Blog : Stemming the Brexit tide : Lynn Strongin Dodds

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June 21, 2017

STEMMING THE BREXIT TIDE.

It is hard to believe that it is only a year ago that the UK voted to leave the European Union. It seems like years and the uncertainty has only escalated in light of the Tory government failing to win a majority. While few are willing to call the outcome of what will certainly be long laborious Brexit talks many banks are not waiting and are already hatching their escape routes.

They of course cannot afford to wait, and a hard Brexit will certainly impact financial services which contributed about £71bn to the UK economy last year, according to PwC. Stemming the tide will be crucial especially if predictions from research group Bruegel materialise. The Brussels based firm estimates that the City could lose around 30,000 jobs as global banks may be forced to shift €1.8 trillion (£1.6 trillion) of assets to the continent after the UK shuts the EU door.

While this number may seem eye-watering, the announcements of impending departures have come thick and fast. Over the past year, HSBC indicated it could move its London based trading operations, which generate about 20% of revenue for the lender’s investment bank, to Paris while Goldman Sachs intimated that is was already implementing plans to relocate hundreds of staff out of the City before any Brexit deal is struck. Meanwhile UBS is looking to move 1,000 of the bank’s 5,000 jobs in London while JP Morgan is exploring different European and overseas locales.

Many in the Square Mile and Canary Wharf may take comfort from the united front put forth by Chancellor of the Exchequer Phillip Hammond and Bank of England Governor Mark Carney to defend the City’s fortunes. In his Mansion House speech, Hammond, emboldened by a weakened Prime Minister, broke ranks and said changes to customs arrangements should be phased in with transitional measures to protect key industries.

As for the City, he warned, “Fragmentation of financial services would result in poorer quality and higher-priced products for everyone concerned. Avoiding fragmentation of financial services is a huge prize for the economies of Europe, and I believe we can do it.”

This will grate with his hard-line colleagues including Brexit Minister David Davis who kick-started talks with his EU counterpart, Michel Barnier, earlier in the week. Although Davis adopted a stringent tone that confirmed Britain would be leaving the customs union and the single market, he did concede to the EU’s preferred order for the talks, which will mean trade negotiations do not begin immediately.

In the meantime, the political wrangling will continue on the UK domestic front and it is anyone’s guess whether the incumbent Prime Minister and her cabinet will be there for round two, set to begin the week of 17 July.

Lynn Strongin Dodds

Managing Editor, Best Execution

©BestExecution 2017

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News : Exane grabs top prize at Extel awards

By

Ian Rycott

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June 13, 2017

EXANE GRABS TOP PRIZE AT EXTEL AWARDS.

Exane BNP moved up the ranks to take the top prize for equities in this year’s Extel Survey which is often dubbed as the Oscars of the City. The French bank beat UBS and Morgan Stanley who came in second and third respectively.

For the last two years, Morgan Stanley has been named the leading pan-European brokerage firm for equity and equity-linked research. Prior to that, since 2000, only UBS – for a dozen years – and Bank of America Merrill Lynch were in the enviable number one spot.

Exane BNP Paribas bolstered its equity capital markets business in January with three hires, including Andreas Bernstorff, who joined from Citigroup as head of ECM in Europe, the Middle East and Africa. The bank also brought in Bénédicte Thibord from Kepler Cheuvreux to become global head of corporate access, and Phil Griffith joined from Morgan Stanley as deputy head of equity sales.

The results of 2017 carried added significance in the run-up to MiFID II. The unbundling requirement is shining an ever-brighter light onto the quality of investment banks’ research capabilities and in order to be relevant, brokerage houses need to be among the top three.

On Equity Trading & Execution, Kepler Cheuvreux made a very impressive move up from 10th to 3rd. They are now 1st in Electronic Trading, #1 in High-Touch Sales Trading, 3rd in Delta One/ETFs and 9th in Program/Portfolio Trading. Kepler Cheuvreux are one of the few agency-only brokers in Europe that own their execution technology (in-house R&D).

Kepler Cheuvreux, Patricia Shin-Ranunkel — Patricia Ranunkel, Global Head of Salestrading, Kepler Cheuvreux

As Ben Spruntulis, head of research at Exane BNP Paribas, said: “MiFID II will fundamentally change the way equity advisory services are priced, delivered and consumed. We believe that top people, quality product and great service will be more important than ever.”

As for other results, UBS retained its crown as the leading bank for equity trading and execution, followed by Morgan Stanley and Kepler Cheuvreux. However, the Swiss bank lost its pole ranking in the category for equity sales, dropping out of the top three spots, which were filled by Exane BNP Paribas, Morgan Stanley and Bank of America Merrill Lynch, respectively.

On the asset management front, J.P. Morgan Asset Management kept a firm grip as the number one ranked fund manager while Amundi Asset Management came in second and Allianz Global Investors in third, a drop from second last year. In terms of equity trading acumen, the winners were Lupus Alpha Asset Management, Deutsche Asset & Wealth Management and EFG Bank.

The 2017 pan-European survey elicited a larger participation than ever before with over 600 rankings covering equity sectors, economics and strategy, equity derivatives, emerging markets, and UK small & mid-caps categories.

©TheDESK 2017
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Best Practices in Sellside Regulation Implementation: How Regulators are Crafting the Self-regulating Bank

By

Ian Rycott

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June 12, 2017

Best Practices in Sellside Regulation Implementation — How Regulators are Crafting the Self-regulating Bank

GreySpark Partners presents a report that provides investment banks with guidance on how to build a forward-looking, self-regulating sellside institution that has the flexibility to adjust to ongoing regulatory demands and the resilience to remain competitive within the industry. The financial crisis has dramatically reshaped the regulatory landscape, precipitating a significant change in the attitudes and approaches toward regulation for the regulatory bodies within the EU and the US, the largest banks in those jurisdictions and their clients.

https://research.greyspark.com/2017/best-practices-in-sellside-regulation-implementation/

Buyer’s Guide: Trade Surveillance Systems — Protecting Against Internal Violations of Trading Rules

By

Ian Rycott

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May 26, 2017

Buyer’s Guide: Trade Surveillance Systems — Protecting Against Internal Violations of Trading Rules

This report reviews six third-party technology vendor trade surveillance systems utilised by both buyside and sellside markets participants. The vendor solutions featured in the report are:

eflow’s TZ;
Fidessa’s Market Abuse Monitor;
First Derivatives’ Kx for Surveillance;
LiquidMetrix’s Market Surveillance;
OneMarketData’s OneTick Trade Surveillance; and
Sybenetix’s Compass.

https://research.greyspark.com/2017/buyers-guide-trade-surveillance-systems/

Trends in Derivatives Trading 2017: An Analysis of the Progression of the OTC Fixed Income Swaps Futurisation Sellside Imperatives

By

Ian Rycott

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May 11, 2017

Trends in Derivatives Trading 2017 — An Analysis of the Progression of the OTC Fixed Income Swaps Futurisation Sellside Imperatives

This report assesses the sellside imperatives driving the futurisation of OTC fixed income swaps, looking specifically at the dynamics of OTC IRS and CDS indices trading. The report assesses how the regulations in both the EU and the US are impacting the market structure for trading in these instruments, and it provides an analysis of the possible reasons for the slow uptake of exchange-traded swaps futures.

https://research.greyspark.com/2017/trends-in-derivatives-trading-2017/

News : Ancoa acquired

By

Ian Rycott

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May 10, 2017

CINNOBER ACQUIRES MARKET SURVEILLANCE SPECIALIST ANCOA SOFTWARE.

By Dan Barnes, Editor of The DESK (sister publication to Best Execution).

Cinnober Financial Technology has acquired the assets of Ancoa Software, the UK-based market surveillance specialist company, as a going concern. Terms of the deal have not been disclosed, although fair value must be paid for assets. The company Ancoa Software was placed into administration on 5 May 2017 by business rescue and recovery specialist Leonard Curtis.

Ancoa lost its chief executive Kurt Vandebroek and founder and chief technology officer Andrew Louth in recent months, following a spate of concerns from customers regarding its capacity to process historical and real-time data. The firm’s systems were designed to provide surveillance and analytics for exchanges, regulators, buy and sell-side firms.

Cinnober, which has acquired the intellectual property rights, contracts and team at Ancoa, reports ten customers are moving across to a new entity, Cinnober Surveillance, which was incorporated on 4 May 2017.

Alex Cadwallader, director at Leonard Curtis Business Solutions Group and one of the Joint Administrators, said, “This deal has enabled the ownership of the business and certain assets to transfer to Cinnober without any disruption. We feel that it is the best outcome for all employees as well as customers.”

Existing Ancoa clients Convergex, MarketAxess, Linear Investments, Energie Steiermark and Cenkos Securities are named as moving across, while other known users, including Tradeweb, Quantlab and Tower Trading, have not been confirmed as moving across. Taking on the assets and staff of Ancoa, Cinnober says it hopes to be able to overcome the challenges faced by Ancoa customers.

“We have an army of developers and experience in building high performance systems and real time systems and so we can contribute to the architecture and the thinking,” says Veronica Augustsson, CEO of Cinnober.

Cinnober is an independent supplier of financial technology to marketplaces and clearinghouses. Its portfolio of offerings includes price discovery and matching, real-time risk management, clearing and settlement, index calculation and data distribution.

Augustsson continues, “The [Ancoa] development team is extremely good and the technology behind it is very good. We are 100% committed to continue to serve the customers and to meet their expectation on what was sold. There will be a three month clear-up process focussed on delivering existing commitments committed things and then we will have a refresh on sales, with a stable product and a more organised way of running a company.”

Ancoa was founded in 2010 by chief technology officer Andrew Louth and chief marketing officer Stefan Hendrickx. In September 2015 Ancoa closed a Series A funding round bringing its total investment to £4.145 million, with investors including Buysse & Partners, LRM Capital, SmartFin Capital, Velocity Capital and Ancoa’s management team as well as a number of high-net worth individuals and family offices.

Ancoa clients told The DESK in April that in some cases the Ancoa surveillance platform was not able to handle T+1 and historical datasets, while the real-time service was reported to be struggling to process the required number of transactions-per-minute.

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Managing Complexity Through Automation

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GlobalTrading

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May 10, 2017

By Damian Bierman, Head of Asia-Pacific, Portware

Technology provided by third-party systems improves trading efficiency and enhances execution alpha.

Buy-side dealing desks, tasked with achieving the goal of best execution, face very real challenges in the face of increased trade volumes and ever-rising complexity. Buy-side cost structure is under pressure around the globe, so adding more headcount is often not the answer. The need to manage large volumes of increasingly complex orders and execute them with quality presents an ideal opportunity for technology to fill the gap, delivering the kind of intelligent trade automation which allows trading operations to scale.

Below a certain notional value, for instance, a human trader is unlikely to add much value to a trade. They are not making the best use of their precious time, and likely incurring an opportunity cost in diverting their attention away from a more difficult trade where their skill and expertise can drive more incremental value.

The challenge, then, is to filter out the noise and provide traders with an alternative way of examining their orders. The aim here is to help identify where the high-value opportunities for intervention lie, and let automation do the rest.

In certain ways, trading is already moving towards exception-based management. Technology can be applied to create a framework of intelligent rules that analyses orders when they come in and, if they fit certain criteria, automatically allocates the orders to different buckets for intelligently automated execution. In this scenario, the trader is only notified if something goes wrong, or if a material event occurs that could impact price in an unexpected or unpredictable way, giving the trader a chance to get ahead of it.

The adoption of this framework has proven efficient, and Portware’s largest clients now automate as much as 70% of their trades. The residual 30% of their order flow that is managed manually is, not surprisingly, the really hard stuff where human expertise has the greatest impact. The traders get to focus their energies squarely on the orders where they’re going to make the most difference, which is both measurable and valuable—and typically, these orders are more satisfying for the trader to work.

Other techniques coming into play are centred around synthesizing a wide range of internal and external data points to help trading desks determine both how and where to execute their orders. These take into account factors such as broker commissions payments, or ranking brokers based on past performance for a specific name, sector or capitalization band, and then using those factors to devise a weighting system that determines where a given order should be routed.

Artificial intelligence and predictive analytics to optimize algorithmic trade execution
Algorithmic trade execution is another important area where technology is driving efficiencies and performance. A typical institutional buy-side trader could easily have 12 or more broker algo suites on their desk. However, it is almost impossible for a trader to know at any given point in time, with statistical certainty, the optimal strategy to be used to execute a particular order—a challenge that is compounded by the volume of orders they are working on over the course of a normal day.

Furthermore, it is not realistic to expect a trader to master the myriad nuances of all of the strategies offered by their brokers. Understanding these strategies to the degree necessary to deploy them optimally over time for a single order—let alone for an entire day’s worth of trades, many of which will have different characteristics, and often quite different factors influencing price movements and thus the trader’s ability to maximize alpha capture (or minimize alpha degradation, as the case may be)—is a tall order, and technology can help ease the burden.

In fact, helping to alleviate that complexity, while at the same time allowing a trader to get the very best from their algo provider of choice – who no doubt has poured lots of R&D dollars into the continued development of their execution strategies – is at the heart of some of the most exciting work going on in trading platforms today.

The cutting edge of execution technology today offers the ability to work within a particular broker’s algo suite, applying principles of artificial intelligence and predictive analytics to understand not only the key factors likely to impact a given trade, but also take into account the intentions and the style of the portfolio manager that identified the alpha opportunity in the first place. This all feeds models which tailor the execution profile for each order that a trader feeds into the system.

Once the schedule for an order is determined, the trade is implemented across the different strategies available to it over the life of the order. Whereas a human trader might only have the bandwidth to look at a given order a handful of times throughout the day – perhaps changing strategies a couple of times at discrete intervals – a system with intelligent capabilities will have the ability to monitor all orders continuously, running a tight feedback loop, tracking execution outcomes in real-time against a set of criteria and dynamically adjusting the execution strategy and its associated parameters automatically, in order to maximize alpha capture.

Creating a single, unified trading workspace
During the past two-to-three years, clients have told us time and again: “I don’t want my traders looking at two systems anymore.” While it’s perfectly acceptable for the middle office to keep the order management system (OMS) on their desk, and fine if the portfolio managers have it to monitor their positions, the trading desk should not need direct access to both an OMS and execution management system (EMS) in order to trade.

Instead, the message we’re hearing is that for any activity a trader might need to conduct in the OMS, whether that’s splitting out an order from a particular account, or aggregating a group of orders for a more streamlined execution, or managing allocations back to the OMS for post-trade processing, the preference – and sometimes even the mandate – from our largest clients is to be able to access these functions directly via the execution platform where they do their actual trading.

Not only is this “single workspace” concept becoming more evident in the interplay between the OMS and EMS, but we find it also applies to external systems that provide traders valuable colour and insights crucial to efficiently executing their trades. Whether that’s incorporating pre-trade analytics from one or more providers, integrating data from market microstructure experts which can assist traders in seeking liquidity, or acting quickly when material news breaks on a stock they’re tracking, traders have come to expect decision support throughout the trading day.

Ideally, all this market information, colour, and insight is synthesized from multiple sources and made available to the trader in the EMS—their trading cockpit—in real time, allowing them to harness the power of that information, making it alertable and, ultimately, actionable.

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Redefining The Trading Stack

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GlobalTrading

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May 10, 2017

By Ben Jefferys, Head of Trading Solutions, IRESS

Market participants need to take a clear, objective look at their own individual requirements before selecting an appropriate trading system.

Market complexity and escalating regulation are forcing both brokerages and fund managers to install new dealing technologies. The orthodoxy, in part promoted by influential service providers, is that an integrated multi-asset trading system is the panacea.

Typically, we are told that it is the role of the order management system (OMS) to collate order flows from all asset classes within one channel. However, although this is suitable for some firms with sufficient size to bear the high costs of investment and organizational structure to warrant a combined process, it is often less appropriate for others.

Unfortunately, many firms feel they have limited choice, compelled to use compromised or over-purposed solutions which are inflexible and hard to change by entrenched supplier incumbents or in-house solutions. Contracting commission pools for institutional brokers, means there is even further consolidation. Moreover, financial markets are highly segmented and tiered which can mean that all-encompassing multi-asset OMSs can complicate rather than rationalise processes.

Instead, it makes sense to re-define the trading stack. We should firstly recognise that not all sell-side firms are the same, nor are their clients. So it should be accepted that in order to best serve clients now and in the future the solution may in fact be to use separate systems that openly communicate across the stack.

To understand why, it is necessary to clarify the purpose of the OMS. In the first instance, its role is to manage order workflow, routing and execution to and from counterparties, exchanges, algo engines and dark pools. In addition, it should control risk and its design must be robust to capture uptime and resilient to ensure minimal disruption.

But, the selection of the best OMS depends on other factors too. It needs to be open and flexible, yet easily controlled so that clients’ individual risk can be managed. It must also be scalable and adaptable to changing future requirements, which means it should work for the benefit of the user in all circumstances. Too often a firm is stuck with an OMS that is no longer efficient, unable to swap it for a better system because of prohibitive cost or overwhelmed by the complexity of transferring.

Critical to the ultimate decision is whether to opt for a single- or multi-asset model. If multi-asset then what does that really mean? It is especially important now, because the industry is in a state of flux, having to reassess operational practices and structures concurrent with regulatory changes, notably Markets in Financial Instruments Directive (MiFID) II, while making sure it is well-placed to adapt or exploit unforeseen later developments.

Adapting to change
In these fluid times, when all industry participants have to make often costly adjustments, it is right to re-evaluate the trading stack and incorporate an ability to react to future structural changes with minimal disruption.

There are several key issues to address if considering a multi-asset platform, but they all lie within one fundamental question: does that option really suit my requirements? In fact, am I totally clear on my requirements?

For instance, if you need flexibility and specialisation, but lack the economies of scale or the ability to change the whole trading stack at the same time, then an all-encompassing multi-asset OMS might not only be a pipe-dream, but also expensive, defeating the objective of lowering costs. A sell-side firm – even a tier 1 investment bank – whose clients trade different asset classes need to clearly understand what multi-asset capability is required. It’s not a one-fits-all scenario.

Indeed, many clients look for specialisation in certain asset classes while maintaining an ability to handle others in a simpler form. Matching your trading stack to your firm’s core capabilities and structure is key. It is not uncommon to see different OMSs used across the asset classes traded by the sell-side.

This model has ramifications for the traditional middle office. But it need not be directly coupled to the OMS whereby each system used has its own middle office function. Instead it is shared by each vertical system. The sell-side can then bring it all together post-trade when the middle office becomes agnostic to the trading process. At all times this middle office layer remains informed; it is not a disconnected process.

This model creates an independent middle office function, integrated with several discrete OMS and execution management systems (EMS). This normalises the middle office workflow and interaction with third party trade processing agents and with of course the back office giving the sell-side full control and flexibility of their post trade process.

Another way of redefining the trading stack that we see is to incorporate middle office processing into the back office. If the latter has already been rationalised or restructured, it perhaps makes sense to extend its functionality to cover all aspects of the post-trade lifecycle.

When these designs are coupled with an open EMS strategy sell-sides can implement a powerful yet perfectly flexible and specialised multi-asset solution that isn’t limiting in the future.

However, there is a fine line between delivering specialisation and flexibility, and introducing cumbersome complexity. Problems often occur when in-house systems are introduced in a piecemeal fashion. To avoid them, it is essential to build your structure like a Lego edifice, making sure the parts fit together according to a plan in order to create the whole.

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Blog : The knives are sharpened : Lynn Strongin Dodds

By

Lynn Strongin Dodds

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May 5, 2017

THE KNIVES ARE SHARPENED.

As the UK political parties swing into campaign mode, the Europeans are focusing intently on wresting every European institution and activity back to their continental shores. This is particularly the case with euro denominated clearing which has been a hotly debated topic long before Britain decided to leave the European Union.

In fact, even when the business was a shadow of its current self, the Brussels cabal in the 1990s were annoyed that the service was based in London. Fast forward to 2015 and the European Central Bank tried to move it to the eurozone but failed when the European Court of Justice ruled that London could retain one of its most prized possessions.

The City which processes up to three-quarters of global euro-denominated derivatives, clearing a notional €850bn a day, is unlikely to be that lucky next time. The European Commission is seizing the Brexit opportunity and not wasting any time drawing its battle lines before anyone sits at a negotiating table.

Although the finer details have not been divulged it is thought that the Commission is gearing up to propose in June that UK operators of clearing houses have to either relocate to mainland Europe or to be directly regulated by European authorities. The argument is that these central counterparties may pose a significant systemic risk to the broader financial system and EU regulators need to be able to monitor and intervene to prevent any shocks to the systems.

There are reports that officials are considering a system of thresholds to determine if a non-EU clearing house should face increased European supervision or other measures. This could allow current EU-US agreements to remain unscathed, if transatlantic activity does not change significantly. More worryingly, it is also contemplating whether to set conditions that would automatically require LCH, the largest London-based clearing house, to relocate operations if it wants to handle the same level of euro-denominated trading.

The British, of course, are standing their ground and claim that moving clearing is not practical and will only benefit New York as a financial centre. The stakes are high; if the business is forced to move this could translate into the loss of up to 83,000 job losses over the next seven years, according to a recent study by EY.

However, the UK cannot have it both ways and if a deal can’t be reached, they may have to accept EU regulation which would go against the grain of wanting to extricate the country from the red tape of EU legislation.

This debate will be one of the most contentious issues of the Brexit talks and while it is difficult to predict the outcome, recent events have shown that we are in for a long, protracted, back biting and often nasty, two or more years of negotiations. Let’s hope it is more civil behind the scenes.

Lynn Strongin Dodds

Managing Editor, Best Execution

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Disruption Within A Regulated Industry

By

GlobalTrading

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May 3, 2017

By Tan T-Kiang, Chief Technology Officer, Grasshopper

Financial innovators face pitfalls and hurdles to compete successfully in a highly regulated environment and it’s not for the faint-hearted.

Customers around the world claimed to have lost $2.4 trillion in February 2014, when Mt. Gox, a Tokyo-based bitcoin exchange and the biggest in the world at that time, closed trading and took down its website. The decision was made just days after all withdrawals had been suspended and Mt. Gox CEO Mark Karpeles had resigned from the board of the Bitcoin Foundation.

Of the missing $2.4 trillion, only about $91 million has ever been recovered to distribute to claimants. Considering that all the Bitcoins in the world only add up to $7 billion, or 0.3% of the claim amount, the mystery surrounding this notorious incident involving the controversial currency is a timely reminder about the dangers of any decentralized and unregulated environment.

The fact that it occurred within the finance industry, one of the world’s most regulated industries, is a clear warning that we should not disregard the regulations that serve to protect the most vulnerable members of society, even if they seem to hinder and fetter disruption more than innovators and entrepreneurs would like.

Of course, disruption itself is an inherent feature of the world today, and an irresistible force in many industries. However, it is a significantly more achievable endeavour and its consequences are more benign in some industries than others.

For example, within the technological sector itself, the gaming ecosystem has been singled out for cultivating disruption. With an ever-evolving customer base, that is increasingly diverse but still bound by a collective identity that promotes a high comfort level with adaptation and change, the gaming industry has grown from strength-to-strength.

In terms of creating compelling content and capturing market share, everything – from content channels to gaming devices – has been disrupted. Long-established gaming heavyweights such as Nintendo and Sony are suffering an erosion of their businesses as relatively new players such as smartphone companies enter the market.

In contrast, heavily-regulated industries, such as finance, do not explicitly encourage innovation. After all, innovation stems from free-thinking, creativity and the capacity to allow for failure – all of which do not meld well with the stiff regulations that govern finance. Perhaps, the lack of free food and scattered beanbags in traditional financial firms makes it difficult to attract the top technological talent necessary to drive such change.

But jokes aside, it is tough to innovate from within an entity that is so heavily regulated. Many financial institutions have had to pick the necessary evil of diverting their resources into regulatory compliance rather than invest in innovation.

Forced into a position where their technological advancement measures are mostly reactive, banks and exchanges have been fending off rising competition from externally-led digital disruption, especially from the burgeoning Fintech sector, where companies have gained significant traction and recognition. These include major players such as Apple, Google and Alibaba, all of which offer payment services that were previously only provided through old-style financial institutions.

Despite the entrenched obstacles that limit the industry’s potential to drive innovation, traditional incumbents that do not increase their level of digital innovation to promote agility and advancement can be sure of one thing – they will pay the ultimate price of becoming obsolete.

Incentives to innovate
Ranging from automated teller machines, to online banking, to online payments for credit cards, banks around the world have shown that they are willing to adopt new technologies, even if the complex nature of banking systems means it is difficult for these institutions to implement digital disruption.

Exchanges, once dominated by established institutions, have been highly adaptable in terms of altering course.

The London Stock Exchange remodeled itself as a clearing and data operator rather than a traditional stock exchange. Futures exchanges such as the Chicago Mercantile Exchange surpassed traditional stock exchanges in value and acquired them, and other exchanges, such as the Singapore Exchange, moved from being primarily open-outcry trading platforms to fully-fledged technology-driven exchanges providing fair trading practices.

Meanwhile others, for example the Tokyo Stock Exchange, are investing in revolutionary technology such as blockchain, which they hope could change the way exchanges do business.

Moving forward, organisations should collaborate to leverage on their respective strengths. Large entities should work with smaller startups, and indeed, some have already pioneered the use of sandboxes or formed partnerships with fledgling companies to work together on projects and trials.

For instance, last year, DBS Bank in Singapore opened DBS Asia X, an innovation hub that has project pods and co-working spaces, that will house 40 startups that were part of an accelerator programme created and run by the bank.

Startups can lean on the infrastructure that larger organisations can provide, such as their hardwire expertise in regulatory compliance, established market presence and capital resources rather than building them from scratch.

And larger organizations would do well to learn from the startup culture of agility, being willing to embrace failure, and working with iterative improvements without knowing how the end product is going to look like – all traits which are fundamental to innovation and change.

Startups that have entered the financial industry and are discouraged by the maze of austere regulation should take heart. For startups that do not have the strength to innovate in an environment strewn with obstacles, it might be a wiser and, perhaps, an easier choice to pick another industry that is not quite as regulated.

However, those who believe they possess the necessary mettle, and are able to find the right partners and the best staff, might achieve results that will change the world we live in as well reaping lucrative rewards.

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STEMMING THE BREXIT TIDE.

EXANE GRABS TOP PRIZE AT EXTEL AWARDS.

CINNOBER ACQUIRES MARKET SURVEILLANCE SPECIALIST ANCOA SOFTWARE.

THE KNIVES ARE SHARPENED.

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