Muriel Faure, chair, Technological Innovations Commission at Association Francaise de la Gestions d’Actifs (AFG)
Responding to growing industry pressure, the European Securities & Markets Authority is consulting on changes to MiFiD 2 as it acknowledges current rules may ‘may create unintended obstacles for retail investors’.
Europe’s securities regulator believes one of the continent’s biggest inefficiencies is hiding in plain sight: cash. Households keep 31 per cent of their financial wealth in bank accounts, compared with 21 per cent in the United States. In what amounts to a U-turn after years of prioritising investor protection, ESMA now is questioning whether ‘unnecessary complexity’ makes retail investing ‘daunting or inaccessible’ and thus ‘deters capital market participation’.
Although the consultation covers four broad themes, the authority concentrates on the areas it can change.
It asks whether costs-and-charges tables, loss alerts and lengthy key-information documents make sense on a smartphone; whether suitability questionnaires harvest more data than advisers need; and whether the execution-only knowledge test gives genuine protection or ends in perfunctory box-ticking. Crowdfunding platforms, now under ESMA supervision, also come in for scrutiny: the watchdog wonders aloud if the EU-mandated 24-hour “reflection period” deters first-time investors.
Industry participants will see the consultation as long overdue. During a Tradetech paris 2025 panel about European market structure, Muriel Faure, chair of the AFG’s (the French asset management association) Technological Innovations Commission summed up the situation saying:
“New retail investors hold far more cryptocurrency than equities, often double, we have to understand why they go there, why they feel safer on crypto exchanges than on equity venues. That means a big push for education”
This shunning of capital markets in favour of either cash or deposits, at least relative to the US situation, finally prompted ESMA to launch its consultation on the “retail investor journey”. The consultation, open until 21 July 2025, asks firms if the very safeguards intended to protect savers—MiFID II disclosures, suitability and appropriateness tests, marketing rules and the new layer of ESG preferences—have not become barriers that scare newcomers away. ESMA promises “regulatory adjustments or clarifications” as early as next autumn if the dossier shows they are needed.
Speaking at the FIX APAC Trading Summit in Hong Kong, Joseph Chan, Under Secretary for Financial Services and the Treasury in the Hong Kong Special Administrative Region (HKSAR) Government has reported a successful bounce back for trading after US-induced market volatility in early Q2.
“Despite the volatility in April due to tariff related tensions, the Hong Kong market has rebounded strongly,” he said. “During April, the average daily turnover exceeded HK$270 million, marking a 1.4 fold increase compared to the same period last year. Our IPO market is also regaining momentum. Just this week, Hong Kong welcomed the listing of a leading mainland new energy company, the world’s largest IPO this year, and this single listing put Hong Kong IPO proceeds for this year to over HK$60 billion [US$7.7 billion], more than six times the amount raised during the same period last year. We currently rank first globally for company listings.”
According to Bloomberg data, Hong Kong was in third place for IPOs in the first four months of 2025, behind the US and Japan.
“Hong Kong’s role as a super connector is more relevant than ever,” said Chan. “We are actively shaping cross border financial connectivity between the mainland and global markets.”
He cited the expanded scope of eligible ETFs under Stock Connect came into effect in July last year, with 85 new mainland ETFs and six Hong Kong ETFs added, bringing the total to more than 240 eligible products, and increased accessibility in delegation of investment management functions to distributed overseas managers, to support more cross-border product offerings.
“The results speak for themselves,” he said. “In the first four months this year, the average daily trade value of northbound trading of Shanghai Hong Kong Stock Connect and Shenzhen Hong Kong Stock Connect were RMB87.2 billion [US$ 12.1 billion] and RMB98.1 billion [US$13.6 billion] respectively. Southbound trading brought average daily values of HK$68.9 billion [US$ 8.8 billion] and HK$43.5 billion [5.6 billion] respectively. Since its launch, southbound Stock Connect has generated over HK$4.3 trillion [US$ 551.1 billion] in net inflows to the Hong Kong Stock Market.”
Chan noted that the SAR had fought to be innovative in delivering a framework for new markets structures, such as the delivery of distributed ledger technology to through the securities lifecycle. This began in February 2023, when Hong Kong claimed to be the world’s first government issuing tokenized green bonds. This transaction applied distributed ledger technology across the bond lifecycle, from primary insurance to coupon payment and secondary trading.
“Yesterday, we welcomed the passage of the rules establishing a licensing regime for stablecoin issuers in Hong Kong,” he said. “The ordinance has established a risk based, pragmatic and flexible regulatory regime. We believe that a robust and fit-for-purpose regulatory environment will provide favourable conditions to support the healthy, responsible and sustainable development of Hong Kong stablecoin and the broader digital asset ecosystem. Indeed, we will also soon release a second policy statement on virtual asset development this year outlining how Hong Kong will continue to leverage its future international finance and innovation technologies to support the real economy and attract global players in the virtual asset space.”
Linking many international investors with mainland China markets , he said that innovation in more traditional securities had also been key to supporting the region’s status.
While MENA markets are becoming more appealing to international investors, structural issues are causing frustration for traders, TradeTech panelists said, with fragmented, retail-oriented systems hindering engagement with the region.
According to State Street Global Advisors, the investable market capitalisation of equity and bond markets in the Middle East (free float) increased from US$552 billion to US$1.1 trillion between June 2019 and 2024. As foreign investors try to profit from this growth, idiosyncrasies in the markets are proving challenging.
“Saudi is probably the easiest market, and certainly the most liquid. However, it has mooted an omnibus approach that would allow for consolidated orders. It would be amazing if they had that,” commented Adrian Bradshaw, senior equity dealer at Invesco. He later added that Monday to Friday opening times for the Tadawul exchange would ease operational difficulties; currently, the market operates on a Sunday to Thursday basis from 10 AM to 3 PM local time.
As of this week, MSCI member stocks from the country have a market cap of US$2.3 trillion.
In the UAE (market cap of MSCI member stocks US$99.9 billion), Dubai is slightly more expensive and less liquid, while Abu Dhabi’s separation of trading and custody accounts proves challenging, Bradshaw added.
“If you place an order and when the market opens and the broker says sorry, it’s in the custody account and not the trading account, then it’s difficult to move it and by lunchtime you haven’t traded,” he explained.
“A lot of MENA structures are quite restrictive, and there are a lot of hurdles to get over,” added Julian Bruce, head of institutional equity trading at EFG Hermes.
According to the World Bank, “The MENA region is expected to grow moderately at 2.6% in 2025 — a forecast that is shrouded in uncertainty given the rapidly changing global environment as well as ongoing conflicts and extreme weather shocks. This is amidst a long history of sluggish economic growth in MENA.”
By contrast, an April report from Franklin Templeton highlighted growth in the region, noting: “of the six members of the Gulf Cooperation Council (GCC), Saudi Arabia, UAE, Qatar, Oman, Kuwait and Bahrain, four are constituents of the MSCI Emerging Market Index, with a fifth, Oman potentially joining in 2027.”
It also highlighted that the equity risk premium in the region declined from 6.6% to 2.4% between 2016 and March 2025, making markets a more appealing place for international investors to turn to.
Looking specifically at US investors’ regional allocations, Bradshaw noted that while some moved their Russian investments to the gulf region for oil exposure, others were hesitant. “A lot of our US clients have been more comfortable going back to Turkey, because they’ve been there before. That’s an established market.”
As foreign demand increases, though, MENA markets are adapting.
“We’ve seen a huge increase in US accounts setting up to trade in Saudi, and a lot of European fund managers are returning to the market” Bruce observed. “Everyone is still underweight versus the benchmark, but are gradually moving to a more neutral position.”
“Abu Dhabi has recently removed the dual account system, so you don’t need to physically check to see if shares are available prior to trading,” he noted. “However, you still need to do that in Dubai and Qatar. That involves communication with local custodians which can be free format, Swift – we’ve moved to emails in some circumstances. It’s very labour intensive, and that stems from the ID market.”
Speakers emphasised the difficulty of using algorithmic trading in these ID markets, which require foreign investors to identify themselves at each stage of a transaction and prevent consolidated orders.
“If we have multiple funds on an order, we can’t use an algorithm – you have to set up five separate orders,” Bradshaw explained. “Algos and an algo wheel we’ve developed for the region are very much future-proofing exercises. They’re not likely to be used until we can send multiple orders.”
Structural differences between countries can make it difficult to trade in the region as a whole, and make the chance for venue consolidation unlikely, panellists agreed.
“There was talk at one point about a GCC central bank, common currency and combined exchange. But I don’t think that will happen any time soon,” Bruce mused.
“Each market is quite strong when it comes to maintaining its own identity. They have different fee structures, different ways of going about most things.”
While concerns of fragmentation are equally prevalent in European markets, Bradshaw argued that the situation across the two regions is very different. “European markets are pretty homogenous in terms of costs, behaviours and trading procedures. We have a flat rate for outgoing and high-touch in Europe – it’s not like that in MENA. The UAE has different costs even within the country.”
As a historically retail-oriented region, an evolution to wholesale-friendly markets will take time, Bruce accepted. “It’s a deliberate, gradual change. We can’t dismiss everything from a generation of retail and high net worth individuals, just to cater for foreign institutions.”
He went on to recount a comment from a regional sovereign wealth fund trader: “Exchanges in the region will struggle to develop quickly if they continue to try shoehorning Western institutional business onto a retail legacy template.”
Eric Boess, global head of trading at Allianz Global Investors.
Bloomberg Terminals went dark this morning, with traders reporting outages worldwide.
The terminal costs between US$24k and US$27k per year.
Eric Boess, global head of trading at Allianz Global Investors, told Global Trading: “I think everybody was impacted and this just shows you how reliant on a small number of providers the whole industry is.
“It seems to work better after “only” two hours, and fortunately it was a quiet day, but this could be a real problem in busy markets.
“Our backup and business continuity plans worked super smoothly, so with some gallows humor this was a real life fire drill we passed well.”
Dimitri Mongeot, senior derivatives trader at AXA IM, added: “There was indeed an outage, and as usual when that happens, it’s an issue for all buy sides and sell sides. In our case, it’s more of a quiet day, so on the derivatives part it was fine.”
Later this morning, a Bloomberg spokesperson told Global Trading: “Our systems are returning to normal operations and Terminal functionality has been restored following a service disruption earlier today.”
“I think banks still managed to stream prices on MarketAxess or Tradeweb, for instance, as long as it was not Bloomberg,” one trader commented.
The UK Debt Management Office extended its 4% Treasury Gilt 2031 auction as a result of the outage. Scheduled to take place between 9 and 10 AM, the auction bidding window close was changed to 11:30 AM.
The European Union delayed an auction, stating: “Due to global technical problems with Bloomberg, the EU postpones the deadline for today’s EUB auction by 1 hour from 12:00 CEST to 13:00 CEST in order to ensure a smooth functioning of the auction.”
Trading of exchange-traded funds has long been dominated by RFQs, which are costly for smaller trades. Now, algos that address the complexities of ETF pricing are shaking up the market.
Europe’s biggest asset-owners are quietly rewriting their ETF playbooks. Vanguard, stewarding US $10.4 trillion worldwide, and BBVA Asset Management, with €110 bn under management now route an increasing share of secondary-market flow through purpose-built execution algorithms instead of the request-for-quote (RFQ) channels that long dominated the trade.
Eoin Cody, portfolio manager and trader at Vanguard Group
“I’m excited to talk about all things ETF algos… it wasn’t something we discussed two or three years ago, but in the last year it’s become far more topical,” said Eoin Cody, portfolio manager and trader at Vanguard during a specific ETF panel at Tradetech Europe 2025
The change in strategy, Cody explained, is the ability and understanding that dealers can now trade patiently rather than accept an immediate risk-transfer price:
“We’re used to quick RFQ fills. Now we’re happy to trade over a longer period, so long as we rest passively and the flow comes to us. It’s about trusting that the algo has been designed for ETFs, not just copied from cash equities.”
BBVA Asset Management’s equity desk, represented by Pablo Fernandez Gomez, senior equity dealer, told the panel they are following a similar path.
Pablo Fernandes Gomez, Senior dealer, BBVA Asset management
Gomez said: “It’s a new tool. We’re learning how to use it… but it’s very useful to have an alternative way to source liquidity in ETFs, we’re using them on highly liquid underliers [securities] and on quiet days – the results are positive.”
Gomez measures success in two ways: spread capture (whether each child order prints at, or near, the mid-price) and arrival-price slippage. Yet he still wants more transparency:
“I’d like one big trading ticket where I can compare risk price, live NAV, RFQ quotes and my own history in the ETF.” He said would be on his Christmas wishlist.
Data from analytics specialist Big XYT shows that costs are particularly high for smaller RFQ trades. The company analysed every European RFQ ETF trade with two-sided pre-trade quotes in 2024, and found RFQ spreads quality versus European Best Bid Offer (EBBO) to vary widely. While order clips between €10k and €100k benefitted from spreads between 50 to 97% of the EBBO, smaller than €10k trades were markedly wider than the EBBO. Larger than €500k trades were also quoted as much tighter than the EBBO with spread quotes at 11% or 14% of the EBBO in this size bracket. According to Big XYT, RFQ venues still handle about 44 per cent of turnover, but the pricing gap shows investors are paying extra for immediacy.
With the buyside driving demand, the sell-side has built the tools in response. James Hilton, European head of multi-asset agency solutions at RBC Capital Markets, offered a striking example of success with a recent trade his desk did.
James Hilton, European head of multi-asset agency solutions at RBC Capital Markets
Without providing specific details he said: “We traded our largest ETF-algo order a couple of weeks back, more than US $400 million, and executed over 70 per cent of it at the mid-point in dark venues.”
Hilton attributes that success in part to having a NAV engine that recalculates fair value tick-by-tick: “The key really is having that intraday fair value. Everyone’s got access to the NAV, but having an intraday fair value is extremely important”.
This is a feasible proposition for equity ETFs, Hilton explained. “With liquid equity ETFs, you can generally calculate what the underlying value of the constituents is. Some of those markets may be closed, so you might need to look at futures for proxies, but effectively you need to understand the value.
Then you need to layer on top of that, the costs of trading those stocks, so taxes, and then you need to have a view on the, I guess, the inventory in the market, and then the create/redeem costs involved. That model tells you when to post, when to step inside the spread and when to sweep.”
Vanguard portfolio managers still believe Algos are not just for smaller trades:
“Size is about risk appetite and benchmark. You can trade small or large through an algo; RFQ still has its place.”
Fernández echoes that nuance, describing algos as his default on calm days, RFQ for outsized or time-sensitive prints, while Clement Paccalet, ETF specialist at BNP, notes that market-on-close and Guaranteed market on close (GMOC) strategies often package an internal RFQ inside an algorithmic wrapper.
At the Tradetech event, all panelists agreed that one feature could make comparison easier: clearer post-trade analytics that measure RFQ and algo fills’ quality side-by-side would make their dealing life easier.
Warming relations between the UK and EU are making an eventual shared consolidated tape more likely, according to regulators – and to the relief of market participants.
Virginie Saade, Citadel.
Virginie Saade, head of government and regulatory policy at Citadel, was clear in her desire for a shared UK-EU tape. “I wish we could have a super CT. We have all these instruments in common between the EU and UK, and when traders ask 10 different brokers about their prices they get 10 different answers. That’s just not acceptable – there is only one answer, one best price.”
A shared tape would ease this process, she observed.
Charlotte Sickermann, ESMA.
Charlotte Sickermann, head of the secondary markets unit at ESMA, was clear that the tender process is different across the jurisdictions, but suggested that there could be space for a shared tape in the future. “Of course, it would be great to have one tape that covers everything. It is possible that someone makes a business case for a ‘super tape’ once the UK and EU tapes are in place, but we need to be realistic. The UK is no longer part of the EU. Although our rules are largely aligned, we have different processes, different needs. It is unavoidable that some parts will deviate.”
Jamie Whitehorn, FCA.
Although Jamie Whitehorn, head of trading venues at the FCA, agreed that the two tapes were distinct entities, he noted that the two authorities were holding regular conversations on technical alignment between the regions. Similarly to conversations held at FIX EMEA earlier this year, regulators emphasised their collaborations but suggested that their hands were tied when it came to fully aligning processes.
Following extensive consultation processes for the tape, though, market participants are less concerned about regional inconsistencies than they once were.
Although an official shared tape would be ideal, Saade commented: “I’m not that worried about the fact that the UK and the EU are going to diverge because the feedback we gave [to both regulators] was exactly the same. In the end, the consolidated tapes are going to look very much alike. So that’s why it’s not so crazy to think that we might have a single provider.”
A competitive edge
Conversation at TradeTech was dominated by discussions of how Europe can capitalise on wobbling US confidence to bring investors to the region. The tape plays a significant role here, panellists argued.
“The tape will allow us to show off to the world. Until we have that, it will be very difficult to compete with the US,” Saade warned.
Arjun Singh-Muchelle, executive director for EMEA government and regulatory affairs at Goldman Sachs Asset Management, concurred. “When we talk to US investors, they want to invest in European or UK names, but they simply don’t have visibility into the total available liquidity. A tape allows for a higher weighting for them to hold local non European and non UK investors to hold European and UK assets.”
From a retail perspective, Saade agreed. “The equity market is such a fast market, and we want to be able to attract a wider variety of investors. The data is not easily available to retail investors, particularly in the UK.”
Mikko Andersson, Scila.
Both Singh-Muchelle and Mikko Andersson, CEO at Scila, advocated for order books to have at least five layers of depth to give market participants a better idea of the liquidity available in a given security, while Andersson called for more Level 2 data to be included.
Pre, post or both?
Whitehorn emphasised the value of having both a pre- and post-trade equities tape.
“The bond tape is very clearly post trade. We heard a lot that an equity post trade tape will have significant public value, partly because of the evolution of market structure. It’s an important complete picture of liquidity in UK markets, which is important not just for investors, but for the companies who are potentially looking to the UK.”
Compared to the bond CT, which is set to launch in early 2026, Whitehorn stated: “I think it’s fair to say that I think some of the design choices have been a little bit more complicated on the equity side.”
“There’s a strong feeling among many that a lot of the primary value lies in on the pre-trade side, and that pre-trade data is possibly underused in certain functions within firms for reasons of cost and complexity. Others think that a pre-trade tape could have a negative impact on market structure and increase cost.”
“We have a strong feeling that omitting pre-trade may be a missed opportunity.”
‘The issue will be cost,’ affirmed Saade. “The latency infrastructure and the data quality are going to be key determinants of that, but also the ramp up in demand for the tape. There needs to be a balance between ensuring latency for a pre-trade tape, because latency will lead to increased demand from the buy side, and maintaining low costs. Getting that balance right will help democratise access to the tape.”
Not a silver bullet
Speakers agreed that the tape will not act as a replacement to direct exchange data feeds.
Singh-Muchelle asserted: “As far as GSAM is concerned, we do not see the CT as a substitute for buying directly. We don’t buy the arguments that there will be an impact on exchange data revenues. We’ll continue to buy those, mostly for low-latency trading applications.”
He suggested that for the tape to be effective, the base case for latency should be 100 milliseconds.
“That sounds fast until you compare that to US securities information processors, some of which are at 0.09 milliseconds,” he continued. “And despite that, there is retail access and media access to the NYSE SIP. There’s a lot of transparency around cost, and we hope those elements are brought into the EU and UK context to help democratise the market ”
While discussions around an equity CT for the UK and Europe have been ongoing for more than a decade – a timeline not missed by panel participants – progress is certainly being made as the industry hurtles towards a 2026 implementation. As regulators soften their rejection of a shared tape, and market participants begin to see further alignment between the two, the potential of a shared tape may be the next big shift in the CT story.
European equity trading volumes are much higher than reported, yet traders still struggle to see, let alone tap, that liquidity, because of fragmentation baked into MiFiD rules. Practitioners are calling for urgent reform.
Fabien Oreve, Candriam
After years of hand-wringing over declining liquidity and primary listings in Europe, new research indicates that liquidity is much greater than previously thought. And yet, “visibility of liquidity is challenging for European stocks”, complained Fabien Oreve, deputy global head of trading and securities finance at Candriam, speaking to the TradeTech audience.
“If you look into market data systems, you will find different ways to measure this liquidity and different ways to calculate average daily volume or ADV of the stock. If you ask five brokers for the ADV over European stocks, you will likely get five different answers”, Oreve added.
“What is the availability and addressability of liquidity in the European system?” echoed Huw Gronow, head of dealing at Newton Investment Management.
Huw Gronow, head of dealing, Newton Investment Management
“We’re still having trouble defining that, it’s an internal debate amongst market practitioners. We can’t scale portfolio trades until we see true liquidity.”
This contributed to the malaise in the primary market, complained Bjorn Sibbern, CEO of SIX Group. “Companies listed in Europe need to see the total trading volume in their shares every day, and that’s not possible because of the fragmentation between exchanges, MTFs, OTC, SIs. We don’t have a clear, full picture today”.
Bjorn Sibbern, CEO, SIX.
The problem is widely acknowledged. Buyside desks still receive prints in half-a-dozen venue formats, FIX flags vary by broker, and when dealers internalise a client-to-client swap the trade never prints the tape. Add the fact that large Systematic Internaliser (SI) prints may be published with a delay, and metrics of “addressable” volume quickly turn fuzzy.
“It’s a slippery slope: the reference price becomes so degraded that we lose faith in it”, warned
Jupiter Asset Management trading head Mike Poole.
Mike Poole, head of trading, Jupiter AM
“Mid-price only works while real risk still prints on the tape; without it, equities could drift toward RFQ-style credit trading.”
Why “addressable” liquidity is understated.
In an unpublished paper that is attracting attention from industry practitioners, Laetitia Visconti, head of market structure at Aquis Exchange, claims to have tackled the measurement problem in detail. Analysts, she told Global Trading, routinely treat only on-exchange volume as addressable and ignore the bilateral prints that are now both automated and executable in size.
Laetitia Visconti, head of market structure, Aquis
“We need to move on from the narrative that only on-venue trading is addressable in Europe. We have seen material growth and automation in bilateral liquidity, often at the detriment to on-exchange volumes. This makes our markets look smaller instead of acknowledging that there has been a redistribution of the volumes over the past few years. Looking at the data and unpacking it, we tried to estimate how much of the off-venue activity should be considered when assessing European volumes.
First, we removed anything flagged ‘Non Price Forming Trades’ which are about 18 % of the CBOE Europe All-Companies total volume. This is clearing activity. Out of what is left, we looked at the nature of the print: no special flag? At the close? Likely those trades are addressable and accessible.
The result? You get a market at least 30 % bigger than you initially thought. This could make a material difference to how European markets are perceived by investors, at a time when we are competing on the global stage to grow our capital markets.”
Visconti’s method matters because it assesses the bilateral surge as a proportion of European equity trading into both volumes to reclassify using better flag mapping and volume to discard as non-addressable. Overall it presents the addressable volumes a lot higher than first thought when examining headlines numbers.
Remove the noise in addressable liquidity data, keep the obviously genuine trades, and Europe’s perceived liquidity pool jumps by a third. This correction could also influence index weights, execution costs, and even listing decisions.
Even sophisticated flags filtering cannot compensate for prints that never occur. Participant at Tradetech mentioned that a growing slice of equity trading is now exchanged internally at brokers via swap-for-swap crosses between customers; those positions novate on derivative books, so no cash print ever hits the public record. That silent volume, along with delayed SI disclosures, leaves a hole in every liquidity heat-map that buyside desks rely on.
Given these problems, a European consolidated tape is seen as more urgent than ever. Jon Relleen, director of infrastructure and exchanges at the UK FCA told delegates the UK has shifted “from reviews to delivery,” placing real-time bond-then-equity consolidated tapes in his top three priorities for the next two years.
Jon Relleen, director of infrastructure and exchanges, supervision, policy and competition for markets, Financial Conduct Authority
Brussels is moving in parallel, but speakers warned that unless both jurisdictions insist on the same data schema, and the same near-instant deadlines, Europe will simply swap one fragmented view for another.
Sam Vaughan-Jones, senior equity dealer, Royal London Asset Management
The advice of pre-trade models should be taken with a hefty grain of salt, according to speakers at this year’s TradeTech – particularly during times of volatility, where prior trade performances will not necessarily repeat themselves.
“Pre-trade models are crucial, but they should be an indication rather than absolute answers,” said Sam Vaughan-Jones, senior equity dealer at Royal London Asset Management.
Danielle Fregeau, global equity trader, Impax Asset Management
In volatile conditions, the performances of historical trades are not reliable indicators of future outcomes. While pre-trade models can be tweaked, Danielle Fregeau, global equity trader at Impax Asset Management, stated that she pivots away from pre-trade analytics in volatile conditions. “It’s hard to get them adapted quickly,” she noted. “To lean on those models is a comfort, but you have to take them with a grain of salt. They could lead you down a trickier path.”
“The models go out the window when volatility is high,” Vaughan-Jones agreed. While their insights are not entirely ignored, traders’ situation-specific decisions are more highly valued.
Sam Vaughan-Jones, senior equity dealer, Royal London Asset Management
Beyond unexpected market conditions, pre-trade models can also be destabilised by a lack of, or inconsistencies in, the data they run on.
“We cannot get real-time fills from one of the brokers we are currently using,” Fregeau said, something “critical” on the high-touch desk. “That kills our post-trade processes and means that we have to be very manual. Then, we cannot feed the results into a pre-trade model.”
Similarly hampering efficiency are inconsistent tagging processes across firms.
“There are differences across the buy side as to how the portfolio manager can convey instructions to traders, and then to the counterparty. We’re miles away from having a standardised approach that would facilitate harmonised transaction cost analysis,” noted Benjamin Mahe, head of high-touch trading at AXA Investment Managers.
In turn, this makes it difficult to create more comprehensive pre-trade models.
“You have to work with the data you have,” Fregeau said. “It’s hard to replicate a trade on a given day – you have to think about expectations for the trade, then look back and reassess.”
While AI and large language models (LLMs) are an inescapable talking point across the industry, Vaughan-Jones assured: “we wouldn’t use them in our pre-trade models.” LLMs may be used as a guide, but during volatility trust in these programmes declines.
“We’re not using AI in pre or post trade,” he continued. “AI is a reason that markets have become more efficient, but it has also increased volatility.”
Fregeau was more optimistic towards LLM use, stating that Impax uses the technology in third-party cost models to establish expected costs and measure how executions perform
Kevin O’Connor, global head of analytics, Virtu
against that.
From a vendor perspective, Kevin O’Connor, global head of analytics at Virtu, agreed that pre-trade models should be seen as decision-support tools rather than predictive models and called for a change of mindset around the technology.
Panelists did not comment on the particular vendors they used for pre-trade models.
Whether vendor or client, the industry agrees that pre-trade models are advisory rather than prescriptive. While technology and data analytics are developing at pace, they are far from being able to predict the future.
Jon Relleen, director of infrastructure and exchanges, supervision, policy and competition for markets, Financial Conduct Authority
The UK Government has established the legal framework for the Private Intermittent Securities and Capital Exchange System (PISCES) stock market system.
Stock markets will be able to launch Private Intermittent Securities and Capital Exchange System (PISCES) platforms “in the coming months, with shares likely to be traded in the Autumn,” the Treasury stated.
Through PISCES, which allows for the intermittent trading of private company shares, UK authorities aim to provide more liquidity to early-stage companies and increase capital market engagement.
Speaking at TradeTech on 14 May, Jon Relleen, director of infrastructure and exchanges, supervision, policy and competition for markets at the Financial Conduct Authority, discussed the introduction of PISCES amid the growth of private markets.
Jon Relleen, director of infrastructure and exchanges, supervision, policy and competition for markets, Financial Conduct Authority
“Increased activity in private markets has been helpful. Lots of money has been flowing through to companies. We don’t want to see it as a competition between public and private markets. What we ultimately care about is the ability for companies to raise funds, promote growth and innovation, and invest.”
Earlier this year, a report from New Financial and HSBC noted that more than US$1 trillion had been lost to private markets within the last decade.
“We’re very conscious that we don’t want these kinds of cliff edges between public and private markets. PISCES has been about reducing that. We understand there is a demand for a regulated marketplace around some second market transactions in the private space.”
Full rules will be published by the FCA once legislation comes into force.
Employees who have share options in their company through an enterprise management incentive (EMI) or company share option plan (CSOP) will be able to trade their shares on PISCES, Exchequer Secretary to the Treasury James Murray confirmed. Initially proposed in the 2025 Spring Statement, this will allow employees to retain tax advantages.
“[This will] boost the attractiveness of the product to high growth companies looking to expand,” noted Emma Reynolds, economic secretary to the Treasury.
Julia Hoggett, CEO of the London Stock Exchange, which developed PISCES, commented: “We look forward to launching our Private Securities Market, utilising the PISCES framework. This will provide private companies and their shareholders with further options to access liquidity, and investors the opportunity to invest in a broad range of high-growth private companies.”
PISCES transactions will also be exempt from stamp duty and stamp duty reserve tax, as confirmed in the 2024 Autumn Budget.
“These are important milestones in delivering the Government’s plan to go further and faster to drive economic growth through the Plan for Change, by supporting private companies to scale and grow, by providing a stepping stone to public markets, and supporting our world leading capital markets,” Murray concluded.
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Warming relations between the UK and EU are making an eventual shared consolidated tape more likely, according to regulators – and to the relief of market participants.
