issuers trying to get people to invest in ETFs in the first place, because you realise just how liquid they are in aggregate. The absence of that information means you have to go looking for it – and many people don’t,” argues Barriball. “A consolidated tape would have huge benefits to ETF issuers trying to get more money into ETFs, improving people’s understanding of aggregate liquidity and also for making meaningful pre- and post-trade calculations.”Such benefits have already been observed in the US, which has had an established consolidated data source in place for years. This creates enhanced market transparency by providing real-time, consolidated trade and quote data across all major exchanges, helping improve price discovery, market efficiency, and investor confidence through the presentation of key market information.“In the US, where we do have a consolidated tape, that has allowed for the asset class to grow at a much bigger rate from a distribution standpoint when liquidity is easily accessible, easily visible and the execution quality that comes on the back of that is just better. It’s allowed many different firms to launch ETFs and grow AUM by going out to the investor community and selling those ETFs confidently,” says Brian Gilman, ETF & FI liquidity sales at Virtu Financial.“In the States, you’re already starting with this head start of investor confidence because of execution quality and the consolidated tape. From a distribution standpoint it’s an easier arena for sure.”Regulators within Europe and the UK appear to be geared towards ensuring greater transparency, which is manifesting itself through a consolidated tape. However, how this will materialise when considering ETFs specifically has not yet been finalised. Regardless, it’s expected that it will help with frustrations associated with fragmentation as discussed before. Lessons from the USWhen comparing these two regions, it’s worth considering what could be learned from the US and translated into European markets to help improve the ETF landscape. The US has a handful of very dominant exchanges, one dominant clearer and a key currency. However, such characteristics cannot directly be translated into a European context.“There is a lot around the US that simply are structural advantages of that market which we cannot emulate,” emphasises Gooch. “However, we’ve got the innovation that’s currently happening around retail and is appealing to the next generation of investors, which is great because that’s where there’s going to be this huge passing of wealth.”Moving forward, there are number of things that can be adopted from across the pond to help boost trading volumes within the UK and Europe. Namely, boosting active ETFs through the relaxation of regulations linked to disclosures, a promotion of retail engagement, and greater transparency in the form of a consolidated market data source, which will ultimately contribute to more liquidity. Can Europe eventually match or compete with the US when considering trading volumes for this specific asset class? Only time will tell – following in the US’ footsteps might not be such a bad idea.The post Lessons to be learned from the US to boost European ETF growth appeared first on The TRADE.

Hong Kong Exchange and Clearing (HKEX) has appointed Vicky Chan managing director, head of post-trade, effective 5 August.Chan returns to HKEX after previously serving for 15 years at the group in a range of teams including cash settlement, clearing operation and platform development.Previously in her career, Chan held roles at various companies including AIA Group, Goldman Sachs, UBS and PricewaterhouseCoopers.Most recently, Chan served as an advisor at several Canadian and international companies, leading projects in areas including blockchain solutions and the development of operations platforms and processes for corporates.As part of the new role, Chan will be responsible for leading the post-trade team to further elevate HKEX’s service offering across its clearing and settlement systems, the firm confirmed.Chan will report to Vanessa Lau, co-chief operating officer and group chief financial officer at HKEX.“As a seasoned operations executive with more than 30 years’ experience, and with her solid knowledge of our clearing and settlement functions, I know Vicky will hit the ground running,” said Lau.“Vicky joins at an exciting time as we continue to invest in modernising our operations capabilities – particularly with the announcement of our plans to develop the new Orion Derivatives Platform – and as we continue to take our trading and post trade operations to the next level.”Read more: Bloomberg and HKEX enhance Swap Connect solutions to facilitate global investments for IRS marketChan will succeed Hector Lau, head of clearing and depository, who has decided to part ways with the firm after seven years.“I would also like to take this opportunity to thank Hector for his contributions over the past seven years and wish him the very best in his next adventure,” added Lau.The post HKEX appoints new head of post-trade appeared first on The TRADE.

EuroCTP has unveiled the first members of its advisory committee – an independent body composed of leading industry participants aiming to exchange views and co-design ‘the best’ European consolidated tape. Through these discussions, all perspectives are set to be taken into account when it comes to defining how the tape will operate.Specifically, the committee members are: Christiane Baumgarten of Deutsche Börse; Emil Framnes of Norges Bank; Jessica Horsfall of Bloomberg; Bogumil Jezewski from XTB; Niels Lemmers from Flow Traders; Allianz’s Eric Boess; Petr Musil of Wood & Co.; Albert Menkveld of the Vrije Universiteit Amsterdam; and Martin Molko from Better Finance.More individuals are also expected to join in the coming period.Eglantine Desautel, chief executive of EuroCTP, explained: “A tape that is truly fit for purpose for Europe’s citizens, investors, and the market must be co-designed. EuroCTP’s Advisory Committee will strengthen our offering and is a testament to our commitment to develop the best consolidated tape for Europe.” Read more: Will the European equities tape tender process end up as a one-horse race?EuroCTP’s aims to foster transparency, fairness and access to market data for all investors by providing a fully consolidated view of the European equity and ETFs market, with participants including BME, Deutsche Boerse Group, Euronext, and Nasdaq.Earlier this month, EuroCTP was selected to join the European Commission’s ‘market data expert group’, set to advise the commission and ESMA on the quality and substance of market data and transmission protocols.The post EuroCTP unveils advisory committee members appeared first on The TRADE.

David Kirk is set to join Millennium, following almost three and a half years at Marble Bar Asset Management where he most recently served as a trader, The TRADE understands. Kirk joins the capital management firm with experience working as a trader on both the buy- and sell-side. Previously he worked as an equities and fixed income trader at James Hambro & Partners and before that as a high touch cash equities trader for Jefferies. Previously in his career he worked for the London Stock Exchange Group, including as a market risk analyst at LCH. Ninety One trader Tom Nickalls is set to leave the asset manager after 11 years to join Morgan Stanley. According to an update on social media, Nickalls will join the sell-side next month in an emerging markets credit role. He joined Ninety One in 2013 as a client operations analyst, moving into a portfolio implementation role in 2015 and taking up his current role as fixed income trader in 2018. He was recognised as a Rising Star of Trading and Execution at Leaders in Trading in 2021.Robert Whelan joined Citadel as equity trader following almost eight years at Pictet Asset Management. Whelan joined Pictet AM as an equity trader back in 2016. Prior to that, he worked at Morgan Stanley, initially joining as an electronic trading associate before going on to a role as equity sales trader. Whelan will act as an execution trader on behalf of the desk and his role is non-risk taking, The TRADE understands.Lara Jacobs was appointed vice president – equities electronic trading coverage at JP Morgan following six years with Liquidnet. She most recently served as head of international client trading, EMEA. Prior to this, she worked as a market structure and strategy analyst before moving onto a role as equity trader. Before her stint with Liquidnet, London-based Jacobs worked on the debt restructuring team for fixed income at M&G Investments.Outset Global appointed William Bradley managing director within its London office. Bradley brings considerable experience in the equity sales and trading space to the role, joining from Goldman Sachs where he served as vice president on the cross-asset sales desk in New York. Before joining Goldman Sachs, Bradley served as assistant vice president at Barclays on the equities liquid markets sales trading desk.Bill Spencer was appointed head of client solutions at MarketAxess following five years at UBS Asset Management, most recently as executive director, multi asset centralised trading. The role is newly created, with Spencer set to hold responsibility for buy-side experience within MarketAxess’ trading system. Whilst at UBS, he worked as a senior trader on the US fixed income desk, as well as working on the daily trading of cash rates, credit, ETFs, and municipal bonds. He also lent his expertise to the trading of credit derivatives and listed futures and options. New-York based Spencer also previously held ETF-related positions at: REX Shares, Gelber Group LLC, and Chicago Trading Company.Chris Robinson was appointed multi-asset trader at Liquidnet, joining from Louis Capital Markets where he worked for almost 13 years. He most recently served as a EMEA and US equity sales and execution trader. Prior to this he worked in equity derivatives for six and a half years, focused on Eurostoxx and sectoral indices. London-based Robinson has also previously served in a pension execution role at BDO UK LLP.The post People Moves Monday: Millennium, Morgan Stanley, Citadel and more… appeared first on The TRADE.

The AFM has granted crypto-asset exchange One Trading an Organised Trading Facility (OTF) license, making the trading venue the first regulated derivatives exchange in Europe accessible to retail clients.The approval makes the exchange the only perpetual futures trading venue within the EU and the first European cash-settled perpetuals platform.The move also establishes One Trading as a Mifid II trading venue. Joshua Barraclough, founder and chief executive of One Trading, said: “The long-term vision of the company is to enable all customer types to go long or short on any asset, use any asset as collateral, settle everything instantly, and perpetually roll contracts.”The exchange has confirmed that its plans are to onshore crypto derivatives as ‘traded on a trading venue’ instruments, set to enhance the regulatory framework and security for European customers. Moreover, One Trading is the only regulated exchange which integrates derivatives product creation and trading without the need for external clearing. Barraclough explained: “Our team has been dedicated to developing a platform that not only meets but exceeds the highest regulatory standards. With this licence, we are well positioned to introduce new regulated products and offer institutional-grade solutions to all customer types starting with BTC and ETH products where no onshore EU regulated venue currently exists.”The post One Trading receives AFM approval for European crypto derivatives trading appeared first on The TRADE.

Robert Whelan has joined Citadel as equity trader following almost eight years at Pictet Asset Management.Whelan joined Pictet AM as an equity trader back in 2016.Prior to that, he worked at Morgan Stanley, initially joining as an electronic trading associate before going on to a role as equity sales trader.Whelan will act as an execution trader on behalf of the desk and his role is non-risk taking, The TRADE understands.Read more: Citadel makes plans to replace departing international equities trading headCitadel had not responded to a request for comment at the time of publishing.The post Citadel appoints new equity trader appeared first on The TRADE.

The UK Financial Conduct Authority (FCA) has announced new rules around payment for research that re-introduce an optional element of rebundling.Released on Friday, the watchdog’s new rule introduces a new payment option for research and follows an industry consultation period that began in April.Under the new proposed payment option, the UK buy-side will be able to facilitate joint payments for third-party research and execution services, provided said firm meets requirements.Read more – FCA tables re-bundling to support more ‘flexible’ approach to researchToday’s proposals stay very close to the proposal put forward in the consultation paper but do also include some minor changes on the back of industry feedback. “They [FCA] have made changes in a few areas which definitely increase the likelihood of the buy-side being tempted to try to get these costs off their own P&Ls and potentially become more open to consuming new research,” Substantive Research’s Mike Carrodus tells The TRADE. “For example, many interpreted the proposed rules in the CP as requiring “strategy level budgets” which would have been a dealbreaker for some asset managers – this has been clarified and removed. Allocating a budget down to individual teams is common practice, but for some asset managers who consume and repackage research insights centrally this would not have been an option.”The FCA’s new rules also mean firms will not have to disclose their top providers in terms of payment amount – something highlighted by participants in the consultation. Instead, they will have to provide information around the breakdown of types of provider in the budget.  Also included in today’s new rules is a softening in how firms ensure separately identifiable research charges versus execution costs. The FCA is now only asking for firms to have arrangements in place that evidence how the separation is done more broadly. Despite some calling for it, the FCA has opted not to re-implement ‘full rebundling’.“Full bundling would lead to opacity of prices paid for research services, challenge the ability to compare prices paid across research providers, and not preserve competition in the separate markets for research and trade execution,” said the watchdog in its findings.“We believe that Mifid II introduced a level of discipline and transparency which exceeds that of fully bundled arrangements, and we want to retain the benefits that have been achieved.”The new payment option is not mandatory. From 1 August onwards, the FCA has suggested that firms must ensure they comply with requirements if they wish to use the new option.“The FCA has provided greater flexibility which will encourage many asset managers to now explore whether their client bases will accommodate a small additional cost to their annual fees in order to align with these changes,” added Carrodus. “However, the regulator is not apologising for Mifid II’s research rules, and has clearly ruled out any return to a fully bundled world. Now we have regulatory clarity, we will wait to see if a group of early adopter asset managers emerges to test the commercial dynamics of this transition!”Read more – In conversation with… Substantive Research’s Mike CarrodusResearch was unbundled as part of Mifid II in 2018 due to various industry concerns surrounding spending on duplicative or low-quality research.The FCA began consulting with the industry on potential rebundling options following the conclusion of HM Treasury’s Investment Research Review (IRR) which concluded that unbundling requirements had had “adverse impacts” on the provision of investment research in the UK and subsequently the UK economy.The IRR also concluded that unbundling requirements were potentially reducing UK asset managers’ access to global investment research and that this was putting them at a competitive disadvantage against international peers.European regulators have also been reassessing the payment for research landscape as of late following similar research into the impacts of Mifid II.Following its own findings, the Bloc is also introducing new legislative adjustments to the Mifid II unbundling rules, also in the form of a new payment option, to bundle research payments with execution.The post FCA to offer partly ‘rebundled’ research to support UK buy-side appeared first on The TRADE.

Euronext has experienced positive earnings in the second quarter of this year, attributed to strong performance of trading and post-trade activities as a result of dynamic trading environments.Stephane BoujnahThe trading venue saw Q2 2024 revenue and income increase 12.2% when compared to the same period last year, totalling €412.9 million.Overall trading revenue grew 20.7% to €142.7 million year-on-year, driven by increases in revenue across all trading segments compared to Q2 2023.Fixed income trading saw the most significant increase in revenues, up 40.7% year-on-year and totalling €35.6 million.Euronext’s fixed income trading volumes achieved record quarterly volumes at MTS, which the trading venue attributed to an economic environment favouring money markets, sustained sovereign issuance activities and supportive volatility. FX trading also showed promise, with a reported revenue of €7.9 million, up 28.7% -thanks to a favourable volatility environment, according to Euronext.Similarly, cash trading and derivatives trading both saw year-on-year revenue increase; up 13.8% and 6.6%, amounting to €74.2 million and €13.9 million, respectively.Euronext stated that cash trading revenues were supported by increased volatility, while derivatives trading reflected higher trading volumes for equity, index and commodity derivatives.Elsewhere, within Euronext’s post-trade business, total revenues were up 16.9% year-on-year, achieving €108.9 million.Contributing to this, clearing as well as custody and settlement figures were up 33.2% (€39.2 million) and 9.4% (€69.7 million), respectively.Euronext’s Q2 2024 results follow a strong Q1 for the trading venue where trading revenues grew 7.4% year-on-year, driven by strong results within its fixed income and power trading segments.Read more: Euronext sees Q1 trading venues rise despite declines in cash and derivatives“Strong organic growth in our non-volume related businesses, combined with dynamic trading activities across asset classes drove the Group’s revenue growth to +12.2%,” said Stéphane Boujnah, chief executive and chair of the managing board at Euronext.The post Positive revenues from Euronext trading segments sees overall revenue rise year-on-year appeared first on The TRADE.

When it comes to investing in electronic trading talent, what are the key things you look out for? As BTIG electronic trading thinks about the future, we are prioritising developing junior talent with a diverse skill set and background including critical thinking, resourcefulness, and a strong work ethic. A good indicator for critical thinking is a robust education in science and mathematics. The latter teaches discipline, reasoning, and completeness. Moreover, a foundational grasp of statistics is also important as many of our methodologies rely on it to uncover truths through sampling and identify biases. Resourcefulness is often highly correlated with programming skills. People who love programming are usually very curious and have developed good engineering skills – they learn how to make things work. Solid programmers understand core principles like organisation, abstraction, and modularity which are also important attributes for traders. The best traders approach their work systematically – they focus on the process without getting distracted by idiosyncrasies in the results.   BTIG is a firm that prizes innovation. We look for talent that can ace new technologies and tackle problems with agility, precision, foresight, and creativity.  When it comes to sourcing better liquidity, how important is human-to-human interaction today? The sweet spot of high-touch trading is finding a natural cross, pairing up a client who wants to sell a large block of stock with another client who wants to buy it. That’s a win all around – both clients avoid the friction of trading in the market and save the associated costs. Trust, discretion and personal relationships are indispensable in such a transaction, so human traders will always do that better than any computer. If you are trying to move a large block, it makes sense to try your high-touch traders first. There are also occasions where a human trader is needed to navigate complex trades with multiple legs, involving derivatives, or with highly specialised requirements. However, there are instances where a trader is not able to find a contra. One alternative is for the trader to execute the order principally, where the broker takes the other side of the trade. This entails risk of course, and the price will include a premium to compensate for that risk. This is fair, but it’s not clear that the result is better than an algorithmic execution.  The high-touch handling also incurs a higher commission than an algorithm (low-touch). The remaining choice for the trader is to execute the order on an agency basis. For this, the trader will almost surely use an algorithm as a human cannot check all the trading venues as quickly and comprehensively as a computer can.  The trader may add value to that execution by making profitable decisions around when to execute the order and how aggressively. High-level decisions like those are best left to a human trader. They are, of course, very difficult to get right. Lower-level execution decisions – venue selection, order types, execution rate, tactics – are best left to the algorithm to determine. These decisions, which involve complex tradeoffs that often change over the lifetime of the order, are the sweet spot for algorithms. In this age of AI, that should not be a surprise and it seems to be gaining acceptance on the buyside with its recent trend toward increased automation and electronic execution. Given the distinct advantages of low- and high-touch trading, some clients would like to leverage both. At BTIG, we offer each client the option of allowing the high-touch trader to see its algorithm orders, in case the trader is able to find a contra. For these clients it is the best of both worlds—a high-quality algorithmic execution without forgoing the possibility of a natural cross. On the technology side, where is the focus for BTIG electronic trading at the moment? We are investing heavily in our technology. Our primary focus is on optimising algorithms for performance.  BTIG’s algorithms have semi-autonomous co-located modules for executing child orders. These constitute the heart of our ability to optimise at the lowest tactical level. For heavy-duty number crunching and analytics, we have a special system component that leverages the Julia programming language, which was created specifically for such tasks. For our front office, we have built a data warehouse system that supports analysis, reporting, and research. This system comprises best-in-class tools for data storage, manipulation, and visualisation. Additionally, we have invested in customised tools for real-time monitoring and control. The post Fireside Friday with… BTIG’s Stephen Ponzio appeared first on The TRADE.