From transaction cost analysis (TCA) to algorithmic trading, dark pools and Reg NMS, this week's TradeTech USA Equity Trading Summit in New York City was a barometer of change in the buy side world. And with Reg NMS going into effect for exchanges this past Monday it was obviously the talk of the conference.Dan Mathisson, managing director, global head of Advanced Execution Services (AES) at Credit Suisse, summed up the Reg NMS effect saying most people didn't even notice, which was a good sign. Considering hundreds of traders were at the TradeTech event, the first week post-Reg NMS could be categorized as being a nonevent.
Panelists at the event did point out that the first days saw a lot of locked markets but not a lot of crossed markets. Traders also saw an increase in the number of quotes but only a small move to regional exchanges, as the International Securities Exchange (ISE) picked up in volume, although nothing significant.
Matt Andresen, president of Citadel Execution Services, was on hand to provide his vision for the future of the buy and sell side trading equity environments. He pointed out three major trends that would shape the trading world going forward. Andresen foresees the re-emergence of block trading, the consolidation of equity and equity derivatives trading desks on the Street, and future exchange upheaval.
On the exchange front, Andresen describes the three types of exchanges-futures, which historically have had a "moat around them;" options, which can't internalize orders and equities, which present a very low barrier to entry. He envisions "imminent consolidation" as equities exchanges try to move up the food chain into the futures and options arena. "This year equity exchanges will consolidate upstream," he says.
When asked about the vast number of markets cropping up constantly in the trading world, Andresen says he sees the magic number at or around four. "With two there is not enough choice," he explains. But adds that there should be at least two to three more markets that have a critical mass and can be supported to round out the field.