As many of the industry stakeholders get to grips with understanding the demands of MiFID II/MiFIR, there is now a realisation of how the market will be affected. The more advanced firms are turning their attention to how they will want to compete in the new environment and what they will need to do in order stand out in the new world.
Certainly, for those of us trading in the Fixed Income markets, one thing that is becoming perfectly clear is that, under the new regime in 2018, we are going to change from an opaque trading environment with indicative pricing and a partial record of trades to a transparent view of a smattering of real executable prices and the (almost) complete record of trades done published for the entire market to see.
MiFID II/MiFIR’s transparency regime will be layered on top of an already changing market place, with new initiatives designed to improve both price and more importantly in the Fixed Income markets, liquidity discovery as well: Algomi and Neptune are good examples of how inventory can be implicitly or explicitly communicated.
It doesn’t stop there. Many firms are starting to realise that there are hidden gems in their own data if they had the means to capture, analyse and interpret it. Innovative firms on both the buy and sell side are emerging as data centric trading desks where a comprehensive picture of the market landscape and behaviour enable specific data points to guide the traders’ workflows and decision making processes.
So rather than struggle with the lack of data today, the challenge will soon be how to cope with the sheer volume of new data and to turn it into something useful.
Just last week, at the Fixed Income Leaders’ Summit, I sat on a panel discussing how to improve pre-trade analytics with better access to market data. It was clear that many were concerned about the volume and quality of data and some of the vendors there were looking to help buy-side firms analyse data by providing governance solutions to provide better quality or benchmark data… all very useful! But taking away some of the “noise” before it reaches the investment firm may actually strip out some of the key data points that might be useful
Our point is this: The firms that build a data acquisition strategy that looks to use all the different types of data sources (e.g. indicative pricing, evaluated pricing, MiFID transparency data – Pre & Post-Trade, axes & IOIs and benchmarks) AND designs its own aggregation, filtering and analysis approaches, is going to be the firm that has the competitive advantage.
The challenge doesn’t stop just there: the data needs to be presented to the trader as well in concise, informative and useable ways so integration with the desktop needs to carefully considered too. Real estate on the Trader desktop is precious, so data visualisation tools to summarise and navigate “big data” together with contextual data integrated directly into the EMS/OMS will be powerful tools in the trader’s armoury .
And as I mentioned before, some of the assets within both buy and sell-side firms are added gems. It still surprises me to see firms use TCA as purely a box-ticking, compliance exercise and not recognise the opportunities to use the same information as powerful front office tools.
This is where Sycamore Financial Technology can help. Talk to us about how the use of data can be improved to compete in the post-MiFID ii environment.