The Winning Formula

European Equity Trading & Technology Report

The
Winning
Formula
EUROPEAN EQUITY TRADING
& TECHNOLOGY REPORT

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The Winning Formula

European Equity Trading & Technology Report

A true representation
of the European equity
market. All the market
players were there
in force
Gianluca Minieri,
Global Head of Trading,
Pioneer Investments

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The Winning Formula

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TA B L E O F
CONTENTS
Introduction

PA RT 2

Trading Technology Strategies and Investments

About TradeTech
About WBR Digital

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The Winning Formula

European Equity Trading & Technology Report

INTRODUCTION:
Regulatory change is shaking up the European equity market. Participants
are on the lookout for how to best ensure limited impact on their business.
Concerns around research payments, best execution, and sourcing liquidity,
amongst others, are bringing to light issues around broker relationships and
what truly adds value to current partnerships.
Added pressures have forced trading professionals to up their game to ensure
they have a competitive advantage. Trading desks need to be more flexible and
cater for multi-asset trades. The need for smarter, more intelligent trading is
essential in a market that remains volatile and illiquid.
Conducted in November 2015, this senior level survey was tasked with
identifying key challenges, opportunities and industry trends related to equity
trading and technology in Europe. The survey was conducted by telephone
interview with 150 senior equity trading buy side professionals made up
primarily of Heads of Trading, CEOs and senior management from leading
asset management firms and hedge funds.

L O C AT I O N

y UK
y Germany
y France
y Other

50%
20%
15%
15%

C L A S S I F I C AT I O N

y Asset Manager 33%

y Prop Traders
33%
y Hedge Funds 33%

PROFESSION

y Global Head, Trading

10%
Global Head, Dealing
y Head of Trading/Head Trader 20%
Head of Dealing, EMEA
Head of Investment, EMEA
y Head, Equities/Equity Trading 50%
Head, Multi-Asset Trading
y Head, Trading Technology 10%
Head, Front Office
Technology
y Chief Information Officer
10%
or CTO Head, IT Trading

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I S H I G H - T O U C H T R A D I N G A S T R AT E G Y
T H AT Y O U H AV E T O E N G A G E W I T H
MORE TO FIND LIQUIDITY?
A trusted sales trader who can access liquidity will always be enormously valuable.
Richard Balarkas, Chief Executive Officer, Quendon Consulting
2015

2016

77%
61%
39%
23%
y Yes

y No

y Yes

y No

The popularity of high-touch trading has not only been a response to the over electronification of modern
trading practices, but that it add a human touch. The result nicely mirrors 2015 with a slight increase in the
number of people feeling that high-touch trading is a strategy that helps traders to find liquidity.

This result seems to contradict a few of the earlier responses: most respondents view their
brokers as overpriced, and 64% think they could develop their in-house trading tools (incl
Algos?) You cant have your cake and eat it too! If clients want high touch services, they
need to realise that it costs a broker a lot more to maintain human traders (especially for agency
brokers). If the buy-side really got organised and wanted to disintermediate (i.e make use of
buyside crossing platforms), they wouldnt need to engage with high touch services.
Alexander Neil, Head of Equity & Derivatives Trading, EFG Bank SA

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H OW M U C H O F A N I M PA C T W I L L T H E
N E W DA R K P O O L T R A D I N G C A P S H AV E
ON HOW AND WHERE YOU TRADE?

y
y
y
y

No impact
Minor impact
Major impact
Significant impact

7%
60%
15%
18%

Here I definitely agree with the consensus. The caps have been designed to maintain the overall market
share of dark order books to the status quo. I dont think the caps will see a major shift to lit order books,
and instead, we will have to put more thought about which individual orders we submit to dark order
books. This will be more of a minor inconvenience than an actual major impact. Sadly, I think some of
the smaller buy-siders though will be priced out of the dark space, as they might not have the resources
to design dark-specific pre-trade SOR tools.
Alexander Neil, Head of Equity & Derivatives Trading, EFG Bank SA

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DO YOU WORK WITH

HFTS/MARKET MAKERS?
2015

2016

66%

57%
43%

34%

y Yes

y No

y Yes

y No

I think this was a tricky question for people to answer, because I think buy side client order flow
interacts with HFT liquidity more than most people realise. I think HFT gets a lot of bad press and that
the contribution to lit order book quality is underestimated. If the buy side really wants to limit their
chances of getting gamed, they have the tools to insulate themselves to a certain extent.
Alexander Neil, Head of Equity & Derivatives Trading, EFG Bank SA

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HOW ARE YOU MONITORING HFT

ACTIVITY AND WHETHER THE
B E H AV I O U R I S D E T R I M E N TA L
TO YOUR TRADE?
2015

y

y

I rely on my broker for 86%

this information
I am investing in
14%
analytics to evaluate
potential front running

2016

y

y

I rely on my broker for 26%

this information
I am investing in
74%
analytics to evaluate
potential front running

Im personally surprised by the apparent high number of buyside firms actually

investing in toxicity detection. It is not an easy or cheap exercise! And if you think
about it on balance, it seems dreadfully inefficient for every buyside firm to do this
quality control exercise individually. In an ideal world, this is something that an
impartial party, or the regulator could be doing for everyone
Alexander Neil, Head of Equity & Derivatives Trading, EFG Bank SA

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HOW MUCH OF THE BUDGET GOES

INTO NEW TRADING TECHNOLOGY
INVESTMENTS PER YEAR?
2015

y

y
y
y
y

None- we are not

investing at present
<100,000
101,000 - 250,000
251,000 - 500,000
501,000 - 750,000

2016

37%
25%
19%
6%
13%

y

y
y
y
y

None- we are not

investing at present
<100,000
101,000 - 250,000
251,000 - 500,000
501,000 - 750,000

2%
13%
44%
33%
8%

Current market pressures on best execution around compliance and outbound costs for asset managers are
increasing. Last year, the majority of respondents were not planning to invest in new trading technologies.
This year, however, there has been a major shift with close to 98% of respondents looking to invest.
This follows the growing trend toward buy side autonomy in a variety of areas, and resulting in a greater
control of their trades and performance.

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ARE YOU INVESTING IN SOR

FOR BEST EXECUTION?
2015

2016

35% 21% 46% 48% 19% 31%

to
g
in nt
ok re
lo ur
m yc
Ia m m
s, ce te
Ye la sys
p
re OR
S
er
ok
br
y is
m lys
on ana
y
el is
I r r th
fo

ith
w in
y
pp ve
ha I ha
m
I a tem
o, s
N e sy
th lace
p

Smart order routing was previously a technology that only applied to the sell side community, however
as more investment managers invest in these technologies they are able to gain a clearer picture over
where brokers are routing their trades. 48% of respondents still rely on their brokers for this information.
However there is an increase with 31% of respondents looking to replace their current systems - a clear
sign that SOR for the buy side is becoming increasingly attractive in the light of market transparency,
the monitoring of trade execution and overcoming conflicts of interest.

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I N W H A T T Y P E O F A N A LY S I S A R E
YOU PRIORITISING INVESTMENT?
2015

2016

8% 7% 15% 33% 21% 15% 56% 44%

of
ea

sis

ly

ve

bo

na

sis

ly

is
ys

l
na

a
de

th

ra

na

ea

d
ra

a
de

t
st

ll

A

Po

a
Tr

et

Pr

In order to make smarter trading decisions, and indeed, to be able to understand and evaluate the market,
traders need more transparency. In addition, increased investment in trade analysis demonstrates the
growing need for real time information.

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ARE YOU INVESTING

IN OMS AND EMS?
2015

14% 8%

2016

14% 23% 73% 69%

S
EM

S
M
O

ng

sti
ve
in
m th
I a bo
in

y
nl

O

y
nl

Historically speaking OMS and EMS are systems that are only used by the sell side. However, mirroring
last year, 69% of respondents state they are investing in both order and execution management systems.
The FCAs best execution review forced the buy side to detail how and why trades are executed,
demonstrating why the majority are investing in both systems.

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ARE YOU HAPPY WITH YOUR

C U R R E N T T C A A N A LY S I S ?
2015

y Y
 es
y No

2016

50%
50%

y Y
 es
y No

83%
17%

The need for real time TCA is increasing due to an environment of dynamic algorithms, fragmentation,
dark pools and SORs. Last year respondents were evenly split, however, with a plethora of new TCA
providers, and many providers improving their data quality and multi-asset capabilities, the majority of
respondents are now happy with their TCA analysis.

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THE TOP REASONS FOR

UNHAPPINESS WITH TCA
A N A LY S I S
2015

2016

y D
 oes not provide real 24%
time data
y Not good value for money 20%
y Can not provide analysis 32%
for the asset classes
I work with
y Too expensive
28%
y We do our analysis
with in house tools
20%
y Cant deal with the
amount of data
24%
y Bad interface
28%

y D
 oes not provide real 12%
time data
y Not good value for money 46%
y Can not provide analysis 15%
for the asset classes
I work with
y Too expensive
35%
y We do our analysis
with in house tools
46%
y Cant deal with the
amount of data
27%
y Bad interface
4%

For those who are not satisfied with their TCA provider the biggest downfall is value for money.
This provides colour to fact that close to 50% of respondents are developing TCA analysis
capabilities in house.

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W H AT O T H E R T E C H N O L O G Y A R E A S
ARE YOU LOOKING TO INVEST IN?

y
y
y
y
y
y

Cloud services
Social media data analysis
Algo development
Infrastructure
Data analytics
Automation

52%
41%
35%
33%
25%
24%

It is apparent that cloud services are the hottest area for technological investment. The cloud can help
capture alpha from data sources anywhere. Trading and asset management business functions centre
on data, and the need for improved cloud computing and big data capabilities for security, data transfer
compliance and regulation is growing. Investments have increased in light of these improvements to cloud
security and with the market becoming increasingly cost conscious.

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I S I N F O R M AT I O N L E A K A G E
AND CYBER SECURITY A
CONCERN FOR YOU?
2015

2016

11% 14% 61% 43% 9% 20% 19% 24%

g
Si

or

fi
ni

aj
M

nt

ca

nc

co

er

nc

co

er

rn

er

nc
co

ce
on

ac

or
in
M

ot
N

With the European equity market becoming increasingly competitive, and with recent hacks in the market,
there has been an increased awareness over the importance of data security and information leakage. With
the confidentiality of data so important in this space, the importance of protecting your information is vital.

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ABOUT TRADETECH

TradeTech is the worlds largest annual conference for over 1,000 senior equity
trading and technology professionals. Since its launch in 2001, TradeTech has
become the industrys prime source for strategies, information and networking
and is the most comprehensive industry get together in the world. It is an
event created for the industry by the industry where all the key issues
are uncovered, discussed and resolved. TradeTech is fully supported by the
large investment banks, as well as dozens of solution providers, MTFs, stock
exchanges and technology innovation companies and industry media.
Earlier this year TradeTech returned to Paris and this was very well received
by the 1,000+ senior equity trading professionals who attended. Now in its
15th year TradeTech will be returning to the Palais des Congrs de Paris, April
12th 13th and some of the markets most pressing issues to be discussed over
the 2 days include:
The impact of the new regulations on commission payments,
best execution and the impact of MiFID II
Market structure and the buy side sell side relationship
Next generation trading strategies
New tools for monitoring best execution: TCA, EMS/OMS and SOR
Trading opportunities in developed and emerging markets
TradeTech Europe brings together all market participants in the equities
markets, allowing those essential discussions to take place to influence the
future of equity trading. Do not miss out on hearing from leading market
experts from the buy side, sell side, exchange and technology community to
understand how this is happening.

The Winning Formula

European Equity Trading & Technology Report

A B O U T W B R D I G I TA L

At WBR Digital we design and execute bespoke content marketing campaigns

all year round, delivering our clients unparalleled access to the wider WBR
event audience.
We believe in creating rich content that engages and inspires. We conduct
in-depth industry research, then add analysis and a double-shot of creativity,
before marketing it for you, to targeted audiences of your choosing.
Its industry research, its thought leadership, its quality content its the
perfect opportunity to generate qualified sales-ready leads.
Contact us to find out how your business could benefit from:
Lead generation campaigns that fit your priorities
Bespoke webinars, benchmarking reports and whitepapers
In-depth research on current fast-moving issues and future trends
The opportunity to position your company as a thought leader
Contact:
Tanyel Crossley
Head of Digital Publishing
Tel: +44 (0)20 7368 9708
Email: Tanyel.Crossley@wbr.co.uk

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