By Stephanie Lawton
Advances in electronic trading technologies, including DMA, and the role of FIX in streamlining global investment strategies were top of the agenda at the FIXGlobal Face2Face event, held in Kuala Lumpur, Malaysia on the 21st of May. FIXGlobal’s Stephanie Lawton reports.
Opening the event, UBS’ Owen Tomlin, Head of Direct Execution Sales for SE Asia, gave an overview of the latest developments in the FIX Protocol, its impact on the regional trading environment and the advantages it offers for both the buy and sell-side of the industry.
Tomlin was followed by an exchange between Invesco’s Regional Head of Operations, Dean Chisholm, and Rebecca Thomas, UBS Investment Bank’s Direct Execution Sales & Marketing. The topic was ‘The Importance of Electronic trading to the Buy-side.’
The speakers conceded that front-end capital expenditure was unavoidable for the adoption of electronic trading hard and software, but agreed that prices were likely to come down as the technologies became more widespread. The advantages, however, were now indisputable. The need to manage compliance and risk, coupled with an increasing focus on global investment strategies meant that electronic trading technologies were now an essential tool in navigating global markets and regulatory requirements. The role of the trader, they believed, would now be more focused on cost analysis and understanding market impact on trading strategies.
Tasked with updating delegates on the priorities of the Malaysian Securities Commission, its Head of Institution Supervision Department, Market Supervision Division, Puan Shareena Mohd Sheriff, said the Commission had looked at best practice in similar jurisdictions overseas before formulating guidelines to clarify the kind of electronic facilities that would be regulated under the Capital Market Services Act .
The next session opened with Peter Tierney, MD Asia region, NYSE Technologies, adding an international perspective on the changing trading environment for exchanges and cautioning the delegates that, with the proliferation of electronic trading, the onus was on the industry to become more efficient.
Tierney was joined by Bursa Malaysia’s CIO, Jit Jee Lim, who spoke about the challenges faced by the domestic exchange. Among the major projects close to fruition was the launch of DMA. The bourse was also looking at de-coupling the business of the exchange, looking at co-location and exploring new OMS and certification. In terms of FIX, Lim said the industry needed to embrace the Protocol and that Bursa Malaysia would support them by being FIXenabled and capable of leap-frogging to the latest versions. Lim added that the bourse worked closely with the local regulator and that the ability of trade across multiple Asian exchanges was still under discussion.
Immediately after lunch, Shireen Muhiudeen, Principal Fund Manager / MD, of Corton-Smith Asset Management and Azura Azman Head of Equities Broking Division, RHB Investment Bank focused on the importance of electronic trading to the local sell and buy-side. Azman, speaking from the sell-side perspective, said that while Best Execution could be described as “when clients don’t complain”, the onus was on the industry to constantly exceed client expectations. This she argued could only be achieved using electronic trading. Muhiudeen agreed, adding that electronic trading was now standard and that, as well as assisting with best execution, it provided a safeguard for all sides of the trade.
Azman highlighted that the implementation of FIX was not without challenges, saying that with a glut of suppliers it was difficult to gauge which best suited your requirements and that there were considerable cost factors. At RHB, she said, they had taken a step by step approach that matched their needs and preferred a system that was both flexible and scalable.
Muhiudeen said they continued to have a long and happy relationship with Bloomberg, but agreed that they were always open to competing solutions providers that offered value to clients in a cost-effective way.
Turning to DMA, Muhiudeen said it would bring greater cost and risk to the buyside, but conceded that ultimately the client would determine whether execution was performed in-house or not. Azman believed that DMA would attract different players, but that there would still be clients that needed sales traders who could add more value through information flows.
The session concluded with a plea from Muhiudeen to local exchanges to fasttrack the ability to trade across multiple exchanges in Asia.
The highlight of the day was the demonstration of a live DMA trade by Stephan Kwong, Executive Director, Head, DMA Connectivity at AMFutures, AM Bank Group and Andrew Tiang, MD of N2N Connect.
While offering assurances that there was “no guarantee for success”, within no time, the connection was up and running, demonstrating to the delegates the efficiency of trades using DMA. Adding to the display, Tiang executed the DMA trade using an algo. Delegates later commented that the trade had been so successful that Tiang should be buying the first round later that evening!
Wrapping up the day, Kwong was joined by Lim Jong Hau, Head of Equity Derivatives Group, CIMB Investment Bank and James Rae, Advanced Execution Service, Head of AES Sales, Credit Sussie and Gerald Blondel, Head, Infrastructure Planning, Global Market Strategy, DMA Project Director of Bursa Malyasia.
Together the panelists spoke about the effect of global market developments on the trading community in Malaysia. Lim said he felt that the introduction of DMA would stimulate the Malaysian market significantly. Kwong agreed, saying reactions from his clients had been positive and he hoped that Bursa Malaysia would meet its third quarter timeline for live DMA trading on the exchange.
The ease with which algorithms could be fitted into DMA was also applauded by the panelists, with Lim and Kwong saying it allowed greater automation and security for trades, and would free up traders to focus on increased orders and strategic investment decisions.
Blondel wrapped up the day asking the delegates for their wish list for Bursa Malaysia. The overwhelming preference was for DMA to be fully operational as quickly as possible.
For details on the next Face2Face event, please visit www.fixglobal.com