Eric Heliene, head of buy-side trading desk, Groupama Asset Management
The intensification of financial regulation is a fundamental trend transforming the asset management ecosystem. The planned transition to T+1 settlement in 2024 and the forthcoming revision of Mifid II are poignant examples of this. These developments highlight how regulations, even when specific to a market like the United States or the European Union, can have global repercussions, compelling actors to revise their operations to remain competitive and compliant.
Beyond T+1 and Mifid II, the overall increase in regulatory requirements presents significant organisational and technological challenges. Players must adapt quickly, investing in advanced systems and enhancing team skills to manage increasingly complex and interconnected processes. This regulatory pressure highlights the issue of critical size. Smaller entities might find it challenging to sustain the financial and operational weight of these demands, potentially catalysing consolidations, strategic partnerships, or outsourcing initiatives for specific functions.
All these factors create an environment where flexibility and innovation are paramount. Asset managers need to respond not just to current challenges but also anticipate future regulatory developments, requiring a long-term strategic vision and continuous adaptability.
Vikesh Patel, President at Cboe Clear Europe
Repeated efforts by incumbent exchanges to restrict clearing competition in equities will be a dominant theme of Europe’s post-trade environment in 2024. We could see pressure being exerted to remove interoperability arrangements, as well as undermine the open access provisions that sit at the heart of Mifir – moves that would drastically impede competition.
The benefits of competitive clearing are recognised and undisputed across the industry – from driving innovation to reducing costs, enhancing service levels, increasing transparency and accountability, and so on. Market participants have clearly been voicing their desire for competitive clearing. We also expect to see a heightened demand for the pan-European clearing model, which we pioneered in cash equities, in other asset classes. In terms of regulation, we believe focus will intensify around settlement efficiencies, anticipating challenges in aligning US and global settlement cycles. Meanwhile, the EU’s CSDR Refit, expected to be implemented next year, could impose buy-ins on UK participants, adding another layer of cost on market participants.
Natan Tiefenbrun, president, North American and European equities, Cboe Global Markets
2024 will be the year that the rubber hits the road for the EU’s Mifir review, as the political framework agreed in 2023 is transformed into implementable rules by ESMA. While the EU has agreed to a real-time pre- and post-trade consolidated tape (CT) for equities – the devil will be in the detail. ESMA has important decisions to make including what constitutes ‘real-time’, the workings of the selection and authorisation process (which will determine the governance and pricing to consumers), and the revenue sharing model for data contributors. Thus far, the only declared bidder is the consortia of exchanges that fought the introduction of the CT and tried to undermine its viability, so ESMA needs to encourage additional bidders. To meet consumers’ long-term needs, including for reasonably priced consolidated market data, ESMA must attract and select a provider committed to the speedy delivery and enabling broad adoption of the CT, and to a governance framework that gives consumers a voice.
The UK’s plans for an equities tape will also become clear: the FCA recently noted overwhelming market support for it to be more ambitious than the EU’s plans, including attributed quotes, and legislation currently before the UK parliament will give the FCA powers to launch a tender process. Another big theme will be the importance of the retail investor, and how European capital markets can grow by better serving this community. Investor protection measures such as the EU-wide ban on payment for order flow (enforced from 2026) and restrictions on CFD trading may re-shape how retail brokers handle their customer order flow, and what products they make available for trading. It is against this backdrop that Cboe launched single stock options trading on Cboe Europe Derivatives and is enhancing its proposition to retail brokers.
Stuart Lawrence, head of UK equity trading, UBS
This year was a volatile year as markets adjusted to the new “normals” of the central bank policies and dealt with the continued impact of a poor liquidity landscape and ongoing geopolitical events. While the former is now better understood – with the market pricing in potential interest rate cuts next year – the others remain unknowns.
Next year will bring us the move to T+1 in the US which has knock-on effects for the rest of world. We should gain more clarity on the timing of the UK and EU moves to T+1 settlement, and whether they will move in tandem or not. We feel that the sooner settlement dates are aligned globally the better.
The discussion around rebundling of payments for research will continue, and we should expect consultation papers from the UK regulator to appear in Q1 and the EU later in the year. If agreed, legislative change could follow soon afterwards. General consensus is that this change will occur but it is important for us to see the details before we can assess the impact. Finally, we await the Mifid II reviews from both the EU and UK which may come next year unless there are setbacks. The details within them will improve clarity on the regulatory landscape for the future.
Stanislav Ermilov, chief executive, Tallarium
Emir Refit, which goes live in the EU from April, will undoubtably be an area of significant focus for participants trading over the counter (OTC) derivatives markets. To meet the spirit of the revised rules, which aim to increase harmonisation and standardisation, firms will need to put a renewed focus on data quality. While the rules are geared to simplifying reporting requirements for the post-trade, there is still a need to lay solid pre-trade data foundations for successful compliance. Having a single source of data can allow for much greater cohesion between the front- and back-office with a view to minimise risk – as it helps ensure there is a full audit trail.
Ultimately, these trading, compliance, and operational challenges that Emir Refit shines a light on can only be overcome fully if firms have the exact same data sets across the front-, middle- and back-office. Currently, a huge amount of resource goes into collating data and verifying that data. Following that, a substantial amount of company time goes into constructing a reliable market picture, where each company replicates the exact same process in-house. This is done based on a combination of multiple sources, raw data, company front office excel and whatever other sources they can obtain.