Luxembourg-based Candriam holds €149 billion in assets under management, and focuses on sustainable investment. The equity trading division is led by Fabrien Oreve.
Zeimes has been at Candriam, formerly Dexia Asset Management, for almost 25 years as both a fixed income and multi-asset trader.
©Markets Media Europe 2025
A total of US$16.5 trillion in AUM is benchmarked to MSCI indices worldwide, and more than 1,400 ETFs are linked to them. These latest changes to indices will come into effect from 28 February.
North America has the strongest net value to trade in the current indices, according to Barclays data, with more than US$2 billion of stocks needed to be bought to match the new weightings. APAC is not far behind with just under US$2 billion, led by India’s more than US$1 billion in net value, but is counteracted by almost US$4 billion in negative value, primarily from Japan, South Korea and Australia.
Europe floundered, with more than -US$3 billion net value to trade and approximately US$10 million to sell. Only Denmark has displayed a positive performance in the region. The majority of stocks with the most pressure to sell are European, with Volvo A far ahead of the pack at -80 days. This suggests that it would take 80 full days of trading for the company to match new MSCI weightings.
The runner-up, APAC’s electricity generation company Mercury Nz, came in at -40 days – less than half the automobile company’s figure – and with net -US$159.10 to trade for rebalancing. At the opposite end of the spectrum, New Zealand’s Contact Energy is firmly in the positive with close to 60 net days to trade and net US$262.50 to trade to meet the new ratings.
The MSCI stock with the greatest expected flow is currently Japan’s Toyota at close to -US$1 billion, followed by US Mag7 favourite Apple at more than -US$750 million. Chinese consumer electronics firm Xiaomi Corporation, on the other hand, saw almost the opposite story with more than US$700 million.
The largest of the 23 new entrants to the MSCI World Index are United Airline Holdings, Reddit A and Natera. All US companies, they are valued at US$33.98 billion, US$37.53 billion and US$22.41 billion respectively.
Of the global indices, only the MSCI World All Cap Index is seeing a net addition in securities this month, with 111 added and 90 deleted. The ACWI Small Cap Index is losing more than 100 securities overall (193 added, 297 deleted) as is the ACWI Investable Market Index (gaining 193 securities and losing 312).
The Frontier Markets Small Cap Index has seen additions at a faster rate than its global counterpart, seeing 22 additions to 12 deletions. Pakistan had the most securities removed from the index, losing four and gaining three, while Vietnam added four to the index and lost one.
Elsewhere, Hyundai Motor India (US$16.9 billion), the UAE’s Emaar Development (US$14.8 billion) and China’s J&T Global Express B (US$7.1 billion) are the largest securities by market cap to join the Emerging Markets Index. In the Frontier Markets Index, Croatia’s Koncar Elektroindustrija, Morocco’s CFG Bank and Kenya’s Standard Chartered Bank lead the way.
MSCI noted that securities classified in Bangladesh have not been subject to change during the review due to market accessibility issues.
©Markets Media Europe 2025
RavenPack transforms unstructured content into structured data in real-time to serve the hedge fund community.
Al-Wakil will lead the development of systematic investment strategies, using alternative data and advanced analytics to enhance the firm’s offerings.
Al-Wakil joined RavenPack in August 2021 as a senior quantitative researcher. Since then, he has worked on extracting trading signals from alternative data across equities and bonds, and in developing quantitative investable indices in collaboration with banks and index providers. He has also led the integration of generative AI to augment financial analysis workflows.
Before RavenPack, Al-Wakil spent 3 years at Natixis Investment Managers as a quantitative researcher. Before and during his PhD at Paris-Dauphine he was a quant at Seeyond from 2013 to 2017.
In addition to his role at RavenPack, Al-Wakil is a part-time associate professor at the University of Paris-Est, where he leads the Master of Science in portfolio management program.
©Markets Media Europe 2025
Global Trading looks at best practice in tail risk hedging for buy-side desks, including strategies, resourcing and dealer relationships.Markets are close to record highs, and bullishness among fund managers reached extreme levels in December, according to BofA’s global survey. But some traders at buy-side firms are busy scouring the markets for tail hedges, ready to protect their portfolios against a market meltdown.
An example is Boris Molls, head of markets for Brightwell Pensions, the company that manages the £36 billion assets of the British Telecom Pension Scheme, one of the UK’s biggest defined benefit pension funds. With the scheme taking a de-risking path towards what it calls ‘cashflow-aware investing’, it must periodically sell equity-like assets. Molls’ mandate is to ensure that the transition materialises as planned, whatever happens in the markets. Another example is fund giant Axa Investment Managers, which has €35 billion invested in multi-asset funds that switch between equities and bonds with the aim of diversifying investors against market downturns. That worked until 2022, according to Laurent Clavel, Axa IM’s global head of multi-asset.
“Bonds lose value. Equities lose value,” Clavel told delegates the FIX Trading Community Paris conference. “You talk to your client as multi-asset manager, and you go, ‘I lost on both accounts’. And the reaction I got a lot was, ‘Okay, should I stop multi-asset?’ The way we felt at the time is we cannot go back to the client another year and say, ‘Guess what happened? Bond yields went up, and it derated equities.’ Because he’s going to say, ‘yeah, you already told me that at the end of 2022 I thought you would learn your lesson.’ So, we’re trying to learn our lesson.”
For two very different reasons, Brightwell and Axa IM have reached a similar destination. Brightwell needs to protect fixed pension cashflows from fluctuations in the assets that back these liabilities. Axa IM needs to ensure that its multi-asset proposition insulates client portfolios from cross-asset downturns, and thus protect the stream of fees it earns from these clients.
And Clavel has given up trying to rely on sell-side firms to help predict when such downturns might happen. “If you look last summer at the yen carry trade unwind and the spike in VIX, how many sell-side firms flagged that this could happen?” he says “Now they can explain to you all about the yen carry trade and how it was at risk of unwinding but how many people saw that entering into the summer? None.”
Getting the desk ready
The first challenge in any hedging strategy is to define the exposure being hedged. BTPS has about 11% of assets, or £2.8 billion, invested in listed equities, according to its 2024 annual report – a consequence of UK regulation that limits the risk of DB funds. The scheme also owns about £5 billion of ‘equity-like’ assets such as absolute return, infrastructure and property. Such asset classes are sometimes described as having quasi-fixed income cash flows.
But Molls believes these assets will behave like listed equity in a crisis, which might happen at the same time as these assets have to be sold. “We are planning certain redemptions, and the cash of those redemptions will be used to buy corporate bonds and government bonds,” Molls told Global Trading. “But the value of these redemptions might go down when the market sells off.”
“We have verified to ourselves that our private equity and real estate investments are highly correlated with public equity markets, if you actually have to redeem them quickly,” he says. “People will say private equity is not correlated, but if you really, really need to sell it at that point, then it’s highly correlated.”
“Say next year we want to sell £500 million in illiquid equity-like assets. If liquid equity markets sell off by 25% then that £500 million might actually go down by 30%. So the stressed beta of real estate to equity, for example, is greater than one.” By applying this ‘stressed beta’ to our clients’ future cash flow requirements, the notional amount of hedging protection can be much larger than the amount of equities on a pension fund’s balance sheet, Molls explains.
“We established how much money we need to generate in a certain shock. Let’s say we want to sell £500 million” he says. “Now we can say, if the market sets off by 25%, I need to make 30% of £500m in cash. And that’s my mandate – a hedge with an agreed cash return for a given sell-off.” This is not a typical buy-side mandate, but then again Molls is not your typical buy-side trader. He started out structuring and selling derivatives for Societe Generale, where he counted BTPS as a client, and then became head trader of BTPS in 2012, reporting to Brightwell’s chief investment officer. There, using the structures he helped invent at SocGen, he became a pioneer in using algorithmic and quantitative investment strategies as a way of managing tail risk. Meanwhile, Axa IM’s starting point was to find something that would increase in value in 2022-type scenarios. This goal led the firm towards option-based, or convex strategies “The idea is, could we create bond-like convexity, through something else than bonds?” Clavel explains. “And the answer is, obviously yes. It’s called equity puts.”
Managing hedging cost
The challenge with all such tail risk hedging mandates is the premium or cost of the options. Called negative carry or bleed by traders, this eats into investment returns. Even out-of-the-money options involve significant bleed, Molls explains.“Consider a scenario where I need to hedge a six month sell-off larger than 20%. You could say, I can do this perfectly with put options on the S&P 500 and the Euro Stoxx. But that tends to be quite expensive. Because of this, we are using alternative strategies and have some room for relative value,” Molls says.
A similar philosophy is used at Axa IM by Clavel’s team, where the strategy is run by portfolio managers Cesar Vanneaux and Nicolas Armet. “What we do internally is a dynamic gamma strategy,” Clavel continues. “The principle is that something could happen at any time, and basically, you should have something systematic in your portfolio that is efficient and that you don’t have to think about. So that’s what we’ve done.”
“The idea is to optimise the negative carry to be as little as possible, and to optimise the puts, especially the time where you purchase and the maturity and the strike so that it’s as efficient as possible,” Clavel says. “You want to have an insurance policy when nobody does and when everybody tells you that the market is going to go up, when insurance policies don’t look relevant.”
“We started in 2016, using time-spread collars,” Molls says. “You buy long-dated puts, you sell short-dated calls, and then you can do some twists around it. We were the first manager of a pension fund to do this systematically and in size.”
The tail hedge grew steadily, and by June 2021, BTPS was long £3.3 billion notional of equity put options according to its annual report. In his quest to obtain the needed tail risk protection at low cost, Molls has adopted increasingly complex trading strategies.
“If I want to hedge everything below a sell-off of 20%, I can buy a six-month put with 80% strike,” he says. “However, when the market sells off by 20%, vol generally also goes up. So, maybe I want to buy a different put, that has more volatility exposure, that’s further out of the money and works out to be cheaper.”
“The next level is put spreads,” Molls continues. “I could buy the 70%, I sell the 50% and leverage this up. Or I take it one notch further, since I don’t really care about first 10% of the market loss, I sell a 95% and I buy 90, I buy 80%, I sell 70%. You can see how it gets quite complex and requires dedicated derivatives portfolio managers.”
In addition to portfolio managers, such strategies need a risk team as well. “One of the complexities is understanding if the hedge will work,” Molls notes. “Fortunately, we have a risk team that can stresses our hedge strategies to assess if the hedge would be effective.”
Currently, BTPS has £1.8 billion of self-managed exchange-traded equity options by notional amount, according to its annual report. They constitute an outcome-based equity hedge that allows for relative value that emphasises hedge certainty, Molls observes. Brightwell traders implement the hedge directly in the market using several tier-1 broker-dealers for execution and clearing. Brightwell’s portfolio managers also manage the BTPS liability-driven investment (LDI) portfolio and use their gilts to manage liquidity for daily margining of derivatives.
Unlike BTPS, Axa IM does not rely on its tail hedges to provide the cash needed to pay clients, so does not need to wait for them to mature – it can sell the options at a higher price. Clavel explains how it works. “Buy it when it’s cheap, and the funny thing is, when things go upside down, the price of the protection goes up,” he says.
“So suddenly people want to buy protection, the price of that protection goes up, and that’s when you sell. You don’t have to wait for the protection to actually realise – you don’t have to reach your strike, you just sell it when VIX explodes and then you can monetise your gain because people want to buy your protection that you bought when everybody was telling you not to buy it.”
Currently, Axa IM has €600 million notional of equity options being used for this strategy.
Managing the volume and scale of hedge trades
Resourcing the trading desk effectively to support the volume of activity and skills needed to manage these trades is a key challenge for heads of trading. For BTPS, relative value options trading and portfolio management at Brightwell is handled by Molls and his small in-house team of seven PMs. This team with trading, portfolio management and quant skills was built by Molls and Wyn Francis, the CIO, over several years.
“We can implement hedges that don’t trade much ourselves in-house,” Molls says. “You trade every couple of weeks when you manage an outcome-based equity hedge, so it fits within our capacity of equity hedging and other overlays. Maybe you can process 30 trades a day including our other activities, but not hundreds, and 30 would push it already. That’s why we outsource the trading of strategies with high turn-over.” To overcome some of the cost limitations of traditional hedges, Molls has now moved on to an even more sophisticated approach, which he describes as ‘alternative hedge strategies’. He gives an example involving the VIX index.
“I want to be long futures on the CBOE VIX index and keep rolling it, but that’s quite expensive,” Molls says. “You could do call options on the VIX but they’re also expensive. Because of that we try to replicate these options by delta hedging with the VIX future while also minimising roll costs.”
This trading strategy would be too time-consuming to execute with Brightwell’s small team, Molls says, so another solution is required. This is where the outsourcing comes in.
“There’s a lot of stuff going on and a lot of trading. But this delta replication is purely formulaic. I can write this down as a formula and give it to somebody as an algo for trade execution. You can turn this, the formula, into an index, and then we can access the trades in OTC format as one single total return swap on the index.”
Axa IM also works with investment banks that express time-intensive trading strategies as derivatives, Clavel says.
“Investment banks manage to do things that are very complicated, with intraday trading and whatnot. And since what we want our portfolio managers to do is to limit the negative carry, and offer clients convexity that is bond like (without being a bond), this ability is very helpful. So the banks repackage a tail hedging strategy in a total return swap, and you just buy it.”
At Brightwell, Molls says that sometimes the banks craft an index to his specifications, but mostly they pitch him their existing products which his team then refines.
“All banks have their own innovative ideas and design their own indices. We screen what’s out there and start with that. Banks only trade their own indices and we can help to design them. It’s my job to make sure that we get what we need from our counterparty. We need to make sure that their product fits our objectives and that the bid offers that we pay are tight.” Bank of America, JP Morgan and Societe Generale are among the main banks Molls works with. Brightwell has used them for equity option strategies with high trading frequency. Barclays and Nomura are now added to the panel as specialists for alternative hedge strategies.
“You try to have multiple counterparties so that you can tell people ‘if you’re not doing it at the levels that I like, then I’m going to somebody else.’ Also, it is important to diversify the panel of banks to mitigate the risk that a twist on a strategy does not work well,” Molls points out. “For example, we know the VIX strategy would be a hedge for a quick sell off, but not for a slow sell off. Other strategies work in slower sell-offs. It’s all about having a portfolio of these alternative strategies.”
He continues, “One trade that’s quite popular at the moment is rolling US dollar swaptions, so you would buy the 10-year into 20-year swaption straddle, in other words a put and a call on the interest rate. Since that requires a lot of trading, again we can write down the formula, keep rolling it, and then I give this to a bank, and do a total return swap on the index.” Dispersion and correlation between S&P 500 stocks and the index itself is another trade that Brightwell has done, Molls adds.
According to BTPS’s latest annual report, the scheme held £3 billion in equity total return swaps by notional value in June 2024, although Molls warns that since leverage can be written into the index formula, notionals do not give an accurate picture of exposure.
Dealing with multiple strategy types and different types of sell-offs means that a portfolio approach is required, Molls says. “Designing the portfolio, selecting the right hedge strategies and controlling costs is probably more important than fine-tuning strategies. A hedge strategy works in certain scenarios but a portfolio of hedges can cover many scenarios.”
Independent thinking
Understanding the client can present challenges for overstretched sell-side desks looking to support clients with effective hedges.
“We are the opposite of a hedge fund,” Molls observes. “We are okay with losing money, because our benchmark is put options that bleed too much value, and we can do things much more defensively. I can have small negative alpha, I can have a small negative Sharpe ratio until I need the hedge. We want to be low risk on the downside and convex on the upside.”
“The banks just don’t get this,” Molls says. “It’s really hard to get them to think about the right ideas and come with the right stuff and make things defensive. They tend to optimise alpha and Sharpe ratios.” Specifically he notes, “In the portfolio construction, for example, we look at something like the first percentile versus the 99th percentile of returns. We look at the conditional type of statistics, where our portfolio weights are based on conditional Value at Risk (CVaR), or something even worse than CVaR. We call it DVaR, which is the worst of CVaR, from one month to 12 months.”
In a similar way, Axa IM’s Clavel emphasises the importance of not treating tail hedging as part of his funds’ overall alpha. “You should basically not think about it when you choose your tactical allocation,” he explains.
“When you’ve been completely wrong in allocation terms, it’s there. Whereas if you look at it and you go, oh now they’ve rolled the puts, and therefore it reduces the equity Delta in my portfolio, that’s not the idea – you’re not supposed to counter what it’s doing fundamentally. So you don’t look at it and you have basically a tail risk hedge in the back of your mind.”
©Markets Media Europe 2024
European banks reported a standout performance in equity trading in the final quarter of 2024, capitalising on supportive market conditions and robust client activity. While most players saw strong sequential and year-on-year revenue growth, UBS emerged as the undisputed leader, recording a 44% surge in equity trading revenues in its investment banking division from Q4 2023. If transaction income from the Swiss lender’s private banking arm is included, then UBS’s equity trading revenues are on a par with JP Morgan and Bank of America, and only beaten by Goldman Sachs and Morgan Stanley.
Trump deregulation will unleash Goldman’s risk appetite, Solomon says – Global Trading
UBS’s equity trading revenues climbed to US$1.45 billion in Q4 2024, up from US$1.01 billion a year earlier. “We continue to gain market share across our equities and prime services businesses, with client engagement at record levels,” said Sergio P. Ermotti, chief executive office (CEO) of UBS, in the bank’s earnings call.
While UBS stole the limelight, other European banks also benefited from increased market activity with varying degrees of success. BNP Paribas, which has been aggressively expanding its equities franchise since acquiring Deutsche Bank’s prime brokerage unit, reported €856 million in equity trading revenues for Q4 2024, down from €915 million in Q3 but still up 18% year on year.
French rival Société Générale posted €831 million in revenues, down sequentially but still reflecting a resilient derivatives business. Spanish-based Santander reported a ‘gains on financial transactions’ of €413 million during the fourth quarter but did not disclose the equity portion of this figure. Equity value-at-risk in the bank’s trading portfolio increased to €9.5 million, up from €6 million a year earlier.
Banks attributed the surge in equity trading revenues to a supportive market environment. UBS cited “increased client activity on higher cash volumes and supportive volatility across equities and FX”. The bank added “This led to our best fourth quarter markets revenue on record with particular strength in financing supported by all-time-high client balances.”
BNP Paribas echoed this sentiment, emphasising the role of increased hedge fund participation and structured product activity. “Global markets and their activities were up 32%, driven by strong performance both in equity and prime services, as well as robust performance for FICC, thanks to strong activity in primary, macro, and Forex,” Lars Machenil said on the BNP call.
UBS capitalised on these conditions by leveraging its expanded prime brokerage capabilities and deepened client relationships, particularly among private bank clients. “Structured products, equities, and alternatives all recorded double-digit transaction revenue increases. Our investments in capabilities, solutions, and unified teams support the durability of this revenue line and fuel our ability to capture wallet-share in all climates,” said UBS.
While the past year has been a boon for European investment banks, expectations for 2025 remain tempered by macroeconomic uncertainty. However, volatility -a key driver of trading revenues- is expected to persist, potentially creating another lucrative environment for banks.
BNP Paribas executives signaled optimism about the trading outlook in their earnings call, noting that markets may outperform current consensus expectations.
“We expect ’25 is going to be a year with a lot of volatility for a lot of reasons. So global markets and CIB globally will deliver probably much more than the consensus is telling us today,” BNP CEO Jean-Laurent Bonnafe said.
©Markets Media Europe 2025
In recent years, the macroeconomic landscape has significantly influenced investor sentiment, characterised by various risks and tensions in financial markets. Key factors include rising inflationary pressures linked to the Covid-19 pandemic and increasing interest rates from global central banks. However, these were not the sole contributors to market volatility. Persistent geopolitical tensions have also affected the economic growth of major world powers, resulting in production slowdowns due to escalating energy and raw material costs and supply chain disruptions. Such developments have heightened uncertainty among market participants.
The rise of retail investors
In this dynamic context, retail investors have enhanced their market presence, continuing the upward trend that had an acceleration around four years ago with the pandemic’s onset. Despite a slowdown in growth, retail flow maintained a significant role in financial markets throughout 2023. In the early months of the year, US retail investors accounted for about 15% of total US equity market volume, trading around $1.5bn daily1. The bond market similarly benefited from small investor participation, generating an average daily notional value of $1.1tn and approximately a 20% increase from 20222. US Treasury securities saw an 11% increase, with an average daily volume of $760bn, while corporate bonds rose by 20%, with an average daily volume of $42.5bn3.
The rise in volatility, the movement of high-growth tech stocks and interest in innovative digital assets have stimulated retail investor participation in financial markets, with a particular focus on alternative assets. Despite the reduced enthusiasm for the cryptocurrency market compared to previous years, many retail investors still consider Bitcoin, Ethereum, and other digital currencies as investment opportunities. This trend became evident in 2020, when low-cost trading services and easy access to multi-asset online platforms allowed small investors to pursue profit opportunities.
Market dynamics and the impact of cost-free models
The proliferation of “zero-commission” trading models has attracted an increasing number of clients. This trend has initiated a market-wide reduction in both direct costs, such as trading fees, and indirect costs associated with trading. Additionally, the increased participation of investors has enhanced market liquidity by tightening bid-ask spreads, improving order execution, and minimising price impact.
This growing order flow has also raised concerns about the Payment for Order Flow (PFOF) model in Europe. This practice risks directing orders toward market makers offering higher rebates rather than ensuring best execution. In 2021, the US platform Robinhood experienced a significant surge in retail investment flows. This culminated in notable trading events, such as those surrounding GameStop and AMC, where volumes skyrocketed, driven by social media and online forums.
Regulatory developments in the retail investment landscape
The activities of retail investors on platforms like Robinhood drew the attention of the media and regulatory authorities. Such events prompted regulators to closely monitor trading behaviours, raising concerns about execution quality and market distortions. The MiFID II directive has improved transparency regarding costs and the quality of financial services, offering retail investors clearer access to detailed information. Responding to these issues, the European Securities and Markets Authority (ESMA) recently banned the practice of PFOF in Europe, marking a significant step toward enhancing investor protection.
In May 2023, the European Commission announced the Retail Investment Strategy (RIS) as part of the Capital Markets Union action package. This initiative amends the regulatory framework with measures designed to guide small investors toward more informed choices, providing greater information about investment processes and the associated risks and benefits of financial instruments. By promoting products like Exchange Traded Products (ETPs), the RIS encourages market access and includes mechanisms to protect retail investors from deceptive practices and high-risk investments.
These developments have contributed to significant growth in the retail business. Brokers have adapted to increasing flows by enhancing digital platforms, refining commission structures to suit clients, and providing educational tools. In Italy, this adaptation has been supported by the extensive experience of financial intermediaries in the B2B2C segment, collaborating with commercial banks, private banking, and online trading to respond to recent market demands more rapidly and effectively.
The growth of investing in stocks, ETFs and bonds
Stock exchanges have also introduced new operational features. For instance, in 2023, Euronext revamped the Global Equity Market (GEM), allowing the trading of a diverse range of European and US stocks in euros (over 350 securities). Companies like Apple and Microsoft have driven stable demand and increased investor enthusiasm, supported by their success in cloud services and artificial intelligence. Analysis of equity securities indicates a strong presence of tech stocks in retail investors’ portfolios. Due to profit opportunities, stocks like Tesla, Amazon and Nvidia have also attracted substantial interest. These stocks are now consistently among the Top 5 most traded US equities by retail investors in 20234.
The Exchange Traded Funds (ETF) market has also experienced significant growth. The rise of innovative execution methods, such as fractional share trading, has enabled small investors to access products that would otherwise be prohibitively expensive. Thanks to an increasingly wide range of products offered by major asset managers, investors have been able to diversify their portfolios more easily. In 2023, retail investors traded approximately $600bn in ETFs and an average daily volume of $1.51bn5. Interest in fixed income ETFs also surged, with $332bn traded annually, benefiting from favourable interest rates and increased liquidity. This trend has continued into 2024. Similarly, interest in ETFs on indices, technology, and actively managed commodities remains high, with a total of $640bn traded annually6.
The bond market has attracted investors seeking stability as well as those interested in opportunities presented by declining bond prices. The emergence of Retail Aggregators has enhanced market liquidity and continuous pricing in order books. Market data reveals increased investments in shorter-duration bonds and government securities to mitigate interest rate risk from central bank interventions. The Italian Ministry of Treasury’s direct placement of BTP bonds has become a notable case in recent years. The initial direct placement of BTP Italia on March 19th 2012, marked a turning point for small investors, enabling online purchases through the Mercato Telematico delle Obbligazioni (MOT) platform. Since then, the Treasury has repeatedly utilised this placement method with remarkable results, as demonstrated by the two BTP Valore issuances in 2023, maturing in June 20277 and October 20288, each raising over €17bn. With step-up coupons and a loyalty bonus at maturity, small investors are incentivised to hold the bonds in their portfolios until redemption, pushing the price above par on the secondary market.
Future outlook for retail Investors
Looking ahead, the participation of small investors in financial markets appears set to grow even further. Economic prospects suggest a steady increase in order flow, fostered by a more integrated relationship between retail investors and brokers. A trading environment that is increasingly accessible, new investment opportunities, more advanced trading platforms, greater transparency in transactions, and regulations aimed at protecting investors could make the impact of retail order size flow increasingly significant in financial markets. As this landscape evolves, understanding the dynamics of retail order flow will be essential for all market participants.
1. Pallavi Rao, “Charted: US Retail Investor Inflows (2014–2023)”, Charted: US Retail Investor Inflows (2014–2023) (visualcapitalist.com), Nov 2023.
2. Raphael Stern, “Why fixed income ETFs in the current macro environment? “
www.invesco.com/apac/en/institutional/insights/etf/why-fixed-income-etfs-in-the-current-macro-environment.html , Oct 2024.
3. Katie Kolchin, “Fixed Income Market Structure Compendium”, www.sifma.org/resources/research/insights-fixed-income-market-structure-compendium , Apr 2024.
4. Data analysis based on internal information provided by Intesa Sanpaolo SpA.
5. Natan Ponieman, “Retail Investing Peaks In 2023: How Small-Time Trading Matured From Meme Stock Frenzy“ markets.businessinsider.com/news/etf/retail-investing-peaks-in-2023-how-small-time-trading-matured-from-meme-stock-frenzy-1032894724, Dec 2023.
6. BlackRock’s iShares division “BlackRock reports record fixed income inflows in 2023 global ETP market” funds-europe.com/blackrock-reports-record-fixed-income-inflows-in-2023-global-etp-market, Jan 2024.
7. MEF Ministero dell’Economia e delle Finanze – www.dt.mef.gov.it/it/news_debito_pubblico/2023/btp_valore_09062023.html#:~:text=BTP%20Valore%2C%20che%20ha%20data,il%201%C2%B0%20giugno%20scorso, Jun 2023.
8. MEF Ministero dell’Economia e delle Finanze – www.dt.mef.gov.it/it/news/2023/risultati_BTP_valore.html, Oct 2023.
©Markets Media Europe 2024
Why reference data services?
Our founders realised that it did not make sense for the industry to individually do the same tasks over and over, so the concept of the reference data services came alive. The best way to describe our uniqueness is that we neutralise as much of the processing as we can to keep down costs for our clients.
We accomplished this through a combination of managed technology, AI and subject matter experts. It’s our own technology, which we have developed in house, plus our data operations teams that, together, deliver the service that we provide to our clients.
We give clients the data via a couple of different methods, whether that be files or application programming interfaces (APIs), in an easily digestible manner so that they can then consume it and put it into their internal systems.
However, with the rise of how much people are using AI and getting value from data internally, we also provide customisations to drive business. We mutualise everything we can to drive down costs and then we provide our subject matter experts, whether that’s in a consultative manner or through our data operations team, to assist where we need to so that we can customise a client’s output based on their individual needs and strategies.
How does the service help clients adapt to new regulations?
In the regulatory space, there are two aspects. There’s the interpretation of the regulation, which is definitely individualised a bit, and then where to get all of the necessary data. Firms end up spending a lot of money looking internally. If the regulatory mandate requires access to a certain bucket of data, but that bucket is filled from ten different resources within the organisation, it takes time, energy, and money to get that data and make sure it’s in the right format. Oftentimes, the pieces from the different parts of the company don’t connect very easily; that’s where a lot of money is spent.
Recent changes in regulations led to the need for a much larger set of reference data, they are not just limited to trade specific data. We normalise the required reference data, so instead of a firm having to source data from a number of different internal and external systems and prepare it for the regulations, we do all that on our side. In addition we give them tools, for example APIs, so they can more easily get the data that they need.
In MiFID II, for instance, we have APIs where you can ask, “is the counterparty I’m trading with a designated reporter (DR) or a designated publishing entity (DPE)?” Then you can figure out who the reporting obligation lands on. We help with that headache of making sense of the data.
SmartStream also provides a Systematic Internaliser (SI) Registry; how was this introduced?
We were primarily focused on security master data until MiFID II came along, and we realised with the help of our customers that our reference data services were applicable to regulatory data as much as to security master data. And so, we went on our first regulatory journey with MiFID II.
While doing that, we realised that there was a set of data that the whole industry needed to meet the obligations of MiFID II, but nobody was providing it. After discussions with others in the industry the SI registry service was born.
We collaborated with a number of APAs to develop a new system, where the firms would send data through their APA, we would then aggregate it, normalise it, and make it into a format that can then be sent back out to the market.
There haven’t been any drastic changes to the SI regime itself, but its application has been changing over the last year. SI data is needed for things like venue of execution and sorting through counterparty reporting rules and regulations, but it’s not needed for post-trade transparency reporting. For post-trade reporting, the EU has transitioned to the DPE regime, and the UK has transitioned to the DR regime.
What other hot topics have you seen in the reference data space?
In the area of regulations, the EMIR Refit in both the UK and EU has kept the industry busy. We are also getting our first peek at what a MiFID III may look like over the next few years as the regulators begin to share more details. Across all jurisdictions and regulations, we see that counterparty and venue classification continues to be challenging for some in the industry
We created a new service called the Regulatory Registry, and this came to be as we recognised that across a number of regulations firms needed to maintain data to correctly classify those they are trading with and the venues they are trading on. Because of changes such as the the new DR and DPE mandates as well as EMIR requirements this set of data has become much more relevant.
And this data set does not stay static nor are the requirements the same across the jurisdictions. For example, for post-trade reporting in the UK, the DR regime is just at the company level. However, in the EU is it is at the legal entity and the asset class level combined.
The end result is that we took data that was spread out across different services of ours, added more, and now we have counterparty and venue of execution indicators where firms can better manage their counterparty risk and exposure and have the right data to more accurately report.
We also did a lot of work around EMIR reporting in the commodity space last year. There’s not a lot of normalisation in the commodities world, so we helped our clients understand the underliers for commodity derivatives in a way that they were able to report accurately.
Other areas where we’re seeing interest include data requirements for new derivatives exchanges, and new products like cryptocurrency underliers. We’re working with our clients to make sure that they’re getting all the data they need to manage that trading and risk.
How have managed services client demands been changing around data?
In the vendor managed services space, firms increasingly want the ability to process data from numerous sources instead of being reliant on one or two providers. We’re being asked to pull in and normalise across a larger number of providers and sources of data.
Our symbology data, where we can take symbols from different providers and link them together, is very important, especially with automated trading. We just had a use case where a broker and a client couldn’t talk to one another because they were using different identifiers. We were able to link those together for them. Symbology is one of our strongest products across all the asset classes; firms need their machines to be able to talk to each other, not just their humans being able to talk to each other. Even within an organisation, you can go from one department to another, and their formats differ.
What’s on your agenda in 2025?
We’re doing a lot from a technology perspective. We’re focused on making sure that our cloud strategy and our ability to meet our clients’s regulatory needs like DORA are achieved.
From a functionality perspective, we are working on the user story more, making sure that as things are becoming more automated our products can align with the workflow that our clients need. We’re making sure data is in an accessible format that can be digested into the new way that people are dealing with data externally.
Personally, I also joined Markets Media’s Women in Finance board in 2024. I really enjoyed interacting with the larger group and being invited to the Women in Finance Awards in November. I got my feet wet last year, and this year I’m looking forward to interacting with the group more and getting more involved in all the functions that they have planned.
©Markets Media Europe 2024
According to Bloomberg, anonymous sources at the CFTC have claimed that acting chairman Caroline Pham is removing from post those who have opposed her historically, infringing internal policies and executive orders.
Quiet personnel changes at the CFTC include the removal of Joel Mattingly, chief financial officer, and Marti Tracy, chief human capital officer, according to anonymous sources at the commission.
In her role, Tracy had been working on an investigation into Pham’s treatment of employees, Bloomberg’s sources said. The CFTC clarified that Tracy was removed from her post as part of an internal investigation into failures to address HR matters, which included allegations of misconduct by division of enforcement staff and “targeting Republicans illegally in violation of the First Amendment, including senior officers of the United States and Presidential appointees that are protected from the Biden Administration’s politically motivated attacks.”
Criticisms of Pham’s treatment of employees were first formally raised in 2023, when a complaint against her was filed by the National Treasury Employees Union. In the individual and institutional grievance report, staff alleged: “The CFTC has improperly allowed Commissioner Caroline Pham to reportedly intimidate, harass and abuse other CFTC employees in public, which has created and fostered a hostile work environment for all bargaining unit employees (BUEs) who must necessarily interact with or encounter Pham in their professional capacities.”
“BUEs are now afraid to do their work that requires them to interact with Pham, to speak up in defense of their right to be free from her intimidating, hostile or abusive conduct in the CFTC workplace, and/or to approach the Union with their concerns for fear of retaliation by Pham.”
The report also highlighted Pham’s open dislike for the CFTC’s enforcement division, expressed in both dissenting statements and public social media posts. Her complaints were often against broad enforcement measures and regulation by enforcement.
Last week, Pham announced a reorganisation of the enforcement division and stated that a simplified structure would prevent regulation by enforcement. She added: “These much-needed changes will maximise the CFTC’s resources to bring more actions to pursue fraudsters and other bad actors, and not punish good citizens.”
Mattingley, who has been at the CFTC since 2014 and been chief financial officer since 2020, has criticised Pham’s travel expenses – such as business class upgrades and luxury hotel stays – on several occasions, CFTC staff told Bloomberg.
On these accounts, the commission stated: “Claims about Acting Chairman Pham’s travel are categorically false. All aspects of Pham’s travel have been reviewed and approved by agency officials […] with voluminous supporting documentation.
“Any personal travel by Pham, including business class travel, hotel stays, and commuting expenses, was paid for with personal funds and was not paid by the CFTC and is substantiated with receipts.”
It concluded: “At all times, Pham complied in full with all laws, regulations, and agency policies.”
©Markets Media Europe 2025
A total of 13 new hires have joined the Amsterdam office in quant research and development and portfolio analyst roles. From APG Asset Management, Tim Zwinkels and Edmund Wadge have been named senior quantitative researchers, Maarten Smit a senior portfolio analyst and Gijsbert de Lange an investment solutions expert.
Guido Baltussen, international head of quant strategies, told Global Trading: “These individuals are further strengthening the platform, and showing the market that we’re really investing in quant. It’s a key focus area for us.”
These are the latest in a string of quant hires from Northern Trust. Baltussen was appointed in late 2023, and joined by Milan Vidojevic as director the following January. Last November, Jan Rohof became APAC director of the division.
Baltussen continued: “We have strong heritage with the quality factor. Everything we do is focused on risk efficiency. We want clients to understand every base point of risk that they take. That’s where most of our research efforts go.
“To do effective research you need certain tech skills, and the people using that research need to know what they’re doing with it. You need to understand what’s happening to bring the best returns to clients.”
At the end of 2024, Northern Trust Asset Management managed US$43 billion in quant strategies across equities and fixed income.
©Markets Media Europe 2025
Andrew Douglas, chair of the AST technical group, told Global Trading: “The UK and the EU independently reached the same conclusion on date, which in my view confirms the validity of 11 October as the best date.”
The AST was established in December 2022 by then-Chancellor Jeremy Hunt. Tasked with determining the timeline for a T+1 transition in the UK, and the operational and technical changes this would require, the committee provides recommendations to the government, regulators and market participants. Members include representatives from major banks, such as Citi and Goldman Sachs, infrastructure providers and trade associations.
In its final implementation plan the taskforce has outlined a code of conduct for T+1 (UK-TCC), including twelve actions within four business areas which must be made by all market participants to facilitate the transition. A further 27 actions are ‘highly recommended’.
Firstly, the taskforce requires the Treasury to amend the central securities depository regulation (CSDR), an EU and UK regulation focused on cross-border settlement in the region. Trading venues are requested to update their rulebooks to align with T+1, taking the scope of the settlement cycle into consideration. Prior to implementation, financial market infrastructures (FMIs) must remove any barriers to T+1 that may exist in their current technology, procedures and operations.
Douglas elaborated: “The major update required is to replace references to T+2 with T+1 and to review the FMI’s own processes and procedures for other impacts and amend accordingly. These are Critical Recommendations Zero B, FMI 01a and FMI 01b, and we will see the result of this analysis (FMI01a) by the end of 2025.
“As regards CSDR, our recommendation Zero A covers the request to HM Treasury and the detail is clearly set out in Sections 1.1-1.4 of the implementation plan. We believe this is comprehensive.”
The taskforce also advises that the CREST settlement system modernisation project avoids scheduling major changes to systems immediately before, during or after the T+1 go-live. A response from the EUI on an updated timeline is expected to be received in the first half of 2025.
Stock lending recalls are another key issue. According to the plan, the International Securities Lending Association (ISLA) will develop timing guidelines for optimal practices in this space, with consideration to cash market sale trade execution, communication in the securities lending workflow and recall coverage. Recalls should be automated either in-house or through vendor partnerships, the group said, and instruction deadlines must align with end-of-day at the LSE.
Once operational, the Financial Markets Standard Board’s standards for sharing of standard settlement instructions must be followed by all market participants.
In a statement, the Treasury said: “The government welcomes this report and will set out its response shortly.”
©Markets Media Europe 2025
Global Trading is an industry-leading news service for the global equities capital markets: providing information, education, insights and analysis for senior professionals working within trading and execution across Europe, the UK, North America, APAC and other emerging markets. With a focus on the intersection between the buy and sell-sides, Global Trading covers all industry elements from technology and trading strategies to regulation, best execution, market structure and liquidity.
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