“Many ... corporate bond trading platforms ... have been successful by providing ... solutions that improve the efficiency and effectiveness of the ... dealer-focused (RFQ) trading protocol, with the understanding that the role of dealers as intermediaries is here to stay.”
https://cyberian.digital/wp-content/uploads/2020/01/Cyberian_Off_Exchange_Liquidity_Final.pdf Despite their expanding popularity for both crypto and equities, there is a trade-off that comes with using off-exchanges which investors must consider. The lack of transparency that is associated with these private platforms is often cited as a potential problem because it is perceived to affect the ability to get the best price. In his bestseller “Flash Boys: A Wall Street Revolt” author Michael Lewis lays out some of the predatory tactics used by HFTs to front-run large block trades performed in off-exchanges.
https://tabbforum.com/opinions/trend-analytics-the-new-pre-trade/ Michael Mollemans TABB Group - " “Traditional approaches are not fit for purpose in today's markets,” said Dr. Darko Matovski, CEO of causaLens. “Using technology that autonomously adapts to dynamic changes and embeds causality is the only way to discover alpha in execution.” " Also see: The IEX D-Limit Proposal: It’s Good…But What If It’s TOO Good?
https://tabbforum.com/opinions/redefining-the-us-consolidated-tape/ Larry Tabb TABB Group - "with a new governance structure, a new and better consolidated tape could tackle some major issues: ... Reducing the latency associated with how data is aggregated, normalized, and redistributed. ... Increase the depth-of-book levels incorporated in the consolidated tape ... Fix or revise the professional versus non-professional definitions that determine how much a firm needs to pay the SIP per user. ... Putting odd-lot quotes into the consolidated quote. "
https://tabbforum.com/opinions/sec-proposes-amendments-to-governance-of-market-data-plans/ Steven Lofchie, Cadwalader - "Under the proposed Order, market participants would be required to submit a "single, new equity data plan" (aka: the "New Consolidated Data Plan") in which all of the exchanges would participate. A governance committee for the new plan would be formed. One-third of the votes would be held by entities other than the exchanges." ... "Having one market system plan rather than three is not going to change the reality that the exchanges and the broker-dealers have interests that are fundamentally averse to one another: Each wants to "own" as much data (intellectual property) as possible, give away as little data as possible, and either charge as much as possible or pay as little as possible."
https://tabbforum.com/opinions/sef-trading-stumbles-to-end-the-year/ Colby Jenkins TABB Group - "Taking all of this into account, 2019 was nonetheless an up year for SEF trading (Exhibit 4, below). Compared to total notional volume traded two years ago, notional SEF activity has grown by just under 40%, or roughly $58.15 trillion, since 2017 – primarily driven by the IRD market. With a significant slowdown in IRD SEF trading over the past quarter, though, 2020 is already shaping up to be a year of further departure from the SEF market status-quo."
https://tabbforum.com/opinions/from-too-big-to-fail-to-too-large-to-survive/ Larry Tabb TABB Group - "The trading business is being captured by electronic market makers/liquidity providers, and the short-term risk transfer business is being poached by shorter-term quantitative and specialized hedge funds." ... "If the business isn’t shuttered, it becomes almost impossible to rip out the core processing systems, order management platforms, algorithmic infrastructures, reporting lines and business planning processes to achieve the cost structure and agility needed to succeed. Unfortunately, for most firms, that is what is needed."
https://tabbforum.com/opinions/the-strange-economics-of-exchange-management/ Kurt Dew Northeastern University - "The markets are evolving toward a two trading-space system. The first: exchanges trading SEC-regulated publicly held corporate equity and debt; the second: exchanges trading more generic non-SEC-regulated markets." ... "There is a growing opportunity for a new blockbuster exchange to seize the volume going to generic futures and OTC instruments by a single exchange with spot trading capability. But to be successful, this spot market must be at least as efficient as the existing futures markets, reducing trading costs to a minimum, thereby attracting volume."
https://tabbforum.com/opinions/the-problem-with-algo-wheels/ Michael Mollemans - TABB Group "The problem with algo wheels, however, is that they tend not to account for the risk factors underlying the fat-tail distribution of algo returns, and algo wheel selection processes often turn into a game of guessing the finer points in the algo wheel’s logic. The better the guess, the better the fit to the algo wheel, the better the ranking. All in all, algo wheels need to go beyond gross median cost calculations to include standard deviation risk factors, as well as netting out market and sector betas, or the end result likely will be broker algo rankings that just oscillate between best to worst and then from worst to best along a mean reverting system over time." Click here for other articles on the wheel.