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Instead, a combination of rising interest rates, inflation, soaring energy prices and geopolitical tensions have hit hedge funds, and subsequently the risk management practices of prime brokers. These forces have rumbled markets and led to heightened volatility.
Despite retail flows not necessarily adding much in terms of available liquidity, Liquidnet noted that book depth, lower correlations and reduced volatility had improved for traders and portfoliomanagers. Wholesales were found to have increased their consumption of flow from retail brokers. billion worth of purchasing.
Are central limit order books still fit for purpose? Central limit order books (CLOBs) across primary exchanges remain a significant part of the trading ecosystem for European equities. The evolution towards agility and flexibility has clearly been supported by the new generation of order and execution management systems (OEMS).
As part of the acquisition, Bryan Messer has been appointed general manager of Asia Pacific, managing director of portfoliomanagement solutions and artificial intelligence at LiquidityBook, with his staff also joining. In addition, the accounting and reconciliation engines of Messer Financial Software will be integrated.
Dominic Rieb-Smith, managing director, international head, prime services sales, JP Morgan, refers to the past year as “a standout”. Data from Convergence tracking the top 25 prime brokers showed their market share grew from 83.3% in April 2023, to 92% in 2024.
While traders don’t have the authority to load up trades, outside of execution they are expected to collaborate with their portfoliomanagers to bring value add to the investment process by making suggestions around idea generation and execution. The trading team work closely in tandem with portfoliomanagers when preparing a strategy.
If a portfoliomanager wants to execute a trade days after such an event, they need to understand that liquidity may be reduced, and they must be confident in their strategy if they’re willing to pay more in the bid-offer spread.” “Post the GFC [global financial crisis] things have changed 180 degrees in terms of regulation and compliance regimes.”
As Rebecca Crowe, managing director and chief operating officer, BNY Mellon Markets, previously told The TRADE, “Years ago, it was the middle-office who were contemplating outsourcing and people couldn’t even consider that you would allow somebody into your books and records in that way.”
That buy-side trader would speak with their portfoliomanagers, and that portfoliomanager could then potentially respond to the liquidity opportunity that is being presented to them. What they don’t have is the requirement to be everywhere, all the time.
He joined DWS Group a year later as a portfoliomanager and worked his way up through the ranks, going on to lead teams of PMs focused on a range of instruments that stretched across asset classes. But Eppacher began to notice a distance between himself and the day-to-day action of what was happening in the markets.
Although there are clear differences in asset classes, I think trading fundamentals are consistent across products, so multi-asset traders and specialists really require a lot of the same skills.
These systems touch upon all elements of the trading lifecycle throughout the front-to-middle-to-back-office including execution, order, risk and portfoliomanagement. By seeing what is available on the order book, traders have an idea of how much volume can be executed at a specific price.
Within equity futures, there is a centralised exchange, deep order books and excellent liquidity in most contracts. Pre-trade, market impact and peer models are not as common and can be less detailed compared to equities and this is an area which might benefit from more investment by vendors and brokers alike.
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