I think it’s similar to 2024 to some extent, the main challenges are going to be political and macroeconomic uncertainties and how that will impact traders’ trading strategy. In 2025 we could have a bit more clarity than we had in 2024, with the US election – a big topic – now being decided. But other things such as the war in Ukraine, and the situation in Gaza and Israel are still developing, so I think we are looking at a bit more certainty, but it’s still a market of unpredictability – a main challenge for traders. 

Another point relates to more than just their trading activities, it’s more about how it’s going to impact their preparation for their long-term strategies. Looking at how predicted trends are panning out is more important than ever, for example increased focus more on emerging market markets and the nuance and technological needs are paramount.

Financial products are different in EM than in developed markets where products are more electronic, with more high frequency trading, etc. It’s all highly dependent on macroeconomics and political uncertainty. 

What can we expect to be prioritised on the regulatory front this year?

There are a few big regulatory changes which are probably not going to go live in 2025, but will need technological and infrastructure-related preparation and change before 2026 and 2027. 

The first one is the move to T+1 settlement in the UK and Europe. We already know the date – 11 October 2027 – less than three years away and people will need time to prepare, which means that the work should starts now.  

The second big one is the creation of the consolidated tape in the UK and in Europe for bonds, and then equities followed by the derivative products. People will need to start getting ready to look at the data, connect to the CTP in Europe and in the UK and they will need to reassess how it will impact their business model/trading activities. The first deadlines are coming in next quarter so it’s something important to put in the roadmap.

The third topic is artificial intelligence, with the implementation of the AI Act in Europe and potentially similar initiative happening in the UK means that AI is going to remain a big topic impacting the financial market industry. I would advise watching what the regulators are going to implement and also prepare your trading activity for that impact.

Number four that I’d put on my list is the current consultation by IOSCO on pre-hedging activities cross-asset. This one will take time before it goes to national regulators so probably another year or so away, but I think if you don’t engage with these early consultations it may impact your trading activities.

Overall, both the UK and Europe also have a competitive and growth agenda and it is going to be a necessary focus on simplification of existing regulation – to streamline processes and make it easier for market participants.

When it comes to EU and UK regulators, are these converging or diverging? What’s the outlook for 2025 and beyond? 

It really depends on the topics. In the last two to three years, the two sides couldn’t speak too much to each other until 2024, where this started to change. A good example is the T+1 reduction of settlement cycle for securities markets – where there needs very strong alignment between UK and Europe for the European time zone to be able to converge on the date of application. So convergence makes a lot of sense as the industry pushes for it and conversations are particularly important when it comes to project implementation. 

Another area where convergence is needed is potentially AI regulation. There will be differences due to the fact that Europe is more prescriptive into the way they make regulation, where the UK is going to focus on principle-based regulation. We can already see where Europe is heading with their AI act which was quite prescriptive.

In addition, digital assets could be something similar where the industry will need a global approach. Better alignment is a positive approach.

For this growth of competitive agendas into the UK and in Europe, it’s key to make sure that there are consultations on both sides and market participants can take a very key role there, through their trading associations, or through talking directly with regulators. When you look at an asset manager, pension fund, or bank, most of them who are in the UK also trade in Europe, so that’s why it’s such an important topic to discuss. 

How is the role of technology changing as market structure develops?

I think it’s even more important than it has been in the past. If you look at the last 20 years, where the traders could add a much more important role than the technologies that was supporting them, now it’s almost the opposite – you can see the rise of technology in the way that traders develop new trading activities very clearly and market structure is an important part of that. 

For me there are three key levels where market structure is vital.

Firstly, the technology focus – a company needs to have a very strong technological foundation, a sound system which is solid but flexible. Some companies are still playing catch up when it comes to their technology architecture level and it’s only when you have some technologies like that in place that you can move to the second level, the data. 

It’s increasingly important in financial market to become a data-led organisation, and it is about usage of internal data versus external data, and how to use your own data to develop clear and unique insights. That’s why the consolidated tape in the UK and Europe will be a very big added value for the market. 

The third layer, which I see is how AI can use this data layer and people are starting to realise the importance of the potential impact of AI in their business model. If you don’t do it, others will take the lead. We already see that in the very liquid instruments like equities, but it will develop in other asset classes like bonds.

Using technology, data and the intelligence layer will increase your productivity – which is where you already have developments like algorithmic trading. In that instance, of course, it is more developed in some asset classes than others, but development is these capabilities is happening. Then comes the artificial intelligence aspect, how the newest innovations in the future can pragmatically help traders and market makers. Essentially all are ‘efficiency tools’.

Suppose that you have a good technology foundation, a good data foundation, the focus must then become how do you make sure that your team are extremely efficient going forward. That’s the key to making the most of technology as market structure continues to change.

Malrait is set to join Etrading Software as chair of its industry stakeholder group (ISG) on the consolidated tape (CT) on 20 January, as revealed by The TRADE on Monday 13 January.

The post Fireside Friday with… ING Bank’s Stephane Malrait appeared first on The TRADE.

He is set to begin his new role on 20 January and will be charged with ensuring user needs are fully represented in the CT.

Specifically, he will lead discussions within the ISG on functionalities, fee and licensing models and other tender process requirements. 

Sassan Danesh, chief executive of Etrading Software, said: “We are delighted to have Stephane on-board and leading our stakeholder engagement activities. His leadership will be instrumental in the design of a high-quality tape.” 

Malrait was most recently managing director and global head of market structure and innovation for financial markets at ING Bank, overseeing the financial market innovation strategies within the firm. 

Before joining ING in 2015, he spent eight years at Société Générale, most recently working as global head of FIC eCommerce.

He also previously worked at JP Morgan Chase for ten years, serving in different roles in global FX eCommerce business management and cross-asset eCommerce technology, based in London and New York.

In December 2023, Etrading Software confirmed plans to bid to become the consolidated tape provider (CTP) for both the UK and EU. A move which followed the announcement that the Bloomberg, MarketAxess and Tradeweb JV was off the table. 

Speaking to his appointment, Malrait, said: “The consolidated tape is going to be a major market structure change in the UK and Europe and will impact all market participants. It is important that the voice of the user community is represented to advice and give feedback to CT providers.”

The FCA is set to appoint a bond CTP early this year, with the EU planning for the end of the year.

Read more: ESMA launches first stage of bond CTP selection process

Malrait was nominated by The TRADE for the coveted Industry Person of the Year award at the 2024 Leaders in Trading event in London. 

The recognition is designed to celebrate those individuals who have made a significant impact on their own organisation and, equally, the industry externally, with a commitment to bettering and future proofing the markets for years to come.

The post ING Bank’s Malrait joins Etrading Software appeared first on The TRADE.

As one of the most anticipated awards of the year, the recognition is designed to celebrate those individuals who have made a significant impact on their own organisation and, equally, the industry externally, with a commitment to bettering and future proofing the markets for years to come. 

Shortlisted individuals are repeated contributors to discussion whether that be through panels, associations or schemes to support the next generation joining the financial services industry. 

Last year, Goldman Sachs’ chief operating officer for EMEA equity execution services Eleanor Beasley took home the Industry Person of the Year Award in a landslide victory. 

The winner will be decided by a live industry vote at The TRADE’s Leaders in Trading gala awards night on 7 November at The Savoy. Congratulations to this year’s shortlisted nominees! 

Industry Person of the Year 2024 shortlist: 

James Baugh, managing director, head of European market structure, TD Cowen

James Baugh is an industry stalwart, having worked in the financial markets for over 25 years. Over the course of his career, Baugh has become renowned as a trusted partner to clients and for leading positive change in the European equities marketplace. He is an active participant in discussions on key topics impacting the industry. His team provides opinions and insights into shifting regulation and market structure, illustrating how these changes directly affect day-to-day business. 

Baugh currently serves as managing director, head of European market structure at TD Cowen; a position he has held since August 2021. Since joining the firm, Baugh has been a key driving force behind the growth of the firm’s European agency equities execution business. He has also helped shape the firm’s liquidity strategy by guiding clients through the complexities of European equity markets.  

Before joining TD Cowen, Baugh spent five years at Citi as European head of market structure. This followed 11 years at London Stock Exchange as head of equity sales, where he led initiatives like Turquoise Plato Block Discovery.  

A graduate of Newcastle University, Baugh began his career as a commodity analyst before taking on various roles at Dow Jones, including managing their European power index business. 

During the span of his career, Baugh has also represented several top financial organisations both across various industry forums including AFME, Q15 and Sustainable Trading, and on the board of Turquoise as a non-executive director.

Kate Finlayson, managing director, FICC market structure and liquidity strategy, JP Morgan

Kate Finlayson has considerable experience in financial markets, boasting a 25-year career that spans equities, fixed income, currencies and commodities.  

She currently serves as global head of FICC market structure and liquidity strategy at JP Morgan, having joined the firm in 2017. As part of her role, Finlayson has helped establish the FICC market structure function at JP Morgan, which she has developed into a global business with an extensive scope and reach.  

Before joining JP Morgan, Finlayson spent 14 years at UBS, holding a variety of senior positions including her most recent stint as head of market structure and liquidity strategy. Prior to UBS, Finlayson worked at Goldman Sachs in equity capital markets and prime brokerage.  

At JP Morgan, Finlayson engages with clients on the impact of market structural developments and drivers of change. Finlayson and her team also provide critical insights on emerging execution trends, microstructural dynamics and policy initiatives shaping liquidity across global markets. Widely considered to be a thought leader in the industry and a market structure expert, her insights are increasingly in demand. 

Alongside her role at JP Morgan, Finlayson is a trustee on the board of directors for JP Morgan Chase Pension Plan Trustee Limited. She also has external roles on industry advisory committees, including the UK FCA’s Secondary Markets Advisory Committee as well as the EMEA and US Quorum 15 Fixed Income advisory boards.

Bianca Gould, head of equities and fixed income EMEA, markets, BNY

Bianca Gould has extensive experience spanning 20 years in the industry, holding several senior roles throughout her tenure. She is particularly dedicated to supporting junior talent across the market.  

Currently, she is head of fixed income and equities EMEA within the BNY Global Markets Trading division and also sits on the executive committee for Pershing Limited. 

As part of her role, Gould is also responsible for expanding BNY’s execution footprint across EMEA.  A critical part of this strategy includes the recent launch of the firm’s new EU desk, based in Dublin Ireland. The aim is to deliver integrated execution serviced to its clients and facilitate more efficient trading for EU-based clients across both fixed income and equity markets globally.

Prior to joining BNY, she was the co-head of equities electronic sales and trading EMEA for RBC Capital Markets. Before that, she worked at Redburn for 15 years, having made partner in 2009 and remained the youngest partner appointed to date until the removal of the programme after her departure.   

In recent times, Gould has taken part in the Moonwalk initiative – walking a marathon during the night – to raise money for Breast Cancer, a charity close to her heart.

Stéphane Malrait, managing director and global head of market structure and innovation for financial markets, ING Bank

Stéphane Malrait is a market structure oracle. As a familiar face at some of the most important industry events, he works closely with advocacy groups, policy makers and regulators to make real change across financial markets.

Malrait works tirelessly to drive positive change in trading and market structure in the capital market space, understanding the important role of continued technological developments. At present he is working on the implementation of financial regulations that will impact the clients trading activity and transform how trading floors operate.  

Currently he serves as managing director and global head of market structure and innovation for financial markets at ING Bank, leading the financial market innovation strategies within the firm and contributing to industry working groups as a representative of the bank.

Before joining ING in 2015, Malrait spent eight years at Société Générale, most recently working as global head of FIC eCommerce. He also previously worked at JP Morgan Chase for ten years, serving in different roles in global FX eCommerce business management and cross-asset eCommerce technology, based in London and New York.

Since 2005, he has been an active member of the ACI Financial Market Association and is also a key part of the ECB FX contact group and a board member of ICMA.

Simon McQuoid-Mason, head of equity product and quant research, SIX Swiss Exchange

Simon McQuoid-Mason is a consistent thought leader across the trading landscape, continually unpacking the latest industry trends and sharing key insight on industry panels, important forums, and via insightful interviews.

McQuoid-Mason is currently head of equity product and quant research at SIX Swiss Exchange, having joined in 2020 as head of equity product for UK and Ireland. In his role, he is responsible for driving the evolution of SIX’s equity markets offering, including SwissAtMid and is also the lead author of SIX’s Trading InfoSnack series, a thought-provoking analytics series on market micro-structure and trading dynamics.   

He also serves as the current non-executive chair of the assets for the Te Aupōuri iwi, a Māori tribe from the far north of New Zealand, from who he descends. 

In addition, his past roles include stints at Bank of Queensland, the London Stock Exchange, Morgan Stanley and Emerge Capital Partners.   

A proponent of a pragmatic approach to the various trading areas, McQuoid-Mason consistently advocates for a rethink in terms of how key industry challenges are addressed, with a particular focus on ensuring policy makers and the wider public understand the benefits of thriving equity markets and overall reducing market complexity.

The post Leaders in Trading 2024: Industry Person of the Year shortlist revealed appeared first on The TRADE.

The average passively managed dollar, according to Morningstar, still outperforms its active rival. Nicholas Edwards, chief executive of Alternative Asset Management in London, is convinced that the future is passive.

Edwards argues that about 70% of all market activity now relies on algorithms, and says that this is impossible to compete with unless traders are at their desks 24/7 and have the ability to make decisions within milliseconds. Omnipresent algorithms, he asserts, will continue to reduce the scope for market arbitrage. “Automation drives pricing,” he says. “If people can move quickly, they will.”

Active investors, in Edwards’ view, are doomed to a shrinking minority in the future: “Most active managers underperform and pension fund managers won’t take the risk.” A small pool of investors will continue to provide the underlying due diligence Edwards says, however, those who perform that due diligence do not see things in quite the same way.

The financial crisis made traders more fearful, according to an equity derivatives trader in Paris who preferred not to be named. In a context of low interest rates, “people became much happier with returns of 5%-6%” and saw passive strategies as the safest way to achieve them.

As the memory of the financial crisis recedes, and with interest rates likely to rise, the trader expects that outperformance via more active strategies will be sought. “People are more likely to take risks when things are going well.” This suggests that, at different times, active and passive approaches may both be appropriate. However, the choice of passive or active strategies is not simply a question of the economic cycle.

The game changer

The rise of artificial intelligence (AI) has the potential to redefine both approaches, as the various facets AI are likely to be used by fund managers to collect information much faster than in the past. This will allow them to replicate the performance of a chosen index more accurately and cheaply, the Paris trader says. But AI cuts both ways and also has the potential to improve active strategies.

The trader gives the example of the release of a new iPhone. The stock price of Apple is sensitive to initial customer reaction and comments posted by new purchasers on online forums are highly valuable information. Collating and synthesising this feedback to form an overall verdict has in the past been labour-intensive and time-consuming, but, says the trader, AI can dramatically accelerate the process.

Advancements in technology, which made passive investing possible in the first place, is now threatening to break down an old and misleading distinction. Santiago Braje, global head of credit trading at ING Bank in London, believes that these developments can serve both active and passive investors.

Braje leads “Project Katana”, which started life about 18 months ago and is paid for by ING’s innovation fund, building out a tool which combines artificial and human intelligence. Braje cites the huge amount of information needed to make a trading decision. Processing that information, he says, often still takes place in the mind of the individual trader using “rudimentary” tools such as Excel spreadsheets. “Katana”, the Japanese word for sword, was first used to give ING’s own market makers a fast overview of market conditions. In a real-time environment, “every second that is saved in scanning for that information is valuable,” Braje says.

Traders are supported by, and control, the technology rather than being replaced by it, he argues.”The universe is simply too big” in terms of available tradeable securities, and “Katana” can quickly reduce that universe to a manageable size. Braje says that this is where the prototype can add most value. As well as developing a tool with a large active asset manager client, ING is also in discussions to apply the technology for a passive manager, where Braje believes it can be used to improve the efficiency of execution. Braje expects that the prototype can be turned into a working system for clients within a few months.

A false dichotomy

Passive investment does not equate to passive investors. Such investors continue to control holding periods, and these can be much shorter than might be expected. Epoch Investment Partners calculate an average holding period of less than nine days for the SPDR S&P 500 exchange-traded fund, the largest on the market, in 2016. It seems more useful to think of active and passive as points on a relative scale, rather than as opposing strategies.

The question, as for the Vanguard index-tracking pioneers of the 1970s, is ultimately about fees, and trust. The only tangible forward-looking certainty about a fund is its cost: Investors don’t have anything else that they can be sure about. A lack of trust arises when an active manager charging high fees achieves returns that look like those of a closet tracker.

According to James Sore, chief investment officer of Syndicate Room in Cambridge, UK, and fund manager at Fund Twenty8, which claims to be the only passive fund for early-stage investing, one of the most important factors fuelling the continued rise of passive index investing is the “huge pressure to create accurate, comprehensible and comparable disclosure of fees. 

“Post-fee performance comparisons have exposed a persistent under-performance of actively managed funds compared to passive. Furthermore, a number of actively managed funds were not clearly demonstrating their total fees – top-line fees were competitive but excluded other, less visible fees. Active managers need to deliver value for fees.It is that simple,” he argues.

Passive investors then are active investors who have found a way to reduce costs. Sore predicts that “as fund performance comparisons become more intelligible, the true champion active funds will begin to shine and attract an increasing amount of capital and those that fail consistently to beat passive funds will die away. That leads to a less volatile and varied actively managed funds market, but one that actually delivers value.”

After all, investors wanting to avoid assets that may at times be overvalued by any objective measure have only two choices: active management, or avoiding the market altogether. Morningstar data shows that active clearly outperformed passive during the market crashes of 2000-02 and 2007-09.

All this suggests that there is something artificial and misleading in the distinction between active and passive. A decision to track an index, after all, still involves an active decision to purchase the securities in that index. There are few, if any, passive investors who have a portfolio that accurately weights all globally investable assets. Many funds track a local benchmark index – a clear piece of active asset allocation. There seems no obvious reason to assume that an investor who is reluctant to pick individual securities will be any better at asset allocation. Ultimately, technology is open-ended and will serve whichever trading style is cleverest in embracing it.

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