Budgets curtail MMT voluntary flag take-up, FIX says

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August 27, 2025

Laetitia Visconti, head of market structure, Aquis Exchange; co-chair of FIX’s European consolidated tape working group

Voluntary trade flags developed by the FIX Trading Community haven’t seen the take-up that the group hoped, members told Global Trading, with UK-EU reporting consistency held back by a lack of investment in non-obligatory changes.

“I think that’s because of the firms’ budgets,” Laetitia Visconti, head of market structure at Aquis Exchange and co-chair of FIX’s European consolidated tape working group, told Global Trading. “Firms are more likely to implement such voluntary flags when they’re opening up the code for something mandatory.”

Ahead of the consolidated tapes (CT) being introduced in the UK and Europe, FIX has released a fifth iteration of its Market Model Typology (MMT 5.0). This includes new voluntary flags, which FIX says “serve as a further transparency enhancement besides the regulatory framework as well as reducing the regulatory divergence between the EU and UK where possible.”

The flags are designed to add transparency and granularity to trade reporting, improving consistency for both on- and off-venue liquidity and allowing market participants to identify and quantify that liquidity.

“We don’t believe that the existing combinations of flags catered for all the scenarios that we thought were available,” said Alex Ings, client access product manager at UBS and co-chair of the European consolidated tape working group at FIX.

“Because this is a group made up of different participants from across all areas of the industry, we were able to put together a comprehensive set of different scenarios, and determined how they would look with the current flags based on regulation. We found that the existing combinations of flags don’t cater for all the scenarios that are used in the industry. You might get two different situations, but the flags would look the same on the tape.”

Inconsistencies between the European and UK CT regimes have been extensively discussed, and FIX has been working with both ESMA and the FCA to understand the two.

Jim Kaye, executive director of FIX, explained, “We spend a lot of time talking to regulators. We understand that there are different regulatory objectives and different focuses between the UK and the EU, but at the end of the day, we’re doing the same trading on both sides of the border. Realigning the reporting regimes as far as possible is desirable.”

“There are cases of potato, potahto when it comes to regional differences. In some cases, flags for the same scenario in the UK and the EU are going to have different values. A flag might be mandatory in one place and voluntary in another. We need to get over that,” Visconti added.

MMT 5.0 provides a single scheme, incorporating the regulatory requirements of both jurisdictions.

Broadly, the main goal of MMT is to improve liquidity visibility across Europe, Visconti stated.

“Regulatory reporting changes have muddled the understanding of where liquidity is,” she explained. “We’re trying to find the key data points that are going to allow people to understand it. For instance, when you look at off-venue liquidity, knowing whether it has been provided in an automated or manual fashion is important. If it’s automated, it’s likely to be easier to access.”

FIX states that there is a challenge in the lack of clear definitions for “addressable” and “accessible” liquidity.

Visconti commented, “Everyone categorises on venue volumes as fully accessible, but that’s not strictly true. Of course if you’re going aggressive in a lit book, you’re sure to get the trade done. If you go into a dark book, you’re taking the risk of not finding a counterparty. Accessible does not mean you can get it all. It’s exactly the same for off-venue.”

In its work, the community has defined four types of addressable liquidity: ‘Interactable Liquidity’ (executions on venues that are price-forming), including some over-the-counter and SI activity; ‘Multilateral Liquidity’ (trades on venues excluding negotiated and bilateral trades); ‘Multilateral “Lit” Liquidity’ (trades where volume and price are publicly visible); and ‘Multilateral “Lit” Liquidity (excluding batch auctions)’, a refined subset excluding certain auction mechanisms.

“We’re trying to tie that together and say, at the end of the day, liquidity is liquidity,” Visconti said. “It doesn’t really matter how it’s being distributed.”

The typology also aims to remove unnecessary and duplicative reports from the tape, ensuring that investors can use all the data it provides with ease.

“We want to get to the point where you don’t need to do any filtering to have the correct view of liquidity from the tape, you can just take everything that’s there,” Ings explained.

This Week from Trader TV: Matt Howell, T. Rowe Price

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GlobalTrading

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August 26, 2025

ETF Innovations, 0DTE Options, and Fed uncertainty reshapes trading.

Thinned summer liquidity, surging ETF flows, and the growth of zero days to expiry (0DTE) options are reshaping market dynamics in the second half of 2025, says Matt Howell, global head of trading strategy at T. Rowe Price. He discusses the drivers for ETF innovations and shorter-dated products; he looks at the impact these flows are having on market volatility and how they are reshaping the way traders are reacting and trading volatility.

With the September US Federal Reserve meeting looming and the Fed Chair’s term ending in May 2026, Howell shares his views on the implications of a wholesale market regime change in the US and speaks to the biggest upcoming issues multi-asset desks need to be paying attention to over the next few months.

[This post was first published on Trader TV]

FCA flags gaps in algo governance, testing and surveillance

By

Etienne Mercuriali

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August 22, 2025

FCA logo

A new FCA review of algorithmic trading firms has found improvements since 2018. While governance frameworks have matured, the FCA urged closer alignment with MIFID’s Chapter 29, highlighting deficiencies in governance, testing and surveillance under RTS 6.

The FCA has published findings from a multi-firm review into algorithmic trading controls. It says that many firms have strengthened governance since its last review in 2018 but that it still found material weaknesses in compliance oversight, testing procedures and market abuse surveillance. The review sampled ten principal trading firms of different sizes and business models and assessed their compliance with RTS 6.

It has found that: “The quality of self-assessment documents and the overall self-assessment process have improved since our 2018 review.”

But the FCA also said: “There was, however, a significant variation in the sophistication of firms and their level of compliance, even taking account of the nature, scale and complexity of their trading activities.”

Better suited firms had external auditors review their RTS 6 self-assessments, which “often resulted in recommendations and tracked actions for firms to complete, to further strengthen their compliance.”

At weaker firms, the FCA said more detail was often required with deficiencies being addressed more efficiently. “This included out of date policies and unclear processes and documentation which indicated a lack of formal governance and accountability,” it said.

The role of compliance in monitoring algo is also not uniform. The FCA found that: “In some firms’ compliance staff had very strong technical knowledge and provided strong challenge to algorithmic trading processes. “

Others fell short, with the FCA noting that: “the compliance functions of some firms did not have as strong technical knowledge of algorithmic trading. This meant the ability of compliance staff to challenge trading behaviours was limited.”

RTS 6 requires firms to conduct robust conformance and simulation testing. But the FCA said while most complied with Article 6 obligations, that in some cases procedure to conform were not well specced which led to substandard recordkeeping processes. In simulation testing the FCA found a starker contrast with some firms allocating significant resources to testing, while others did not: “Simulation testing carried out by some firms lacked sophistication or did not appear to consider a wide range of market scenarios.”

The FCA found all firms operated pre-trade controls, but oversight was not always clear.

The review said: “In certain cases, ownership of pre-trade and post-trade controls was poorly defined and not documented”.

Market abuse surveillance systems were stronger at larger firms, many of which had in-house tools which were operationally sound to deal with potential market abuse.

But the FCA also said: “In certain cases, firms had not done enough to update or invest in their market surveillance systems. This meant their surveillance was not developing commensurately with the nature, scale, and complexity of their trading activities.”

While the review results were mixed, the FCA stressed that: “This publication creates no new requirements for algorithmic trading firms and is intended to help them comply with existing requirements.”

JP Morgan slapped with capital penalty after banks lose $631m in VaR breaches

By

Nick Dunbar

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August 22, 2025

The Fed has started cracking down on bank trading book volatility, forcing JP Morgan to hold billions more in market risk capital. This happened after a quarter in which not only did US bank trading revenues hit a record, but the number of value-at-risk backtest exceptions reached their highest level since 2021.

The largest US banks may have reaped record trading profits in the quarter that started three days before US President Trump introduced tariffs on 2 April, leading to a six-week period of unprecedented volatility. But this performance came at the expense of trading book stability, as measured by the number of VaR backtest exceptions tracked by the Federal Reserve.

US bank value-at-risk exceptions. Source: Risky Finance

Goldman Sachs suffered the most, experiencing two VaR exceptions of $153 million and $142 million, or $295 million in total. This is despite Goldman’s average daily trading revenue being $119 million during the 65-day time period, across equities and fixed income. Statistically, the only way to reconcile these figures is with a highly skewed distribution, that includes ten or more days of $200 million profits, and a few days of extreme losses when markets went haywire.

JP Morgan’s average daily trading revenue was $139 million, but that didn’t stop the bank from also experiencing a pair of VaR exceptions, losing a combined $188 million on two trading days during the quarter. This gives JP Morgan a slightly less riskier profile during the second quarter than Goldman Sachs, with 40 profitable trading days versus Goldman’s 33, according to the banks’ Fed filings.

Morgan Stanley had only 38 profitable trading days during the quarter, but it managed to scrape through with just one VaR exception, losing $87 million on a single day, while making $91 million per day on average.

Although Goldman lost more this quarter, JP Morgan’s third successive cluster of VaR breaches has exhausted the tolerance of the Federal Reserve, which has increased the bank’s capital multiplier to 3.5 as a penalty. By forcing JP Morgan hold more capital against market risk, the Fed may hope to rein in the bank’s risk-taking mentality.

Sources familiar with the banking giant downplay the Fed’s action, noting that the increased multiplier is automatically pre-determined by regulations based on the number of VaR exceptions in a 250-day period. Bankers argue that the increased VaR exceptions are a fact of life given the tariff-driven market volatility.

In any case, reducing risk may be easier said than done, since all six big US banks have increased trading book positions and derivatives exposures in order to drive profits. JP Morgan’s total trading assets hit a record high of $888 billion in June, followed by Goldman with $636 billion, while JP Morgan’s equity swap notionals approached $1 trillion for the first time, followed by Goldman and Morgan Stanley in joint second place.

Unwinding such eye-watering exposures may generate the same kind of trading book volatility that the Fed wants to see reduced. JP Morgan declined to comment.

Nash to co-lead EMEA portfolio & electronic trading at Cantor

By

Etienne Mercuriali

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August 21, 2025

Cantor Fitzgerald has hired seasoned financier Tony Nash as co-head of EMEA portfolio & electronic trading.

Nash joins from Stifel where he was managing director for electronic trading from 2019 to 2025.

His career spans managerial roles in electronic trading since the 1990s.
After starting in derivatives at Natwest from 1991 to 1997, he joined Deutsche Bank as a managing director in portfolio trading until 2005. He then took on a similar role at Lehman brother until the bank’s demise in 2008. He was partner at Execution Noble from 2008 to 2014, and also a partner at AutonomousRresearch from 2015 to 2019.

Since the appointment of Howard Lutnick as secretary of commerce, Cantor Fitzgerald partnership is co run by Pascal Bandelier, Sage Kelly and Christian Wall. As of 31 December 2024, the partnership had US$ 14.4 billion in total assets.

Announcing his new tenure, he was enthusiastic about the new position and its electronic trading suite that would soon offer an “upgraded Sonic dark algorithm”.

HSBC ECM head joins Shore Capital Markets

By

Lucy Carter

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August 21, 2025

Richard Fagan, head of origination, Shore Capital Markets

UK investment bank Shore Capital Markets has named Richard Fagan as head of origination, effective September.

Fagan has close to 20 years of industry experience and joins the firm from HSBC, where he was most recently head of UK equity capital markets.

Prior to this, he was a capital markets associate at Linklaters advising on corporate, capital markets and M&A across the UK and Asia.

Winterflood scoops up Stifel e-trading leader

By

Lucy Carter

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August 21, 2025

Joe Everitt has been appointed head of low-touch trading and algorithmic sales trading at UK market maker Winterflood Securities.

Based in London, he reports to head of execution services Andrew Stancliffe.

Winterflood reported an £800k operating loss in the six months to 31 January, and a £2.6 million loss the year prior.

The firm was acquired by Marex last month.

Everitt has more than 25 years of industry experience and joins the firm from Stifel Financial, where he has been managing director of electronic trading since 2011.

Prior to this, he was a senior equity trader at Seymour Pierce and FXCM.

Umeno spearheads OneChronos’s Japan launch

By

Lucy Carter

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August 20, 2025

Junya Umeno has joined OneChronos to lead the firm’s new Japan operations, effective September.

Alternative trading system (ATS) OneChronos was launched in 2022 and covers US equities. European, UK and Swiss equity and equity-like securities are expected to be made available this year. The firm also plans to introduce spot FX trading to its platform.

It is the 12th largest US ATS according to FINRA data.

Via LinkedIn, Umeno commented, “Japan’s financial markets are at an important turning point, and I believe OneChronos’s innovative approach can bring new opportunities for efficiency, fairness, and better liquidity access.”

Umeno has been a managing director at BlackRock in Japan since 2006, specialising in trading and market structure.

Liquidnet alum joins Citadel Securities

By

Lucy Carter

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August 20, 2025

Tom Stilwell, client execution trader, Citadel Securities

Tom Stilwell has joined Citadel Securities as a client execution trader.

Based in London, Stilwell will cover US equities. The firm holds 23% of the US equity market share, according to a spokesperson.

He will also work on the expansion of Citadel Securities’ extended hours offering amid growing industry interest in 24-hour trading. Earlier this year, the firm requested that the SEC be more consistent in its rules for a 24-hour operating structure.

Stilwell joins from Liquidnet, where he has been an equity trader since 2022 focusing on European equities, ETFs and global depositary receipts.

Expert says FCA buyback review does not draw the right conclusions

By

Etienne Mercuriali

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August 19, 2025

Michael Seigne, founder, Candor Partners

Issuers’ growing use of buybacks has drawn fresh scrutiny from the UK Financial Conduct Authority, which has concluded a multi-firm review of bank structuring, marketing and execution with no material concerns about outcomes or unmanaged conflicts.
But an industry expert insists that the current system tilts advantages to the corporate bankers who perform the buybacks for issuers.

The FCA study covered 165 buybacks worth £40 billion executed by seven banks for FTSE 350 non-investment companies over 18 months; by comparison, FTSE 350 companies repurchased £78 billion over the same period. The FCA also notes buybacks have risen from 20% of shareholder distributions pre-COVID (2017–2019) to 42% in 2022–2024.

VWAP

The regulator distinguishes vanilla agency mandates from structured products, where fees are linked to “outperformance” versus a benchmark defined as the arithmetic average of daily VWAPs during the actual execution window. Benchmarks typically use continuous trading on the LSE and exclude auctions, reflecting Market Abuse Regulation (MAR) safe-harbour constraints. The FCA found structured buybacks represented 39% of transactions by number (45% by volume), that fee outcomes varied widely—including negative fees (rebates) in 30% of cases—and that, across four strategies, it found no statistically significant differences in average price outcomes.

This comforting message is disputed by ex-Goldman Sachs veteran Michael Seigne, founder of Candor Partners, which provides consulting services on buyback execution. Speaking to Global Trading, Seigne argues that the review “does not draw the right conclusions” and leaves “the goal open to misalignment, opacity, and avoidable cost.” He welcomes the work’s scope but says the findings reveal structural weaknesses that boards and regulators should not ignore.
“When the regulator’s own findings reveal how these products tilt the playing field, it’s right to ask who really benefits from the current design and whether issuers, their boards and investors are getting the whole picture,” Seigne says.

On volatility risk transfer, Seigne notes the FCA describes banks monetising volatility by varying participation and determining the buyback’s completion within contractual bounds, discretion that drives outperformance versus the benchmark. Seigne says that “a well-designed buyback execution strategy does not need to incorporate a volatility bet.” He contrasts structured buybacks with convertibles, arguing the latter are securities with prospectuses and listing safeguards, whereas “structured buybacks lack these protections.”

Seigne’s second concern is the design of variable “outperformance” fees. Because the fee is calculated after completion as the difference between the achieved price and the contracted benchmark, he argues it “functions economically as a retroactive change to purchase price,” pointing to the Companies Act 2006 requirement that shares be fully paid at purchase.

Third, Seigne challenges benchmark construction. The FCA acknowledges that the common benchmark is the average of daily VWAPs (equal shares per day). “If the purpose is to execute a value-based buyback, the suitable product is self-evidently the one with a benchmark that uses the correct maths,” Seigne says, framing it as a suitability question when banks both design the benchmark and control the calculation window.

Seigne also highlights constraints embedded in the UK market abuse regulation (MAR) safe harbour, which exclude certain liquidity sources and can extend durations. The FCA acknowledges features of the listing rules and MAR “could weaken the efficiency of an issuer’s buyback programme” and pledges to “consider this feedback” in future reviews.
“Safe harbours are intended to protect against market-abuse liability, not to lock in long-term inefficiencies in the cost of returning capital to shareholders,” Seigne says.

Finally, Seigne points to asymmetric economics and fee caps. “A fee cap is not automatic; they must be contractually negotiated,”. He argues banks can retain upside from outperformance while their downside is limited by structure.

The FCA concludes it saw no unmanaged conflicts and that enhanced issuer education and clearer option menus—fee caps, price/volume constraints, early-termination terms—would improve outcomes. Seigne agrees education is necessary but insists it is not sufficient: boards should interrogate volatility transfer, benchmark suitability, disclosure of post-trade fee effects and asymmetric payoffs before approving structured buybacks.

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Voluntary trade flags developed by the FIX Trading Community haven’t seen the take-up that the group hoped, members told Global Trading, with UK-EU reporting consistency held back by a lack of investment in non-obligatory changes.

ETF Innovations, 0DTE Options, and Fed uncertainty reshapes trading.

A new FCA review of algorithmic trading firms has found improvements since 2018. While governance frameworks have matured, the FCA urged closer alignment with MIFID’s Chapter 29, highlighting deficiencies in governance, testing and surveillance under RTS 6.

Cantor Fitzgerald has hired seasoned financier Tony Nash as co-head of EMEA portfolio & electronic trading.

UK investment bank Shore Capital Markets has named Richard Fagan as head of origination, effective September.

Joe Everitt has been appointed head of low-touch trading and algorithmic sales trading at UK market maker Winterflood Securities.

Junya Umeno has joined OneChronos to lead the firm’s new Japan operations, effective September.

Tom Stilwell has joined Citadel Securities as a client execution trader.

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