Global asset manager and custodian Northern Trust has adopted an open architecture that will simplify integration with a range of best-in-breed vendors, according to company officials.

“We do not believe that we have to own every piece of the value chain,” said Stephen “Biff” Bowman, CFO of Northern Trust during its first quarter earnings call. “An example is an order management system. It is our goal to allow our clients to access our technology and allow them to communicate and process their trades in an efficient manner.”

The OMS market is competitive with some very good providers, he noted. “We think being able to partner and integrate with those vendors is very important.”

Northern Trust has integrated with significant OMS providers, which includes Bloomberg. The asset manager stated at the end of March that it had added support Bloomberg AIM.

The firm’s strategy aims to drive operational efficiencies for clients, minimizes implementation costs, and reduces operational risks, according to Pete Cherecwich, president of corporate and institutional services at Northern Trust.

“Our approach to supporting the needs of asset owners and asset aggregators is all about optionality, flexibility, collaboration and ultimately driving performance,” he said in a prepared statement on March 26.

In other recent news, Northern Trust has reached a milestone with its private equity blockchain, which the firm has operated since 2017. The asset manager can now deploy legal clauses from digital agreements as smart contracts onto the blockchain.

Northern Trust worked with tech startup Avvoka to enable Emerald Technology Ventures and its investors to negotiate, review, and digitally sign agreements, such as limited partnership agreement side letters.

“The ability to leverage digital documents that include smart contract code across multiple platforms is a very significant step toward the future digital environment of securities servicing,” said Cherewich in a separate statement.

Global cloud providers, such as Amazon, Google, and Microsoft, have demonstrated the power of the standard APIs to deliver global functionality, which is a lesson not lost on Wall Street.

“We see the desire to break up silos and make the trading experience, and the underlying technology, seamless across regions,” Anthony Amicangioli, founder and CEO of HPR, told Markets Media. “The future is a global architecture where everything has the same look and feel whatever the region. The way you interface or connect your APIs becomes normalized so that it is not done one way in New York and another way in London.”

To address the trend, HPR has released CRM-X, the latest component of the vendor’s real-time risk-management portfolio of its Central Risk Manager application and a variety of gateways, which all are based on service-oriented architecture.

“It is designed to be the parent in a hierarchy where you would run multiple CRMs under the CRM-X,” he said. “CRM-X becomes a global management system that interconnects with the CRMs as subsystems.”

Whereas HPR’s CRM collects and distributes real-time risk and surveillance information for individual regions, typically defined by a single currency, CRM-X can receive drop copies from those regional subsystems and provide a view of a single trading entity based on a 24-hour trading cycle, which lets firms “follow the sun” and leverage cross-regional margin accounts globally, according to company officials.

Users accessing the CRM and CRM-X applications can select between the regional or global views, which have the same look and feel.

Of the many functions within global trading organizations, Amicangioli predicts that surveillance will be the first to migrate to global platforms.

“Not only will they use the CRM-X monitoring and display in real time, but also pull data from it to provide wholistic back-end reporting and real-time surveillance,” he added.

Exchanges are expected to make acquisitions to expand their data businesses over the coming year and enter the alternative data space according to Opimas.

The management consultancy said in a report, Exchanges: Innovation and New Business Models to Drive Growth, that selling market data has been a key part of exchanges’ business model in order to generate revenues streams that are less volatile and cyclical than transactional fees. The study continued that some exchanges now generate far more from data than they do from trading and clearing, including London Stock Exchange Group and Switzerland’s SIX, if revenues from the latter’s subsidiary, SIX Financial Information, are included.

“Data still account for a minority of revenues for most exchanges,” said the report. “Over the coming year, we expect to see a number of these exchanges make acquisitions to bolster their data businesses, as they continue to seek additional revenue streams.”

However the increasing cost of market data from exchanges has led to complaints from members. Octavio Marenzi, founder and chief executive of Opimas, said in the report that these complaints are misplaced as market data revenues have been falling at some of the largest exchanges including CME, Deutsche Börse and London Stock Exchange Group.

“For those exchanges where we have seen strong growth, this has typically come from areas such as indices or analytics and has been fuelled by a large number of acquisitions in the area, rather than organic growth,” he added.

Nasdaq today reported results for the first quarter of this year and said in a statement that market data comprised 16% of total net revenues at $100m, the same as in the first three months of 2018.

1Q19 $NDAQ earnings results: Strategic repositioning and non-trading review growth continue https://t.co/7lnQGj0HU7 pic.twitter.com/tEJsdBNAPt

— Nasdaq Exchange (@NasdaqExchange) April 24, 2019

Opimas identified Nasdaq as the exchange which has pursued alternative data most aggressively creating the Nasdaq Analytics Hub in 2017, and acquiring Quandl, an alternative data provider, last year.

“While Nasdaq has staked out a position in alternative data, other exchanges have been reluctant to follow,” added Marenzi. “However, we expect to see more exchanges enter the fray, since it is a natural extension of their existing market data and index businesses.”

Nasdaq reported that investment data & analytics were at $39m in the first quarter of 2019, up $15m year-on-year.

What is Nasdaq’s edge? $NDAQ CEO @adenatfriedman speaks with @CNBC about the company’s strategic pivot to technology and data. https://t.co/6K0ZRP1Xex pic.twitter.com/UIxemwc7jG

— Nasdaq Exchange (@NasdaqExchange) April 24, 2019

Indices

The consultancy said exchanges have also diversified through acquiring indices. Nasdaq reported that its index business contributed 9% of total net revenues at $54m in the first quarter of 2019, up $4m from a year ago. The exchange said ETP assets under management tracking Nasdaq indexes increased 13% year over year to $196bn at the end of March 2019.

Opimas said the European Union’s Benchmark Regulation (BMR) has also provided a boon to index providers, which have been able to levy additional fees to users of their indices for regulatory reporting.

This month Deutsche Börse said in a statement it was acquiring Axioma, a provider of cloud-based portfolio and risk management software, for $850m and combining it with its STOXX and DAX index businesses to form a new company.

@AxiomaInc will combine with @DeutscheBoerse's index businesses @stoxx and DAX to create a new, leading buy-side intelligence player. Read here: https://t.co/xvyYLUtqiI pic.twitter.com/wZCPFp6inF

— Axioma (@AxiomaInc) April 9, 2019

Sebastian Ceria, founder and chief executive of Axioma, said in a statement: “The union of Axioma, STOXX and DAX under the Deutsche Börse umbrella creates a growth company that is uniquely equipped to help clients capitalize on the critical trends now reshaping the investment-management landscape.”

Deutsche Börse and Axioma have had an existing partnership since 2011 and have jointly developed products, including factor indices and exchange-traded fund offerings.

Two out of three ain’t bad, rocker Meat Loaf used to sing.

But in reality its more like 6 out of 10 millennials, 58%, are actively saving for retirement, with the average amount already saved being $26,475, according to a new survey from LendEDU. The firm’s newest millennial study also found that few millennials are investing outside of their retirement accounts, with only 35% of older millennials (33-38) playing the market. But those that do still strongly prefer traditional advisors over robo-advisors.

LendEDU’s research was predicated on the fact Millennials catch a lot of heat these days for the numerous things they do wrong. So, the question remains, does this generation get anything right?

In total, 1,000 American millennials were surveyed for this particular survey. All respondents fell within the ages of 23 and 38, the millennial age range, according to Pew. Additionally, a quota was used to ensure the study received a near even split of millennials between three income brackets. 340 millennials in the high-income bracket, which is an individual annual income bracket of $100,000 or more, were surveyed. 330 millennials in the middle-income bracket, which is an annual income between $50,000 and $99,999, were surveyed. Finally, 330 millennials in the lower-income bracket, which is an individual annual income of $49,999 or less, were surveyed. The income brackets are pre-established parameters set by Pollfish.

This survey was conducted over a two-day span, starting on March 1, 2019 and ending on March 2, 2019. All respondents were asked to answer all questions truthfully and to the best of their abilities.

Through surveying 1,000 Americans aged 23 to 38, LendEDU found that the majority of the largest living generation have already stowed away a considerable amount of money – that will continue to compound – in preparation for the golden years.

But, what about investing outside of retirement saving? While millennials could be more actively involved in the market, survey data also revealed that this generation still greatly favors traditional financial advisors over robo-advisors, dispelling a common narrative. The goal of this particular study was to capture a broad snapshot of millennial investing habits, from retirement savings to personal stock plays. The data was further broken down by income and age in order to more clearly define the finance spectrum that exists for millennials.

Observations & Analysis

Interestingly, income appeared to have the biggest impact on if a millennial was saving for retirement as the result range (34% to 77%) was wider when the results were broken down by income compared to when the same answers were classified by age (41% to 65%).

However, age was definitely the biggest factor in terms of how much the average millennial was stowing away for retirement, the survey found.

Age holds much more weight in determining how much millennials have saved for retirement rather than individual annual income. This could be attributed to two things:

Compound Interest

First, is the power of compounding interest. The sooner one begins to save, the greater that power becomes. Compound interest is the interest generated based on the initial principal amount, in addition to the interest accumulated over time. Essentially, an investor is earning interest on interest, which can lead to a rapid snowballing of wealth.

Time is the greatest ammunition for compound interest, not amount saved each month. For example, Susie invests $5,000 per year into her 401(k) from the age of 23 until the age of 33, at which point she stops with a total of $50,000 invested. On the other hand, similarly-aged Bobby also invests $5,000 per year, but Bobby starts saving at age 33 and continues until he retires at age 63 with a total of $150,000 invested.

Assuming both Bobby and Susie’s 401(k) has the same annual investment return of 7%, Susie will have $602,070 in her account while Bobby will have $540,741 in his account when they both reach age 63. Although Bobby invested for 20 extra years, Susie is reaping the benefits of compound interest as her investment return in those first 10 years is snowballing rapidly.

For the full report, please click here:

High-Earning Millennials Not Contributing as High of a Percentage of Income

It was a tad surprising that there was such little disparity in average amount saved for retirement when the results were segmented by income level.

Between low-income millennials and high-income millennials, the average amount put away for retirement only differed by $188. Considering that the groups were separated in annual income by $50,000, one would think wealthier millennials would have a bit more stowed in their 401(k) or IRA.

It is entirely possible that high-earning millennials are not contributing a high enough percentage of their recurring paycheck proportional to their individual annual income. Most financial planners recommend saving between 10% and 15% of annual income for retirement.

The Big Three For the Few Millennial Investors? Finance, Tech, & Healthcare

LendEDU also wanted to see if we could uncover any other millennial investing trends not specifically geared towards retirement. They first asked millennials if they invested in the market through a personal brokerage account.

As a whole generation, millennials do not appear to be very keen on making personal plays in the stock market outside of retirement contributions. In not one instance, did more than half of any cohort indicate that they were investing in the market through a personal account.

For example, 30% of the overall respondent pool said they were personally invested, while 15% of low-income millennials were as well, which is not surprising as they may not have the additional income available. However, a mere 35% of older millennials aged 33 to 38 were making any type of Wall Street play.

This lack of involvement in the stock market could stem from a deep-seeded mistrust of Wall Street as millennials grew up in the midst of the 2008 financial crisis.

Millennial Money is Going to Three Main Sectors on Wall Street

Although there were few millennials that were personally investing in the stock market, those that were playing the stocks were incredibly consistent in their choices.

In nearly every breakdown of the results – overall, by age, and by income level – millennials were most heavily invested in financial stocks, followed by technology and healthcare.

Finance stock plays were overwhelmingly the most common investment amongst millennials across all income levels and age groups. As government regulations have been gone through a considerable rollback, financial stocks have prospered which spells healthy returns for millennial investors.

Additionally, it is none too surprising to see this generation so interested in gambling on tech stocks. Millennials have grown up as tech giants like Apple, Alphabet, and Facebook have become dominant players on Wall Street.

While millennial involvement in the stock market is minimal, the ones that are investing are seemingly making smart plays. One particular expert recommended that millennials buy into three sectors: finance, healthcare, and tech.

Financial Advisor Use is Strong & Still Preferred Over Robo-Advisors

Overall, 21% of millennials indicated that they use a financial advisor to help them manage their finances. When accounting for income level, 30% of high-income millennials use a financial advisor, while 21% of middle-income millennials do the same. Only 11% of low-income members of this generation said they use a financial advisor, likely due to a lack of funds to pay for advising fees.

Finally, 19% of younger millennials stated that they used a financial advisor, while 32% of middle-aged millennials and 35% of older millennials did the same.

While the numbers don’t exactly jump off the page, they are relatively strong when one considers that the same survey indicated scarcely any millennials are invested in the stock market outside of their retirement account.

In an even more promising result for traditional financial advisors, those millennials that do employ traditional financial advisors overwhelmingly believe they are worth the cost.

Throughout all breakdowns of the data, the lowest percentage of millennials that believed their financial advisor was worth the cost was 84%, and that belonged to low-income millennials. So, even those consumers that might be scraping buy to afford their advisor still believe they are getting good value for their money.

This all bodes well for traditional financial advisors, who have been battling uphill in recent times as technological advances have increasingly made the financial advising industry more automated and affordable. This should subsequently make paying high advisory fees for a traditional human advisor harder to justify.

However, Millennials still want human advisors over robo-advisors. While 19% of millennials had no preference between a human advisor and a robo-advisor, only 16% opted for a robo-advisor, while 65% wanted the traditional financial advisor. Furthermore, the data remained incredibly consistent relative to the overall results when age and income breakdowns were implemented.

While robo-advisors are certainly making headway and may continue to do so, human financial advisors should not worry too much as they are still much the preferred option for tech-savvy millennials. Even when it comes to data-driven investing, consumers still want that human touch. We also found similar trends in a previous survey we conducted.

Although J.P. Morgan and Citi have distanced themselves from the pack of other major dealers in global FX, banks like UBS and Barclays also won client relationships and trading share last year, making an already competitive market even more so. J.P. Morgan and Citi are both at the top in the critical area of e-trading—which now accounts for 80% of global FX trading volume by customers—while also excelling in traditional sales and trading.

Citi defends its title this year as the world’s top FX dealer to global corporates, with J.P. Morgan and HSBC tied in second place. Barclays and Bank of America Merrill Lynch round out the field, tying in the No. 4 spot. Among financials, J.P. Morgan ranks first, while Citi is not far behind in second place. UBS ranks a more distant third and is followed by a tight-packed group of Barclays, Deutsche Bank, Goldman Sachs, with global market shares so close they are statistically tied. These dealers are the 2019 Greenwich Leaders in Global FX Market Share.

“These dealers’ varying strengths and focuses are reflected when looking at the top banks by the major client segments,” says Greenwich Associates consultant Satnam Sohal.

For Dealers, Thinner Margins, Tougher Competition
Thanks to the dual trends of e-trading and more intense competition, dealers are finding it challenging to make money on some transactions, including many G10 spot trades. While these trades are increasingly viewed as loss leaders required to win other, more profitable business, dealers are starting to be more selective in how they allocate their resources across clients.

“Although many of these trends seem to favor the biggest dealers with the biggest IT budgets, smaller and regional banks can compete successfully by carving out a niche, be it in specific currency pairs where they have a natural advantage, in complex structured trades or in specific client segments such as corporates—especially those companies to which the bank provides credit,” says Greenwich Associates Managing Director Frank Feenstra.

In European FX, Global Dealers Dominate but Regional Players Remain Relevant
In the highly competitive and increasingly electronic European FX business, regional banks are finding ways to carve out a niche by focusing on their core domestic banking clients, taking advantage of their close physical proximity to local companies, and leveraging their strength in their home currency if it is not part of the Eurozone.

Local banks in Germany, Italy, the Netherlands, and the United Kingdom feature prominently in their home markets. While global FX dealers rank as the 2019 Greenwich Share Leaders due the large FX volumes they trade with a comparatively small number of MNCs, local dealers tend to have a larger footprint and to trade FX with a larger number of corporates. And although Citi and HSBC rank among the 2019 Greenwich Quality Leaders in these countries, domestic dealers are delivering high levels of service to their customers.

In Canadian FX, E-Trading Grows as Non-Canadian Bank Ups its Take of the Business
The three banks sharing the title of 2019 Greenwich Share Leaders in Canadian Foreign Exchange Services are building out their cutting-edge technology platforms and riding the wave of electronic trading to a dominant position in FX.

At the top of that list is RBC Capital Markets, which boasts the market’s most sophisticated and highly regarded e-trading platform. Likewise, the No. 2 ranked BMO Capital Markets and the third-ranked TD Securities are moving fast up the technology curve and are also gaining ground.

Overall, National Bank Financial, an FX dealer that thrives among corporates and is expanding into investors, leads in the ability to understand client needs and deliver intensive sales coverage and earned the title of Greenwich Quality Leader for Canadian FX Service in 2019.

Click here for the full list of 2019 Greenwich Leaders in Foreign Exchange Services – Global

OPR – the Order Protection Rule – has been depending on one’s point-of-view either a good thing when trading or not. For the institutional buy-side and brokers that must comply with best execution requirements it has been good but for the sell side it has added to their duties and added to their technology spend and compliance responsibilities. It has also helped level the playoog field between Mom and Pop investors and the Vanguards of the world.

Now, the OPR or also known as the trade-through rule (Rule 611), has been and still is a central tenet of Regulation National Market Structure (Reg NMS), which requires brokers to route orders to the venue displaying the best price. It ensures that investors receive an execution price that is equivalent to what is being quoted on other exchanges.

One of the key arguments for keeping the trade-through rule is that it has served as a “back-stop” protection for displayed limit orders particularly from retail investors. A second argument is fear of a new compliance burden that would fall on brokers if the rule were scrapped. If 611 were eliminated, firms would need to prove that limit orders posted on a trading venue were not getting traded through.

Retail brokerages have come to rely on Rule 611 to ensure they are providing individual investors with the best price available across all exchanges and off-exchange trading venues.

In a recent thought leadership paper, Nasdaq outlined some important suggestions for improving market structure. While the paper is comprehensive it is not exhaustive in covering all myriad market structure topics, but it focusses on three central areas the exchange operator thinks need closer and immediate scrutiny:

Suspending unlisted trading privileges (UTP) for thinly traded securities
Reform of the Order Protection Rule
More intelligent tick regime to combat a one size fits all market structure
Changing the definition of professional and non-professional market data users
Reform of Securities Information Processors (SIP)
It is number two that is the subject here – the OPR. Nasdaq’s position is that it should be reformed or fixed. Phil Mackintosh, Chief Economist, Nasdaq spoke to Traders Magazine and said reformation makes the most sense.

“Updating the Order Protection Rule makes sense to most in the market as it would help reduce the fragmentation in the market and the forced connection costs. This is an example of where a “one size fits all” regulation, although equal to all, is considered unfair by some participants,” Mackintosh said. “Some might not find this proposal popular, believing it reduces protections for small investors, but we think modern markets have enough data and transparency to still hold those handling orders accountable.”

Nasdaq and Mackintosh believe there is a better way to maintain the benefits of the Order Protection Rule while creating a better balance between value and obligation. Nasdaq proposes to give investors some freedom to choose the small markets in which to trade by excluding the smallest markets from the Order Protection Rule. At the same time, exchanges like Nasdaq would unlock exchange innovation by giving the smaller markets the freedom to innovate, create differentiated market models, and compete on a more level playing field with non-exchange dark pools, all within the conventions of Best Execution and SEC Rule 605.

Remember – the Order Protection Rule was designed to “promote market efficiency and further the interests of both investors who submit displayed limit orders and investors who submit marketable orders. In particular, individual investor limit orders are protected, which makes the fragmented market less of a concern to those individual investors. Nasdaq argues that brokers no longer receive calls from individual investors asking why another trade occurred at a price that was worse than their limit price. If OPR was eliminated, the confusion would return and many individual investors would be calling their brokers with questions. In essence this led to a sort of renaissance period for individual retail investors and trading commissions and costs went down.

But many on the Street aren’t so sure what to do when it comes to the OPR. According to an ongoing Traders Magazine online poll that asked if the OPR should be revised, scrapped or left alone, 31% of respondents said to revise it, 31% said to scrap it altogether while 38% wanted to leave it alone.

David Weisberger, co-founder of CoinRoutes and market structure sage, told Traders Magazine that his thoughts on the Order Protection Rule (OPR) are simple:

“Abolish the OPR and strengthen best execution obligations via an overhaul of Rule 605,” Weisberger said.

As for some of the ideas put forth by Nasdaq in its whitepaper, Weisberger said that they are well- crafted to potentially improve markets while serving their (Nasdaq’s)own interests.

“Flexibility in the OPR would likely encourage innovations in market structure such as freeing block trading or auction venues to aggregate liquidity without having to sweep other markets,” he said. “It would not, however, stop the locked market problem that creates the competitive ISO orders that occur today and provides a lot of the need for ultrafast collocation and data services.”

James Angel, Associate Professor of Finance at Georgetown University’s McDonough School of Business, agreed with CoinRoutes’ Weisberger and said he too was in favor of scrapping the OPR altogether and replacing it with enhanced broker best-ex reporting.

“A lot of the lunacy in our current markets is a result of protected quotes,” Angel said. “As long as brokers are trying to get best ex, there is no need for exchanges to be in the business of routing orders to their competitors.”

Jack Miller, Head of Equities at Baird, was more circumspect about Rule 611 and what should be done. He told Traders Magazine that clearly Rule 611 is a hot button topic in the conversation around equity market structure and one of the more controversial features of Reg NMS. Its supporters – mainly speaking on behalf of retail investors – point to the rule’s success in limiting trade-throughs, reducing the negative outcomes associated with missed trading opportunities for those willing to display their orders. Its detractors – mainly speaking on behalf of institutional investors – point to the rule’s role increasing market complexity and making it more difficult to trade blocks. And in a lot of ways they are both right – creating difficult tradeoffs that address one symptom while potentially creating another.

“A minimum market share requirement (1.5% as recently proposed by NASDAQ) would directly address one element of this complexity by increasing barriers to entry for new exchanges wishing to display protected quotes and thereby reducing the systematic costs and risks imposed by requiring other market participants to connect to those new venues,” Miller said. “Besides creating a bit of a chicken-and-egg problem that strongly favors incumbents, this proposal has the benefit of being simple and objective (market share being straightforward to measure). While market share alone may not capture the subjective concept of “value” added to the markets, some kind of de minimis exemption makes sense in my view.”

Miller disagrees with CoinRoutes Weisberger and Georgetown’s Angel on dumping the OPR.

Why?

“Ultimately an outright repeal of the Order Protection Rule could lead to a regression into some of the market features that gave rise to its implementation in the first place – clients missing opportunities to trade or trading at inferior prices,” he began. “There are no simple answers but capturing the spirit of this rule while enhancing liquidity discovery and removing impediments to trading in size are worthwhile goals. One issue with Rule 611 is it applies the same way across stocks with very different liquidity and price characteristics. It’s worth considering whether the rule can be ‘tuned’ to better balance the needs of retail and institutional investors across a wider variety of securities.”

In the words of Miller, stay tuned for more.