The launch of EWIN represents a significant technological advancement for the exchange group. Developed in collaboration with McKay Brothers, the independent microwave network provider, and leveraging the faster transmission speeds of microwave technology, EWIN offers a direct and highly efficient communication pathway, reducing the time required to send orders from London Equinix LD4 to Euronext’s Optiq matching engine in Bergamo IT3 to under four milliseconds, around half the latency of existing fibre links. EWIN is also designed to ensure seamless and efficient order handling, offering 100% resilience, thanks to its full fibre back-up.

Major financial firms Goldman Sachs and Morgan Stanley have already adopted the new technology.

“After establishing our new IT3 data centre in Bergamo, near Milan, we realised from a few large tier-one brokers that they were interested in exploring the performance benefits of microwave technologies,” explains Nicolas Rivard, Global Head of Cash Equity and Data Services at Euronext, in conversation with TradingTech Insight. “Although microwave networks have been around for some time and are relatively established for certain participants, it is a costly and complex technology with a high barrier to entry. Typically, you cannot buy a small amount of bandwidth, which makes the solution expensive. Additionally, there is a technical aspect because you need to develop IT capabilities to route your orders through the microwave. By default, if you buy bandwidth from a microwave provider, it’s not plug-and-play; you need to develop your protocol into the technology.”

Euronext has worked closely with McKay Brothers to address these challenges, says Rivard. “To lower the barrier to entry in terms of cost, we have purchased a bulk of bandwidth and are offering it to clients in slices, starting from 1 Mbps upwards. This means that clients can try it for six months at 1 Mbps for example, and then scale up as needed, rather than committing to a costly solution from the outset. And to address the technical complexities, the solution we’ve developed together with McKay Brothers allows clients to use the microwave link as if it were any other standard connectivity, making it very plug-and-play.”

The microwave route, provided by McKay Brothers, has been operational for two years, since Euronext went live on IT3 in Bergamo in June 2022. But this is the first time McKay’s technology has been used to underpin an exchange’s own solution.

“The development and design of this service has been quite new compared to our usual offerings,” says Stéphane Tyc, Co-Founder of McKay Brothers. “Typically, when a client purchases microwave bandwidth, they need to undertake significant internal development to integrate with the network. However, Euronext’s end clients don’t need to perform any additional integration work; they simply need to set up logical access to Euronext’s matching engine, a process they are already familiar with. And then they can benefit from a fast network that competes with the microwave products used by market makers. The important thing here is that firms who want to use this link can now just go direct to the exchange to access it, without having to put in place dedicated technology.”

Given that microwave networks are susceptible to weather and other atmospheric conditions, how does Euronext ensure resiliency? “We have two routes, one microwave and one fibre, and they work seamlessly together,” says Rivard. “We have ensured, with McKay and our internal IT team, that every order gets sent twice, once via microwave and once via fibre. The first order that reaches the IT3 datacentre is processed, and the other is blocked by the system. This guarantees 100% redundancy, increasing the overall availability of the service.”

The link is now operational, with Morgan Stanley and Goldman Sachs having gone live on day one, 10th July. “The technology has delivered on its promise so far, with latency below four milliseconds and very stable performance,” says Rivard. “Clients are currently only sending specific order types via EWIN to improve certain latency sensitive execution strategies, such as IOC (immediate or cancel) and other aggressive orders. The number of packets going through the microwave is what we expected. And of course, this is just the beginning.”

Both Euronext and McKay Brothers talk of this new service as a way of further democratising the market, bridging the gap between prop trading firms/market makers and banks/brokers. So will it be rolled out to other European centres?

“First, we need to make sure it works from London, to prove that it has an impact and is beneficial for our clients. That will take a few months to confirm,” says Rivard. “But we already have clients interested in having the same service from other locations and asset classes in Europe.”

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“It’s crucial for people to understand what we’re measuring, as context is important with such low numbers,” Olivier Cousin, Director of FGPA Solutions at Exegy, tells TradingTech Insight. “The STAC T0 report measures the latency of a system ingesting UDP and sending TCP frames. This covers the typical market data tick-to-order flow. The main value of this report lies in what is called ‘actionable latency,’ or reaction time. When a UDP frame contains a specific field, such as a price, which triggers an action, the clock starts only when that specific field (i.e. a price) enters the FPGA, not at the beginning of the UDP frame. We measure the time from this point until the TCP order exits the FPGA. With this benchmark, we are showcasing that the latency induced by the handling of 10Gbs Ethernet went from 24.2ns to 13.9ns with the new AMD card, which includes hardened MAC/PCS.”

Exegy claims to be the only capital markets technology provider offering a comprehensive FPGA development framework specifically tailored for ultra-low latency financial applications. Exegy’s nxFramework standardises the development of FPGA-based trading platforms, allowing developers to focus on optimising their core business logic. Exegy’s offering includes reference designs, expertise, and support, facilitating a faster time-to-production for firms developing ultra-low latency trading systems.

The production-proven FPGA development framework provides clients with reference designs to manage a wide range of applications, including pre-trade risk check gateways and tick-to-trade electronic trading platforms. The collaboration with AMD combines innovative hardware with production-tested applications, delivering groundbreaking performance through an off-the-shelf solution that ensures the lowest possible latency.

“There are two main innovations that contribute to this achievement,” says Cousin. “Typically, within an FPGA, there are resources that handle the 10 Gig connectivity. AMD’s innovation is their AMD Alveo UL3524 accelerator card, which involves hard-wiring the logic that deals with the 10 Gig protocol into the ASIC, rather the FPGA, which still has to manage all the network layers above Ethernet. This innovation is a contributing factor to the 49% latency reduction.”

He continues: “Exegy’s innovation lies in creating a UDP stack, TCP stack, and logic that processes the data and sends orders, all with zero latency in the FPGA. There are no clock cycles used for this critical path, achieving the absolute minimum latency as the FPGA processes the data in less than a clock cycle. Our nxFramework includes a full UDP stack for examining UDP traffic and a full TCP stack that supports the complete TCP protocol. For instance, if the exchange requests a TCP fragment to be resent, the TCP stack will resend it. The system is entirely self-contained and operates exclusively in hardware.”

The significant reduction in tick-to-trade execution latency underscores the success of Exegy’s partnership with AMD, which began last year, and demonstrates the company’s ongoing commitment to minimising latency. The collaboration leverages hardware acceleration, FPGA flexibility, and low-latency networking to ensure high performance and determinism. The Exegy team achieved precise testing measurements, reducing jitter to 200 picoseconds—up to 10 times lower than previous benchmarks—thus ensuring the accuracy of the STAC-T0 results. Existing Exegy customers, as part of their subscription, received updates to the IP cores that enabled this latency record.

“The value we demonstrate with this report is that the nxFramework highlights the lowest achievable latency with the FPGA technology currently available in the industry, and we assist our customers in attaining this performance,” says Cousin. “With the addition of support for this AMD card, customers can migrate their code with minimal development time. Customers using our nxFramework solution can purchase this card and migrate their design to systematically achieve the lowest possible latency.”

STAC benchmarks are the industry standard for evaluating solutions that enable high-speed analytics on time-series tick data. The STAC-T0 benchmark, which uses industry-standard hardware, making it fully transparent and reproducible, specifically assesses tick-to-trade network-I/O latency. The previous lowest benchmark speed of 24.2 nanoseconds was also achieved using AMD accelerators.

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The awards were presented during a celebratory drinks reception after the close of A-Team Group’s TradingTech Briefing in New York City on 6 June 2024.

This year’s awards included more than 40 categories ranging from Best Matching Engine for Cryptocurrency Trading Venues to Best High Performance Network Services, Best Equities Trading Solution, Best Machine-Readable News Supplier, Best AI Solution for Trading, Best Trade Reporting Solution, Best Overall Market Data Provider, Best Specialist Market Data Consultancy and more.

An editor’s recognition award for USA Trading Technology Industry Professional of the Year was presented to Steve Schiff, Vice President, Index Technology at Nasdaq.

Andrew Delaney, President and Chief Content Officer at A-Team Group, said: “Congratulations to the award winners and thank you to all the vendors that entered A-Team Group’s TradingTech Insight Awards USA 2024, to our TradingTech Insight community that voted for its preferred solutions, and to our independent, expert advisory board that worked in collaboration with our editorial team to select this year’s winners.”

A complete list of winners and their solutions can be found in the TradingTech Insight Awards – USA 2024 report.

You can find out more about A-Team Group awards, which also cover RegTech, Data Management and ESG here.

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The routes in Seoul terminate at the KINX Gasan data centre, where Avelacom has established its point-of-presence (PoP). This location was selected to provide direct access to the AWS Northeast region and South Korea’s largest cloud-based cryptocurrency exchanges.

“These are pure crypto trading routes,” Aleksey Larichev, CEO of Avelacom, tells TradingTech Insight. “Korean crypto exchanges are becoming more popular despite limitations on the KYC side. Traders are seeking good liquidity and expanding their business to new venues. Low latency routes to Korea have been among popular inquiries, and now we can support the overseas trading community with the connectivity services they require.”

The new routes complement Avelacom’s recently launched proprietary low latency Seoul-Tokyo route. The network now fully interconnects Seoul, Tokyo, Hong Kong, and Singapore, facilitating direct connectivity between any two points. Additionally, these routes connect to over 100 global Avelacom PoPs, offering direct access to both traditional exchanges globally and cloud-based crypto and digital exchanges. This extensive connectivity supports time-sensitive trading strategies, such as arbitrage and market-making algorithms, and enables the capture of real-time market data feeds.

“Essentially, in the realm of prop trading firms, we need to outpace other providers, including public clouds, in terms of speed. We identified an opportunity to build faster fiber routes. While cryptocurrency was the driving force, the capacity on these routes will be utilised for traditional trading as well,” says Larichev.

He continues: “Our network’s extensive coverage enables us to provide our clients with a one-stop-shop in terms of geographical reach. For instance, if a customer uses our services in Australia, Israel, or South Africa and they are satisfied with the performance, support, and services we deliver, as they expand into new markets, whether cryptocurrency or traditional, they tend to approach us, inquiring if we can provide services at their new locations. In fact, more than 80% of our clients tend to further utilize our offerings across diverse geographical regions and product/instrument spectrums.”

Much of the demand for Avelacom’s services – for both crypto and traditional markets – comes from proprietary trading firms, says Larichev. “Prop shops tend to gravitate towards areas of high volatility, and that goes in waves across both traditional and cryptocurrency markets. For instance, a couple of years ago, there was a significant shift from traditional markets towards cryptocurrencies. However, during the past year, the cryptocurrency market has experienced a slowdown. Consequently, we are now witnessing a number of clients who previously traded exclusively in cryptocurrencies transitioning towards traditional exchanges. The trend oscillates back and forth.”

Avelacom’s new routes are now operational with guaranteed microsecond-level latencies and up to 99.9% network uptime.

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This will be the subject of A-Team Group’s upcoming webinar on 20th May 2024, ‘Trade the Middle East & North Africa: Connectivity, Data Systems & Processes’, featuring Lee Anthony Hodgkinson, Chief Strategy Officer of Tadawul Group, the parent company of Saudi Exchange, and Rami El-Dokany, Secretary General of the Arab Federation of Capital Markets (AFCM).

Saudi IPOs – bucking the international trend

From the perspective of the international capital markets, it could be argued that the MENA region has long been overlooked. However, recent political restructuring, especially in Saudi Arabia, has significantly elevated its economic profile. In 2023, Saudi Arabia’s stock market ranked twelfth globally in terms of market capitalisation, and is on the rise. The GCC (Gulf Cooperation Council) countries, particularly Saudi Arabia and the United Arab Emirates, have shifted from being net exporters to net importers of capital. And the listing of Saudi Aramco – the world’s leading hydrocarbon producer – on the Saudi Exchange in December 2019, led to significant investments in trading infrastructure and regulatory frameworks in the region, in order to meet global standards.

One of the unusual aspects of the Saudi Arabian stock market is its increasing number of listings, which contrasts with the global trend of declining IPOs. “CEOs of most exchanges in the world often complain about the lack of IPOs, that IPOs are declining. But in Saudi, it’s the other way around – private equity people are complaining that everyone wants to go public!” comments Rami El-Dokany, in conversation with TradingTech Insight. “What’s interesting is how Saudi Arabia created this culture, how they’ve increased their investor base, how they want to have a local investor in every household. This strategy has definitely created a strong, liquid market, supported by a strong IPO pipeline.”

With over 40 IPOs on the Saudi Exchange (Tadawul) last year and another 50+ anticipated in 2024, the region clearly offers unique investment opportunities. “The comprehensive infrastructure, robust clearing environments, and solid regulatory frameworks make it a particularly attractive market for international firms when compared to other regions,” says El-Dokany.

Attracting local liquidity

The growing number of listings on GCC-based venues, and the fact that exchanges are now using advanced matching and clearing technologies from the likes of NASDAQ and LSEG, is helping them gain significant momentum. Even outside the GCC, markets like Egypt and Morocco are vibrant, with Egypt – historically the leading exchange in the region – the earliest to adopt a NASDAQ engine in the early 2000s.

“From a macroeconomic perspective, some countries in the region – Egypt in particular – have suffered from unprecedented inflation rates, which has driven local liquidity to all-time highs,” points out El-Dokany. “Historically on the Egyptian market, investors would either put money into time deposits in banks, or would buy and flip real estate.”

AFCM has done much work with local institutions, FinTech companies and new online brokerages to attract local liquidity and increase the number of retail investors to the market, including making market access simpler for younger investors eager to learn about trading, says El-Dokany. “Moreover, we identified and addressed technological bottlenecks, which has been critical,” he says. “For instance, last year, we implemented changes that more than doubled the number of retail investors from 150,000 to almost 360,000. These technological enhancements have significantly improved market accessibility and participation.”

Asset class dynamics

Equities are the most heavily traded asset class in the region, with a diverse liquidity landscape. Local liquidity, sourced from retail and local institutional investors, is predominant, with International interest from global hedge funds and asset managers typically concentrated around new listings. “We’ve observed a significant involvement from regional pension schemes, insurance companies, and even postal services, which have only recently begun investing in equities,” says El-Dokany. “Markets such as Egypt and Saudi Arabia are experiencing growth in retail liquidity, each for different reasons. International investors tend to focus more on listings and IPOs, which sustains high levels of market activity.”

In terms of fixed income, sovereign bonds are more heavily traded than corporate bonds, with good reason, suggests El-Dokany. “Corporate bonds are lagging behind, because accessing bank credit is much easier than issuing a corporate bond with all the associated regulations, even if it’s cheaper by a few basis points. So corporations in the region would prefer to go through a bank rather than issuing bonds.”

ETFs are also increasingly traded, with the Abu Dhabi Securities Exchange (ADX) acting as the major regional hub. The value of ETF trading on ADX rose by over 364.2% in the year to October 2023, reinforcing the exchange’s leading position. As for other asset classes, MENA boasts robust infrastructure for its exchange-traded derivatives and commodities markets, with the Dubai Gold and Commodities Exchange being the largest. FX activities are predominantly bank-driven.

Capitalising on the data

Compared to major global markets like the London Stock Exchange Group (LSEG), where data sales contribute significantly to revenue, data is less commercially utilised in the MENA region, according to El-Dokany. “Management tends to be more focused on increasing trading volumes, and they are under-utilising the power of data,” he says. “This is where AFCM is helping out with capacity building programs, webinars, training, bringing in the data vendors to explain to the exchanges the value that their data holds. And we’re seeing many markets making good steps and investing into the data space. However, we haven’t yet seen a synchronised plan to understand what they actually want to do with the data, where they’re heading.”

From a data residency perspective, stock markets and their associated data centres are typically viewed as public utilities in the region, but that is changing, says El-Dokany. “There’s a prevailing belief that data should remain within national borders. Consequently, data centres are highly valued,” he says, adding that AFCM has been working towards a model where exchanges are not required to own their own data centre within the country’s borders. “We’ve been facilitating discussions with Google in Saudi Arabia and Microsoft in Egypt, to establish local cloud services,” he says, adding that these initiatives also align with exchanges reducing their carbon footprint.

To learn more about the growing opportunities that the MENA markets offer, and the data and technology capabilities required to succeed in this exciting region, register for the upcoming webinar, Trade the Middle East & North Africa: Connectivity, Data Systems & Processes.

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Many Middle Eastern countries have government-led ‘Strategic Visions’ to build the strength of their countries and to diversify from pure natural resources as the primary driver of their economies. One key goal for the region is to grow financial markets, both through attracting foreign investment and widening retail interest in the local markets, while supporting private issuance.

Governments also aim to diversify the product offering, with the goal of the GCC becoming a hub for asset management, plans for developing derivatives markets, growth in the bond markets through the introduction of Sharia-friendly Sukuk bonds. The ambition is palpable.

Technology lies at the heart of these plans, with a spotlight on issues of capacity, regulatory frameworks, digitalisation and connectivity, leveraging AI, and settlements.

At the AFCM conference, there was representation from many of the central banks and regulatory bodies at the event, who appear to be taking proactive approaches to designing regulations in order to support the growth of financial markets. Still in the relatively early phase of this transformational journey, the region is keen to leverage best practices and frameworks from across other regions. Qatar, for example, is adopting English Common Law for the rules and regulations around operating a company in the country so that it is easy for foreign companies to do business there, while others are examining legal environments for structuring financial vehicles from countries such as Luxembourg, Jersey or the Cayman Islands.

The importance of high-quality data to support these growth plans is recognised, particularly as attention is turning to the potential and pitfalls of AI. The opportunity for packaging exchange data was also noted, for example, by the Botswana Stock Exchange where Thapelo Tsheole, the CEO, said that data sales both drives wider interest in trading on their exchange, but has also transformed into a ‘significant revenue stream’ for the exchange. He said this is the case for many exchanges in Africa and that the digitalisation of trading systems enables them to segment and tier the data to suit various client needs.

ESG was also highlighted as an important initiative by many of the central banks and exchanges, again driven by the desire to be appealing to foreign investors seeking such standards. A panel delving into the ISSB standard looked at how proactive exchanges, such as the Amman Stock Exchange (ASE), have been in terms of putting enforcement rules in place for their listed companies to issue sustainability reports, and has conducted a wide programme of education among its listed companies to help them achieve this goal. This is also an important issue for African exchanges. Indeed, four exchanges – the Amman Stock Exchange, Bahrain Bourse, Muscat Stock Exchange and Palestine Stock Exchange – signed MOU’s in a ceremony with the AFCM to join the Net Zero Exchange Group, showing their commitment to sustainability.

The topic of institutional digital assets was also discussed in a panel. Similar to other regions, the challenge lies in the lack of regulatory frameworks as well as the volatility which prevents institutions from being active. That said, the United Arab Emirates (UAE) has been leading the way from a regulatory perspective with both Dubai and Abu Dhabi establishing dedicated regulatory institutions for digital assets, in an effort to drive innovation and have an edge in building an institutional market in digital assets.

Pan Regional DMA

Possibly the most interesting initiatives discussed were efforts in the Middle East and separately, Africa, to create a pan-regional single point of access across multiple regional exchanges.

Following the example set in China, the Tabadul initiative has a vision to connect all the exchanges in the Middle East. It was launched by Abu Dhabi Securities Exchange and joined by the Bahrain Bourse to execute its first trade back in July 2022, and has since grown to have 11 trading members, offering access to 240 listed firms, with a marketplace of 3.8 million investors. New members onboard or coming on board soon including the Astana International Exchange, the Cairo and Alexandria Stock Exchange, and the Tajikistan and Uzbekistan exchanges.

The vision for Tabadul was driven by the ambitious CEO Saker Asllan, who, when he worked at Morgan Stanley in London overheard a larger investor keen to invest in two instruments but realising the cost of the operation was prohibitive and instead shifted his attention to a more accessible option. As such, Tabadul offers single Direct Market Access (DMA), which reduces the cost and friction of cross-border trading and is highly attractive to market makers, which opens up the market to foreign investment, drives growth and capital flows into local businesses. Tabadul has secured the support of local regulators to help support this initiative, and allows each exchange to maintain its own rules and does not charge commission.

Similarly, the African Exchanges Linkage Project (AELP), borne out of the African Securities Exchanges Association (ASEA), aims to bring exchanges together to increase liquidity in local markets through harmonisation of infrastructure, as well as making market data available to increase awareness of its markets amongst global investors. It currently has 26 members including exchanges and regulators. The longer-term vision, according to project manager Lina Tonui, is the “dream of a Pan African Stock Exchange”. There was even suggestion of exploring the link up between Tabadul and AELP at the conference.

Tracking future trading technology developments

What will be interesting is to track how the market develops and adopts trading technology services to help them advance the region’s capital markets. With a view toward helping share knowledge from experienced practitioners and vendors from across Europe and the US into the Middle East, A-Team is thrilled to be partnering with AFCM to bring a TradingTech Summit MENA to Dubai. We’re aiming for a November event to deliver a deeper dive into the technology for capital markets across the MENA region. If you’re interested in taking part from a speaking, sponsorship or delegate point of view, please do get in touch with us at barry@a-teamgroup.com.

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The strategic partnership aims to enhance interoperability between the traditional finance (TradFi) world of banks and financial institutions and the decentralised finance (DeFi) world of blockchain and tokenised assets, which can include carbon credits, renewable energy products, and tangible assets like real estate and collectibles. By leveraging Rapid Addition’s network, Chainlink’s CCIP and the FIX messaging protocol, the collaboration seeks to capitalise on emerging blockchain platforms, while ensuring compliance with global financial regulations.

“Working with Chainlink on this new capability means our clients will benefit from seamless and secure integration into blockchain-based platforms without the need to duplicate systems and controls,” commented Mike Powell, CEO of Rapid Addition. “Our users require access to liquidity and post-trade services regardless of the underlying technology. As a result of this collaboration with Chainlink, financial institutions will be able to leverage their existing trading infrastructure to enter the new era of digital assets.”

The development, which aligns with the initial recommendations from FIX’s digital assets and technology committee, is a response to the growing intersection of on-chain and off-chain financial services, with a focus on improving liquidity and efficiency in centralised markets.

Vince Turcotte, Business Development Lead, Asia Pacific for Chainlink Labs, commented: “The key to institutional adoption of these new asset types lies in the effective interoperability between traditional systems and blockchain technology, which is why we’re so excited to announce this partnership between Rapid Addition and Chainlink. Combining Chainlink CCIP with Rapid Addition’s FIX platform lowers the technical barriers of entry to new trading venues, buy-side participants, and brokers for digital assets.”

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The awards were presented during a celebratory drinks reception at the end of A-Team Group’s TradingTech Summit London on 29 February 2024.

This year’s awards included more than 40 categories ranging from Best Machine-Readable News Supplier to Best Overall Market Data Provider, Best Specialist Trading Technology Consultancy, Best Cloud-Based Market Data Delivery Solution, Best eComms Surveillance Solution, Best Desktop Environment for Interoperability, Best FIX Engine Provider, Best High Performance Network Services, and more.

An editor’s recognition award for TradingTech Industry Professional of the Year was presented to Will Winzor Saile, Partner, Execution Analytics & Architecture, at Redburn Atlantic.

Andrew Delaney, President and Chief Content Officer at A-Team Group, said: “Congratulations to the award winners and thank you to all the vendors that entered A-Team Group’s TradingTech Insight Awards Europe 2024, to our TradingTech Insight community that voted for its preferred solutions, and to our independent, expert advisory board that worked in collaboration with our editorial team to select this year’s winners.”

A complete list of winners and their solutions can be found in the TradingTech Insight Awards Europe 2024.

You can find out more about A-Team Group awards, which also cover RegTech, Data Management and ESG here.

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This highly anticipated gathering will bring together innovators, investors, and thought leaders to examine current trends, challenges, and opportunities in the rapidly evolving trading technology sector. With a packed schedule of keynote speeches, panel discussions, and networking opportunities, the TradingTech Summit London is set to be a compelling and insightful event for anyone interested in the advancements of trading technology.

Following Natan’s chat, there will be an industry leaders panel reviewing regulatory, market structure and technology changes across the trading landscape, featuring senior executives from UBS, ING, HSBC, LSEG and Quilter. Topics under discussion will include: how the industry is responding to regulatory and market structure challenges; what firms can do to optimise their spend and usage of market data; how to get the best ROI on technology investments; best practices around meeting ESG obligations; and the use of generative AI on the trading desk.

A short keynote will take delegates up to morning break, where they will be able to meet and network with speakers and sponsors, and explore the various solutions on display in the exhibition area.

The next panel, ‘Best practice approaches for modernising the trading technology stack’, moderated by A-Team’s Andrew Delaney, will feature spokespeople from Citi, Man Group, UBS and FINOS. In what is expected to be a wide-ranging discussion, panelists will explore the crucial choices that firms face between buying, building, or combining both for trading technology solutions, and strategies for decommissioning legacy systems and running legacy alongside new tech.

Following a short demo of FINOS Vuu, which deals with the complex task of viewporting, throttling and transmitting data, Gary Harmson of Google deliver a keynote speech on managing the cost of cloud. This will be followed by the final panel session of the morning, where Reena Raichura of Finergise will moderate a discussion on interoperability, low code and no code trading platforms and tools. Panellists from Redburn Atlantic, Ninety One and Velox will explore the drivers and business benefits of adopting low code trading tools and platforms – as well as the risks and challenges – and the key success factors for building agile and interoperable trading platforms.

After lunch, the afternoon sessions will commence with a panel on disruptive innovation in market data. “If I am a generator of market data, how can I understand the value/potential of my business if I don’t understand the value of the market data?” asks panel moderator and Industry Advisor Michelle Ansell. “This is more and more pertinent as data is the foundation of many businesses these days.” Panellists from Fidelity International, Investec Bank, BCC Group and Fenics Market Data will discuss how firms can keep their market data costs in check and how the industry might need to move to new market data licensing models. Industry collaboration will also be on the agenda. “The potential benefits from collaboration are undeniable,” says Jonathan Syrén, Head of New Product Development at Fenics Market Data, who will be on the panel. “A shift towards a more open ecosystem could drive significant change, democratising access, fostering innovation, and creating a more resilient and informed market. Data vendors that embrace collaboration stand to thrive in this new landscape. The future is not about guarding data jealously; it is about harnessing its collective power to shape a more transparent and efficient market for all.”

The next panel session, ‘The promise and potential of big data AI and Machine Learning in trading research and analytics’, will look at how firms are using alternative data sources, AI and machine learning techniques for data insights, and how firms can successfully integrate AI and ML tools into trading workflows. “The use of data throughout the trading lifecycle continues to grow, driven by better technology, as well as more advanced analytics techniques. Integrating high quality historical market data is therefore critical for market participants, whether for backtesting, execution analysis, or alpha generation,” says Dr Elliot Banks, Chief Product Officer at BMLL, who will be on the panel alongside senior executives from AWS, Bank of America and BNY Mellon.

The evolution of communications surveillance will be the focus of the next panel session, where representatives from Glencore, Northern Trust, 1GLOBAL and Ignite G2M will explore the latest regulatory requirements around communications surveillance and look at some best practices for investing in appropriate technology to ensure compliance, engender trust and maintain the integrity of operations.

The final panel session of the day will focus on the upcoming transition to T+1 settlement in the US, with a particular emphasis on overcoming the operational and technology challenges of the accelerated timelines. “It’s important that firms don’t just look at T+1 as a purely back office issue,” says Peter Tomlinson, Director & Head of Post Trade at AFME, who will be leading the discussion. “The implications for front office also need to be considered – there could be impacts to existing models for treasury, FX, securities financing, and trading desks.” Panellists from BNY Mellon | Pershing, Goldman Sachs, JP Morgan and DTCC will also discuss how automation and innovative technologies can help improve post trade processes and workflows, the expected benefits for firms of moving to T+1, and what the future might look like.

The Summit will conclude with the TradingTech Insight Europe Award Winners Ceremony Networking and Drinks Reception, where the leading companies in the trading technology sector will be presented with awards across a range of categories.

This event is not to be missed! Book your place here.

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This is a topic that will be discussed in-depth at A-Team Group’s upcoming TradingTech Summit in London on February 29th, with experts including:

• Peter Tomlinson, Director, Head of Post Trade, AFME (Moderator)
• Linda Gibson, Head of Regulatory Change, BNY Mellon | Pershing
• Sachin Mohindra, Executive Director, Client & Market Solutions, Goldman Sachs
• Emma Johnson, Executive Director, Securities Services Global Custody Industry Development, JP Morgan
• Matt Johnson, Director, ITP Product Management and Industry Relations, DTCC

It’s free for financial institutions to attend so do be sure to book your place as it’s filling up fast.

[Book my place for the TradingTech Summit now]

Closing the gaps

“Although the industry generally completes major projects successfully, with firms making the required changes even at the expense of other priorities, the main worry is not about hitting deadlines,” says Robert Cioffi, Global Head of Equities Product Management at ION Markets, the trading, analytics, and risk management solutions vendor. “Rather, it’s the anticipated disruptions and the number of exceptions that could emerge that pose a significant concern.”

While the larger Tier 1 and 2 sell side firms seem to have their T+1 ducks in a row, can the same be said of smaller firms, particularly on the buy side. “Attention often centres on the average broker and bank, yet it’s crucial to consider the outliers, especially the smaller entities,” says David Pearson, Product Manager at post-trade processing provider Torstone Technology. “Contrary to what one might expect, it’s not the large institutions but the smaller players who face challenges. Firms such as small family offices and single fund managers often lack the IT infrastructure to handle electronic allocations, relying instead on email communication. Size should not dictate performance in this context. Both large and small firms are required to manage their allocations efficiently, as failure to do so could result in fines or penalties.”

Although core settlement process will remain largely unchanged under T+1, the pace at which tasks need to be completed will accelerate dramatically. This means that operations teams tasked with diagnosing and rectifying trade failures will need to rapidly review and analyse trade data to identify the root causes of such failures. “Many challenges that people will face will be around resolving trade exceptions,” says Vijay Mayadas, President of Capital Markets at Broadridge Financial Solutions. “Operations analysts often spend much of their day correlating different data sets to diagnose the cause of a trade failure and determine the appropriate remediation. This analysis is typically done using spreadsheets, where trade failures are examined individually to identify issues.”

“It’s the small gaps between systems such as post-trade processing platforms, order management systems and execution management tools that tend to result in the majority of operational challenges,” adds John Joseph, Head of North American Sales Engineering at Xceptor, the data automation platform provider. “These seemingly minor disconnects, which might only represent about 20% of the post-trade environment, can cause up to 80% of the difficulties within a firm. Therefore, it’s critical to closely examine these gaps and to focus on automating this 20% to achieve better Straight Through Processing (STP).”

The importance of intraday allocations

Key to achieving T+1 settlement success is the need to process allocations, confirmations and affirmations on a timely basis. Under the new regime, this should all be completed by the DTC cut-off time of 9:00 PM ET on the trade date itself. However, according to a recent DTCC report, as of December 2023, only 69% of all trades were affirmed by this cut-off time, meaning that there is still work to do.

“At DTCC, we’ve seen a buy-side trend where significant portions of allocations are being submitted after the U.S. close and concentrated in a 2-hour window,” says Val Wotton, Managing Director and General Manager of DTCC Institutional Trade Processing. “The new compressed timeframe will result in a very small window of time to handle and resolve trade exceptions. It is therefore recommended, wherever feasible, that firms move to an intraday allocation model, as they have done historically, for a smoother transition to T+1 settlement.”

Automating these processes as much as possible, so that transactions are matched and agreed upon on the day of the trade, will give firms a much better likelihood of settling within the accelerated T+1 timeframe. However, not all firms are geared up for this, says Xceptor’s John Joseph. “Some operations teams will find themselves struggling, particularly where they aren’t sending their allocations intraday – either in real time or near real time – instead, choosing to wait until the end of the day to finalise their allocations,” he says. “This approach creates a bottleneck because the information needs to be sent to prime brokers, custodians, administrators and dealers. And in situations involving multi-custodian or multi-prime allocations, there’s even more urgency to send those allocations, and broker dealers need to be equipped to receive these allocations and process them without delay.”

Wotton explains how DTCC’s Central Trade Matching (CTM) platform and Match to Instruct (M2i) workflow helps automate post-trade processes to enable firms to meet the necessary deadlines. “DTCC’s CTM provides seamless automated connectivity from trade execution to settlement, enabling accelerated settlement,” he says. “Once a trade has been matched between an investment manager and executing broker, CTM will send status updates to both counterparties. If no match is found for a trade, an exception occurs, in which case each counterparty is automatically updated on a change in the trade status and given the possibility to amend the trade. This allows counterparties to catch trade exceptions prior to settlement, saving valuable time – critical in a T+1 environment.”

He continues: “CTM also provides a Match to Instruct (M2i) workflow which automatically triggers trade affirmation and the delivery of instructions for DTC-eligible securities directly to the DTC for settlement when a trade match occurs between an investment manager and executing broker.  This level of post trade automation maximises the chances of hitting DTC’s 9:00 pm trade-date cut-off for T+1.”

Exception handling and the power of AI

Cioffi suggests that one aspect that has yet to receive widespread attention is the handling of exceptions. “Currently, issues can be resolved within a T+2 timeframe, but the question arises: what happens if trades cannot be sorted out in time under the new schedule. This could lead to significant operational challenges. It’s an area to monitor closely, particularly as firms may face fines for delayed processing, although that will likely expedite the resolution of such problems.

“This situation could also drive changes within the industry,” he continues. “Clearing firms with superior technology and exception handling capabilities may gain an edge over those that struggle in this area. Consequently, buy-side firms, in their duty to their clients, might demand further changes from the clearing firms to meet their obligations effectively.”

One area of technology that is generating interest in this regard is AI, particularly the use of Large Language Models (LLMs) such as GPT. “The introduction of a chat-based interface, powered by a GPT model that interprets chats and translates them into queries across various databases, holds great promise for enhancing productivity,” says Mayadas. “This technology allows operations personnel to use a simple language-based chat interface to navigate complex and diverse trade databases. It aids in identifying the reasons for trade failures and suggests remediation strategies. What’s particularly interesting is the ability of these models to engage in deeper reasoning, assisting users in the thought process required to resolve an exception. Over time, these models can also be trained to guide analysts on which questions to ask next, the top remediation actions to take, and strategies to prevent future occurrences.”

Another advantage of GPT-type technologies is their inherent multilingual capabilities, says Mayadas. “Complex queries can be translated into multiple languages and back again, retaining the original meaning. This feature is likely to be incredibly beneficial for firms in the Asia-Pacific region trading in U.S. markets, where the time constraints are even more acute when dealing with exceptions in a T+1 environment,” he says.

For overseas firms, automation is particularly important, says Wotton. “For firms operating outside the U.S. time zone and conducting cross-border transactions with a requirement to settle U.S. securities, there is a greater need to implement post-trade automation as T+1 will compress the settlement window available to them,” he says. “Firms impacted by the move to T+1 based outside the U.S. should also be aware of post-trade processes which are unique to the U.S., such as trade affirmation which enables institutions to affirm broker confirmations. Here, the executing broker submits a trade confirmation, with either the investment manager or its custodian affirming the trade. Within the T+1 settlement cycle, this process will need to be completed by 9pm ET.”

What of ETFs?

The shift to T+1 settlement is also expected to significantly affect the global ETF market, because of the risk of settlement mismatches stemming from timing differences between the settlement of ETF shares and their underlying assets, as well as between primary and secondary markets. Some observers believe these variances in settlement timings could lead to both a rise in failed trades and to wider trading spreads in the secondary markets.

“The ETF landscape presents an interesting dynamic,” says Jeff O’Connor, Head of Market Structure at Liquidnet, the technology-driven agency execution specialist. “The market for ETFs, now almost seven trillion dollars in assets under management, continues to expand at a record pace. ETF trades often vary in structure across different regions, particularly in settlement procedures and currency market components, which might trade and settle in T+2. So challenges arise when a currency translation is required. Although I believe the industry will eventually adapt, ETFs that have both domestic and international exposure may initially face uncertainties in settling under the new regulations. And given the substantial size of the ETF market, it may be necessary for regulators to re-evaluate their approach to these types of assets.”

New opportunities for tech vendors

So what are the key takeaways, given that there are now less than four months to go before T+1 goes live.

“There’s no room for manual allocations anymore, and reliance on outdated methods could lead to significant financial repercussions,” says O’Connor. “My advice is for asset managers to maintain constant communication with their broker-dealers and to have a comprehensive understanding of the entire process, from clearing to custodial services. While it appears that larger asset managers are well-prepared for these changes, there is a concern regarding the readiness of smaller and even mid-sized managers, who may not yet be fully equipped to handle these requirements.”

Will brokers stop dealing with clients who fail to adopt electronic processing. And might this open up a market for technology providers who can offer affordable solutions. Torstone’s Pearson thinks so. “If brokers are penalised due to their clients’ inability to handle these processes, they may eventually refuse to execute transactions for them,” he says. “The cost of adopting necessary technology can be daunting and prohibitive for these smaller entities, and it remains uncertain whether all small family offices and asset managers fully recognise the need to transition towards some form of electronic processing. However, the electronification of this workflow is critical. This situation presents a significant opportunity for technology providers, particularly those who can offer managed services at a lower cost point to accommodate these firms.”

Come and join us at the TradingTech Summit to hear from Pershing, Goldman Sachs, JP Morgan and the DTCC about how to modernise your front to back trading workflow in preparation for the SEC’s T+1 settlement.

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