The impact of regulation
- ASIC is being widely praised as a responsive and accessible regulator
- SFC regulation from Hong Kong is still causing concern in Australia
- OTC Derivatives clearing regulation still under focus
- Innovation may have suffered; large amount of resources have been primarily focused on regulations and the ways to address it in last 12 months
- Australia’s superannuation funds’ size will outgrow the opportunities available in the domestic markets
- Speed of change is one of the biggest challenges for regulators in markets and the pace of change in regulation will continue
- Buy-side pleased by the amount the regulators and exchanges have engaged with them
- The onus is higher on institutional clients to understand the type of flow they’re interacting with
- Exchanges and regulators don’t seem to cooperate as much with each other as the buy-side would like to see
The impact of changing markets
- Changing nature of algorithmic trading as benchmarks evolve and market structure continues to change
- The ongoing impact of dark trading – competition between brokers and exchanges is a key area, and regulating to ensure dark liquidity is fair
- Standardisation of OTC derivatives markets continues to evolve
- More emphasis on the buy-side for being aware of algo capabilities and to be aware of how they are interacting with the market
- Many concerns around HFT had been overstated; no evidence of harmfulness to the market
- If you want to participate in size, you have to take place in the closing auction
- Bid/offer volume has collapsed in the last few months, but volumes remain stable
- Australian banks have been slow to embrace E-FX
- Dark pools have changed their stripes as soon as people started reporting volumes; HFT, retail, institutional, etc. then the average execution size dropped dramatically
- All standardized OTC derivative contracts should be:
– Traded on exchanges and electronic trading platforms
– Cleared through central counterparties
- The buy-side is collaborating more and more because the algorithms are not designed to get chunky liquidity done; Liquidnet has done a good job; it’s driven by liquidity and block trading rather than algorithms
