The Electronic Trading Scene in Eastern Europe
The Present and Future
Today it is all so different with most of the technological development and deployment covered and even the vast majority of exchanges are user friendly. We worked in close co-operation with the stock exchanges and we have managed to bring latency down to milliseconds and tenths of a millisecond with the capacity of processed orders now in the hundreds of thousands. So, stock algorithmic strategies can finally be used, avoiding any information leakage to executing brokers. Anyone not willing to disclose his order can rely on his/her own machine only.
There remains a lot to be improved and some markets are still in the early stages, even if integration plans for a common platform are in place. Although stock algorithms do work and perform quite well if properly implemented, the next challenge is to develop ones that would actually understand the underlying market and be able to outperform their stock competition. Most of the work to be done is in trading cost optimization, while using advanced and less common order types that could be cheaper to execute.
Work also needs to be done regarding clearing. We would ideally prefer to have clearing centralized through one European house, but in both Western and Eastern Europe that is still sometime away. We are seeing some central counterparties looking at penetrating the region and it will not be long until they provide a “full service” similar to that seen in developed markets.
All of these changes will bring a huge benefit to the end-users. The possibilities to earn money are many, and this is being realized by more and more people. The combination of volatile markets and the FX component, is inviting speculative intra-day traders, as well as long-term investors. Multiple listings, combined with local inefficiencies also offer greater arbitrage opportunities.
The outlook in Eastern Europe still looks very different on a country by country basis. However, at least in theory, we are hoping that all countries will migrate to a single currency one day and this will yield easier and cheaper access to our electronic world.