facebook linkedin twitter
Friday, March 14, 2025
facebook linkedin twitter

Outlook 2025: Jim Toes, STA

By
Anna Lyudvig
-

Jim Toes is President and CEO of the Security Traders Association (STA).

Jim Toes, STA
Jim Toes

What was the highlight of 2024?

STA experienced several notable highlights in 2024. Of course, the most significant outcome of the year was the election results — after months of uncertainty, the stage is set for a new regulatory landscape and a new set of legislative priorities, which is a crucial development for our members regardless of their political views. For our part, STA saw a strong rebound in terms of our affiliate events, with approximately 75 in-person gatherings taking place throughout the year. These events ranged from smaller, community-focused efforts to larger, content-rich conferences, demonstrating our commitment to fostering engagement and dialogue within the industry. Another key achievement was our successful 91st Annual Market Structure Conference held in Orlando, which combined a productive program with a resort setting to provide both professional enrichment and networking opportunities. Finally, the launch of the STA Arizona Chapter marked an important milestone for the securities industry in the Southwest, underscoring our growing presence across the country and the increasing activity in emerging or non-traditional financial hubs.

What trends are getting underway that people may not know about but will be important?

There are a number of trends that will gain momentum in 2025, and our STA Advisory Committees on Retail Trading, Listed Options and ETFs are actively working to plot our next move on emerging regulatory priorities under the new administration. Come what may, we will ensure that our members remain well-informed and ready to adapt. In particular, the impact of new legislative committee appointments in the Senate and House of Representatives should not be underestimated. These appointments often play a crucial but underappreciated role in shaping market structure and regulatory priorities. One significant update is the appointment Arkansas Rep. French Hill, a former banker, as the next chair of the House Financial Services Committee. Beyond that, STA is also driving initiatives like the expansion of our Women in Finance committee, our Grassroots Giving program and emphasizing LinkedIn for communication and engagement.

What are your expectations for 2025?

As STA moves into 2025, expectations are high. We plan to leverage our core strengths—deep industry knowledge, a national footprint and a long history of bipartisan collaboration—to respond effectively to the changes brought by the new administration. Advocacy will remain a cornerstone of STA’s mission, with particular emphasis on addressing market challenges related to capital formation. We have expressed concerns about the SEC’s recent neglect of its responsibilities in this area and intend to bring this issue to the forefront. By focusing on these priorities, we aim to deliver continued value to our members and to the broader financial community.

New WFE Research Quantifies the Impact of Stock Exchanges on Economic Growth

By
Press Release
-

 

London, 6 th January 2025 – The World Federation of Exchanges, the global industry association for exchanges and CCPs (The WFE), has published new research which analyses the link between stock market development and economic growth on a global scale. 

The research analysed quarterly data from 36 countries over two decades (2003-2022). 

Key findings 

Short term analysis: 

• There is a two-way influence between economic output growth and stock market capitalisation in the short term, but only for high-income countries. 

• Low and middle-income countries experience a unidirectional relationship in the short term, where stock market capitalisation positively impacts economic growth, but not vice versa. 

This means that low and middle-income country exchanges aren’t seeing a positive impact on their market capitalisation as a result of economic growth, though higher market capitalisation leads to higher economic growth. This reflects structural differences, such as lower savings rates and limited investment capacity, which inhibits the feedback loop from economic growth to stock market development.

• The low- and middle-income group experience a stronger response in output growth to changes in market capitalisation activity compared to high-income countries. 

• A doubling of market capitalisation leads to an increase of over 0.4% in economic growth within two quarters for low- and middle-income countries. 

This suggests there should be policy interventions aimed at stimulating market capitalisation as they will have a pronounced short-term impact on economic growth in low- and middle-income countries. 

Long term analysis: 

• Stock market capitalization generally promotes economic growth across all income groups, though the effect is much stronger in high-income countries than in low- and middle-income economies. 

• In high-income countries, a 10% increase in stock market capitalization is associated with a 0.045% rise in long-term economic growth. 

• The relationship in low- and middle-income countries is weaker, reflecting challenges such as underdeveloped financial systems and structural inefficiencies. However, growth in stock market capitalisation in low- and middle-income countries contributes a greater percentage to overall economic growth. 

This shows that well-developed stock markets benefit high-income countries by enabling efficient savings and capital allocation, which fosters sustained economic growth. 

Nandini Sukumar, CEO of the World Federation of Exchanges, said, “A growing stock exchange means a growing economy. The research shows that where high-income countries’ stock markets are struggling, regulators must take action to support them, so that they can ensure the continued contribution of this source of economic growth. On the other hand, low- and middle-income countries should focus on strengthening their stock markets to harness these growth benefits and support sustainable economic development. Policymakers must take heed of these findings and better tailor financial regulations and economic strategies to maximise the benefits stock markets bring.” 

Commenting on the research findings Dr Pedro Gurrola-Perez, Head of Research at the WFE, said, “Weaker feedback loops from economic growth to stock market development are due to factors such as lower savings rates, limiting the capital available for investment in stock markets; limited investment capacity, reducing business’s ability and appetite to expand. In these environments, the lack of investor participation and limited business growth may inhibit the ability of economic growth to foster stock market development, and in turn, economic output. Policymakers, particularly in low- and middle-income countries, should therefore focus on strengthening their stock markets to harness these growth benefits and support sustainable economic development.” 

Read the full paper here. 

For more information, please contact: Cally Billimore +44 7391 204 007 Communications Manager communications@world-exchanges.org

About the World Federation of Exchanges (WFE): 

Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 37% are in Asia-Pacific, 44% in EMEA and 19% in the Americas. WFE’s 87 member CCPs and clearing services collectively ensure that risk takers post some $1.3 trillion (equivalent) of resources to back their positions, in the form of initial margin and default fund requirements. WFE exchanges, together with other exchanges feeding into our database, are home to over 51,000 listed companies, and the market capitalisation of these entities is over $110 trillion; around $140 trillion (EOB) in trading annually passes through WFE members (at end 2024). 

The WFE is the definitive source for exchange-traded statistics and publishes over 350 market data indicators. Its free statistics database stretches back 49 years and provides information and insight into developments on global exchanges. The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities’ goals of ensuring the safety and soundness of the global financial system. 

With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policy makers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system. 

Website: www.world-exchanges.org Twitter: @TheWFE

The Era of Data Modernization, Quality and Governance is Here

By
Arcesium
-

By Bryan Dougherty, Head of Product and Technology, Arcesium

Regulators are not backing down on demands that firms modernize disclosure models and enhance data governance practices. A prime example of this is the $900 million wire transfer mistake made by Citibank in 2020, which resulted in the Office of the Comptroller of the Currency (OCC) slapping the financial institution with a $400 million civil money penalty. Old, defective software was identified as the culprit of this costly error and Citi assured regulators it would improve risk management, data governance, and internal controls. However, just four years later, the institution was once again handed a $135 million dollar fine for their inadequate remediation efforts in addressing data quality management issues.

As financial institutions race to keep up with the pace of digitalization and automation, regulators like the SEC, FINRA, and others are hot on their tails, ensuring their rulemaking remains relevant to today’s rapidly evolving market landscape.

For both buy-side and sell-side firms to stay ahead and remain on the right side of these regulations, they must answer the call to modernize their disclosure models, operate using clean and accurate data, and enact meticulous data governance standards that lead to airtight compliance and reporting. Institutions that move to transform data management processes will be able to manage regulatory risk, enhance operational efficiency, swiftly meet investor demands, and achieve better returns.

The dynamic backdrop of regulatory mandates

The monumental swing in attention by regulatory bodies towards reporting and disclosure methods has been a long time coming. As technology has raced ahead, financial institutions are pushed to capitalize on machine learning, automation, and AI, to build efficiencies and keep up with the competition. However, as markets continue to grow in complexity, spanning across multiple asset classes, venues, and regions, investors today conduct business under a cloud of potential risks. These range from liquidity, compliance hurdles, trade manipulation, and operational vulnerabilities. Regulators view these shifts in the market as a mandate for greater oversight of an industry in flux, seeking to protect investors and, ultimately, the entire financial system. 

More oversight means more accountability; more accountability means extensive reporting and disclosure rules. Regulators have made forceful strides with new proposals and intensified enforcement of rules like Regulation Best Interest, the financial recordkeeping and communications law, the revised Form PF, and the recently implemented T+1 rule, which requires trades to be settled one day earlier on the next business day, instead of two days post-trade. Every rule demands heightened accuracy and promptness of financial reporting and disclosure, and both buy-side and sell-side firms need to prepare.

Outdated models unearth the risk of untrustworthy data

To avoid regulatory scrutiny, potential fines, and reputational damage, firms need to address modernizing their disclosure models and tech infrastructure, as was true in the Citibank case.

Firms’ legacy data management platforms and traditional manual spreadsheet processes are unable to properly ingest data from market data vendors, service providers, third-party applications, cloud marketplaces, and internal applications such as accounting, CRM, risk tools, and internal databases. This data fragmentation causes the connection between middle- and back-office operations and front-office aspirations to become disjointed. A firm that relies on bad, inaccurate, and untrustworthy data is flying blind with overly complex workflows, will be slow to incorporate new strategies or asset classes, and will be unable to make informed portfolio decisions. Firms who want to merge into popular private debt vehicles or deploy advanced blended private-public strategies find vexing operational obstacles. They cannot efficiently meet all investor and regulator reporting demands for performance, attribution, and risk. Moreover, disparate datasets lead to costly errors, leaving compliance departments’ reporting and disclosure practices hung out to dry.

Data governance: The backbone of risk control

Updated infrastructure and superior data quality are some of the key steps in meeting regulators and investors’ demands. However, for firms to keep up with evolving rule changes, be audit-ready, and sustain long-term success in meeting reporting and disclosure regulations, they must pursue rigorous data governance and risk management control standards. Citi’s $135 million dollar penalty is a not-so-subtle message from regulators to remediate data quality management and governance. Institutions that formalize clear processes around reporting and disclosure methods that ensure data integrity, accountability, and compliance will be more agile in flagging and rapidly correcting mistakes and in adapting to changing rules in the future.

Automation is the missing piece to efficient and accurate reporting

When faced with increasing regulations, firms can only keep up with expanding reporting requirements if they lean on automation tools for help. Automation can support teams in streamlining data collection and calculation processes, reducing manual errors, and ensuring it’s done efficiently. Teams prioritizing their automation and data processes will be miles ahead in meeting increased reporting demands with greater ease and precision, lessening the chance of costly fines.

Building a golden thread of data

Financial firms should join regulators in their quest for better, more robust reporting. And this is not merely to follow rules, but also to drive alpha. However, driving alpha is no easy task, especially when the investing community is experiencing a state of data explosion and the rise in popularity of opaque and multi-asset-class strategies. The upsurge of less data-transparent private markets continues with an AUM totaling $13.1 trillion, a 20% yearly growth since 2018. Multi-asset strategies have led to asset-class convergence, with its correlation of asset classes causing significant data complexity. The post-trade operations teams who continue to be tasked with manually pulling this raw data from spreadsheets to validate P&L calculation, monitor timestamps, verify trade allocations, and handle transaction reporting are at a disadvantage, burning time and making unavoidable errors.

It’s vital for firms to operate from a single golden thread of investment lifecycle data that is validated and organized. Data management technology should speak directly to the unique needs of modern trading, enabling firms to pull precise information from disparate datasets, as well as the aggregation of holdings, performance, cash flows, risk analytics, and reporting data. Firms must have modernized systems in place that possess the ability to comprehend and interpret data across different asset classes and jurisdictions. These tools provide a crystal-clear picture to their analysts, investors, and regulators alike.

A triple competitive edge: modernization, quality, and governance

In fiscal year 2025, the SEC says it will continue to encourage investor testing on both existing and proposed disclosures to retail investors; and it will advocate for innovative, and more investor focused approaches to disclosure. The procrastination runway in financial services for digital transformation has run out. The SEC stated in its 2025 exam priorities that it will review RIAs and RICs’ compliance programs, including reviewing their consistency of portfolio management practices and disclosures, and issues associated with market volatility.

To have any hope of building secure risk controls, fully compliant reporting, and innovative disclosures, both buy-side and sell-side firms will have no choice but to move away from outdated manual processes and upgrade outdated and inefficient tech infrastructure. Data governance approaches that ensure financial data is standardized, interoperable, and effectively managed to meet evolving regulatory expectations is a prerequisite to growing AUM and staying competitive, now and down the road. The integration of advanced data management systems that operate on clean, organized, and accurate investment lifecycle data is no longer a cost center; it’s a profit center, and a lucrative one. The benefits are extensive, from providing the ability to make informed decisions and facilitate operations to  launching new lines of business, as well as meeting regulatory compliance requisites and strengthening investor confidence – ultimately, lining up the path for both short- and long-term growth.

Outlook 2025: Stephen Cavoli, Virtu Financial

By
Anna Lyudvig
-

Stephen Cavoli is Global Head of Execution Services at Virtu Financial.

Stephen Cavoli

What were the key theme(s) for your business in 2024?

Every successful firm begins and ends with a great product supported by great people. Our key themes remain consistent: We prioritize client needs as the foundation of product development, ensuring the solutions we build align with client workflows and expectations. Wherever possible, these solutions are global and multi-asset, covering the entire trade life cycle.

The key themes varied by region. In APAC, the focus was on India, where we developed collocated trading infrastructure to address client requirements and support the market’s rapid growth and evolving demands. In MENA, we refined algorithms to align with the region’s unique market structure and advanced the launch of a block trading venue to support institutions and large trade executions.

The key themes also varied by product. For our Triton EMS offering, there was a large focus on meeting clients’ needs for multi-asset capabilities within the EMS and deepening integration with third-party systems. The key themes for our data analytics platform were strengthening multi-asset functionality including the addition of TCA for Fixed Income Derivatives and enhancing API access to enable clients to bring trading analytics “in-house.” We also released a more granular pre- and post-trade transaction cost models (SCE and DyCE) in response to client requests. Our global FIX Network expanded by connecting with new banks, brokers, and dealers, as we focus on delivering FIX Network services that simplify client workflows and boost efficiency.

What trends are getting underway that people may not know about but will be important?

We’re seeing more and more desks adopt a single trading infrastructure. This trend is a long-time coming and it’s just begun to tip. As desks migrate to a unified trading infrastructure that supports the entire trade life cycle across all asset classes globally, it simplifies operations, reduces costs, and ensures consistency in execution and post-trade services.

We’re also seen a resurgence of demand for new sources of liquidity. Specifically, clients want algos that identify and interact with these incremental liquidity sources in sophisticated and transparent ways.

What are your clients’ pain points, and how have they changed from one year ago?

Clients are increasingly focused on getting the most out of their commission dollars through quality alpha generating research, navigating global regulations and workflows, optimizing commission spend, demanding better value and cost transparency. We’ve seen more clients embrace our global, multi-asset trading and analytics platform which allows clients to streamline external relationships and internal workflows, saving time, reducing operational risk, and increasing wallet purchasing power.

The demand for intelligent and transparent liquidity access has evolved. Previously, the focus was on static routing and spread positioning. Now, clients demand sophisticated routing decisions and access to unique liquidity pools. Achieving this requires a trading infrastructure capable of consuming vast amounts of market data and making real-time decisions based on specific trading conditions. Brokers must now explain algorithmic decisions with transparency and a clear decision-making rationale. Descriptive statistics are no longer sufficient; clients expect causal analysis to justify order routing choices.

Related to the evolving demand for intelligent and transparent execution and workflow tools, as trading across asset classes becomes increasingly electronic, clients’ requests for more tailored support engagement has increased. Tighter collaboration with clients is mandatory to properly understand their desired outcomes which is highly correlated to being able to solve real-time issues.

Outlook 2025: Jason Paltrowitz, OTC Markets Group

By
Anna Lyudvig
-

Jason Paltrowitz is Executive Vice President of Corporate Services at OTC Markets Group.

Jason Paltrowitz

What were the key theme(s) for your business in 2024?

In 2024, OTC Markets Group focused on three major themes to drive growth, enhance market transparency, and better serve global investors:

Continued Growth in International Business:
OTC Markets Group operates the largest U.S. stock market for non-U.S. equities, facilitating trading for international companies seeking access to U.S. investors. This year, 92% of our total trading volume came from non-U.S. equities, with 79% of that volume attributed to companies with market caps exceeding $1 billion. Reflecting the strong demand for cross-border investment opportunities, we launched two significant initiatives to enhance accessibility and flexibility for global investors.

First, we launched OTC Overnight, an innovative “overnight trading” service, enabling investors in any time zone to access securities on our markets and react to international news in real-time. Second, we launched the MOON ATS, an alternative trading system designed to provide a seamless trading experience for NMS listed securities. Both OTC Overnight and MOON ATS underscore our commitment to building infrastructure that empowers global investors while streamlining access to U.S. markets. These advancements strengthen our role as a bridge between U.S. investors and international companies.

Regulatory Reform and Investor Protection:
A key focus in 2024 was advancing regulatory initiatives to improve market transparency and investor protections. We introduced OTCID, a new identification framework designed to enhance accountability, improve compliance, and help investors make better-informed decisions. OTCID represents a significant milestone in creating a more transparent market for all participants.

Addressing Risks in Low-Priced Securities:
OTC Markets Group prioritized education of the risks associated with low-priced securities, including exchange-listed “penny stocks,” which often pose challenges for retail investors due to their volatility and potential for fraud. We supported industry efforts to crack down on risky practices in the micro- and small-cap markets. By promoting investor education, enhanced standards, and oversight, we aim to protect investors and uphold market integrity.

What was the highlight of 2024?

Several key milestones defined OTC Markets Group’s success in 2024:

Launch of Overnight Trading:
We introduced overnight trading, enabling investors to trade international securities outside traditional market hours. This initiative provides greater flexibility for global investors and enhances access to international markets.

Announcement of OTCID:
The rollout of OTCID marked a major advancement in improving market structure. This new identifier will enhance transparency and accountability, strengthening trust and confidence among market participants.

Growth in QX and QB Markets, Including Expansion into Korea:
Our OTCQX and OTCQB markets continued to experience robust growth, driven by strong demand from international and growth-stage companies. Notably, we expanded our global reach by facilitating new listings from South Korea, further broadening the opportunities available to U.S. investors.

Who were the most important/influential people at your firm in 2024?

While I am proud to have contributed to our success, the accomplishments of 2024 are a testament to the exceptional teams across OTC Markets Group. From our leadership team to those driving initiatives like the launch of OTCID, overnight trading, and the growth of our OTCQX and OTCQB markets, it has been a collective effort. Their expertise, dedication, and innovative thinking have been instrumental in executing our strategic priorities and delivering value to investors and companies globally.

What are your expectations for 2025?

Looking ahead to 2025, OTC Markets Group is focused on deepening global partnerships, expanding investor access, and enhancing market infrastructure:

“List Local, Trade Global” Growth
We are seeing growing interest from non-U.S. exchanges and companies seeking to leverage OTC Markets Group’s platform to gain access to U.S. investors while remaining listed on their local exchanges. A notable trend is the continued discount in valuations of non-U.S. equity markets, particularly in regions like the UK, which presents compelling opportunities for U.S. investors to diversify their portfolios.

Increased Engagement Through OTCID
As OTCID rolls out more broadly, we anticipate greater engagement from companies, brokers, and market participants. OTCID will help enhance transparency and governance while providing investors with clearer, more reliable information about the securities they are trading.

Solidifying Our Leadership in Non-U.S. Equities
With growing interest from Asian retail investors seeking trading access to the world’s leading companies, OTC Markets Group is well-positioned to strengthen its leadership as the platform for trading international equities. This growing demand reflects the global investor appetite for diversified, cross-border investment opportunities.

Outlook 2025: Anthony Denier, Webull

By
Anna Lyudvig
-

Anthony Denier is Group President and US CEO of Webull.

Anthony Denier

What were the key theme(s) for your business in 2024?

In 2024, Webull saw an increased user base from retail investors across the globe. The group now serves over 20 million registered users in 15 regions, offering investment strategies that seamlessly integrate market data and information, a user community, and investor education resources. Additionally, we have seen retail investors putting their cash to work after previously stockpiling in high APY products. The high interest rate environment led to large amounts of uninvested cash. As interest rates come down, retail investors are moving cash back into equities and stimulating market activity.  

What was the highlight of 2024?

The highlight of 2024 for me was retail’s embrace of 24 hour securities trading. This is signaling the continued evolution of retail investors. Just a few years ago, commission free trading for retail investors was unheard of, now it is common place. The same goes for fractional trading, and now 24/5. It is new and disruptive, but will become the standard. 24 hour trading is a natural progression of retail investor demands and expectations, which the industry is now embracing. We are thrilled that Webull users feel confident to trade in an overnight setting, outside of market hours. As the industry continues to move away from legacy, back office systems and transitions to more technology focused solutions, it will allow for more trading hours and continued rapid evolution.

What are your expectations for 2025?

Strong markets will fuel innovation and adoption of new products and technologies like AI and crypto for retail investors. A new administration comes with opportunities for change and growth and markets have been receptive to the election outcome. Retail investors will continue to ride this momentum and further diversify their portfolios based on the next iteration of products and tools available to them. I look forward to what 2025 will bring.

Outlook 2025: Travis Schwab, Eventus

By
Anna Lyudvig
-

Travis Schwab is CEO, Eventus.

Travis Schwab

What were the key themes for your business in 2024?

Eventus’ core themes for 2024 revolved around adaptability, scalability, cutting-edge technology and client-driven innovation in our platform. Enhancements to Validus have been pivotal, focusing on advanced analytics, seamless scalability and comprehensive market coverage to meet the diverse needs of our client base across asset classes and jurisdictions. Key advancements appreciated by clients include enhanced market visualization tools with dynamic zooming, faster performance, and increased flexibility for analyzing trades and orders. The platform’s new pattern and practice procedures empower firms to review behaviors across longer time periods, identify accounts with repeated alerts and detect patterns indicative of market manipulation. Transparency and customization have long been priorities at Eventus, ensuring surveillance procedures are easy to configure while delivering actionable insights through intelligent alerting. These developments allow compliance teams to swiftly adapt to market volatility, rising trade volumes and tighter regulatory demands, turning compliance into a strategic advantage. Our platform is designed by market practitioners and shaped by our clients in order to help solve their unique challenges, and this enables us to innovate and offer new capabilities to all clients continually.

What are firms’ biggest pain points in trade surveillance, and how are they addressing them as markets evolve?

Over the past year, firms’ pain points in trade surveillance have intensified as they face data quality issues, rising alert volumes and increasingly complex market dynamics. Poor data ingestion, inconsistent feeds and regulatory pressure to achieve venue completeness have made addressing surveillance gaps a top priority. Incomplete or untimely data undermines the effectiveness of surveillance systems, especially as firms expand their market coverage to include cross-product and cross-market manipulation.

At the same time, false positive alerts in surveillance platforms have surged amid market volatility, often overwhelming compliance teams and diverting attention from true risks. But all “noise” (which we would define as alerts that don’t lead to any immediate investigation or suspicious transaction reporting) is not necessarily a false positive, as there are some “true positives” with lower value that, taken together, can provide meaningful insight. Over-calibration of the system can produce a false sense of security and create blind spots in which unusual but potentially problematic behaviors are dismissed.

At Eventus, we are introducing AI-driven tools and behavioral analytics to improve accuracy, reduce alert noise and identify nuanced patterns of misconduct more effectively. In early 2025, we’ll be harnessing technologies like natural language processing (NLP) and large language models (LLMs) to automate manual tasks such as report generation, query building and case management, helping teams achieve greater efficiency. Validus-defined logic will enable users to apply their own internal guidelines to automatically close out alerts that don’t immediately rise to an actionable level, casting a wide net to capture problematic behavior without overwhelming the surveillance team with alerts. Each step is documented, providing clients with a complete audit trail including data points used and the reason for close-out. This will allow clients to include what may appear to be low-value alerts that are actually true positives and to leverage trend analytics for system calibration, follow-ups and insights into potential risks.

Workforce shortages remain a challenge, exacerbated by resource-intensive processes. Automation and scalable surveillance platforms are becoming essential for firms to alleviate manual workloads while addressing the rising complexity of their surveillance obligations. Additionally, advanced data visualization tools are helping compliance teams uncover correlations across venues, trades and platforms more seamlessly. Moving forward, firms are recognizing the need for proactive surveillance strategies, where real-time data, comprehensive coverage and innovative solutions allow them to stay ahead of emerging risks and regulatory demands.

What industry trends have been prominent but are now fading (or will soon fade)?

One fading trend is the reliance on legacy surveillance systems often built to monitor specific asset classes, regions or regulatory requirements. While these systems once met firms’ needs, they now struggle to address modern market complexities such as cross-market, cross-product and high-frequency trading. Fragmented, siloed solutions create inefficiencies and fail to provide comprehensive oversight, leaving firms exposed to undetected risks and regulatory scrutiny. They are also cumbersome to update and not customizable to a firm’s unique needs or regulatory challenges.

Legacy systems also face challenges with data integration and scalability. They were not designed to handle the massive data sets generated by today’s interconnected markets or the real-time monitoring regulators now expect. This inability to ingest, process and analyze diverse data sources results in coverage gaps, delays and incomplete insights into trading behaviors. Additionally, as firms expand their market footprint, maintaining these systems becomes increasingly costly and resource-intensive.

The shift is now toward modern, integrated surveillance platforms that can ingest, analyze and correlate data across asset classes, venues and channels in real time.

By moving away from legacy systems to scalable, adaptable solutions, firms can future-proof their surveillance programs, ensure comprehensive coverage and meet evolving regulatory demands. Those embracing this shift are not only enhancing compliance but also improving efficiency and gaining a strategic advantage in safeguarding market integrity.

FLASH FRIDAY: After-Hours Trading: Price Discovery or Market Babysitting?

By
Peter C. Earle, AIER
-

Markets, at their core, are information systems. They aggregate the collective knowledge, expectations, and preferences of market participants in a price which functions as an exchange ratio. In equities trading, each trade contemplates the exchange of a certain amount of money for a title of ownership to some amount of capital goods. Price discovery, the mechanism through which markets reveal this information, is essential for economic calculation and resource allocation. But what happens when markets operate with less liquidity, fewer participants, or, increasingly, automated systems? The rise and fall of night trading two decades ago offers an opportunity to revisit that question, as its recent resurgence prompts a critical examination of whether these extended sessions foster meaningful price discovery, or merely act as a superficial exercise in keeping markets open for longer.

Lessons from the Past

By mid-1999, a frenzied period of financial innovation and financial market enthusiasm had reached a fever pitch. Dot com stocks were roaring as the first wave of online retail trading took shape. With retail investors eager to trade stocks outside regular sessions, night trading seemed destined to become the next big thing. In the midst of what was described as a democratization of market access, the idea was seductive: why should markets close when global events continue to unfold and investors have the tools to react? 

Yet when the bear market began in March 2000, the bloom quickly came off the rose. Liquidity dried up, volumes collapsed, and overnight trading fell into disuse. What professional traders already knew was discovered by retail customers: when prices fall, hobbyist traders lose interest. And in those increasingly thinly-traded markets, prices lose their ability to reliably convey information. Instead of reflecting broad consensus or meaningful activity, prices in illiquid markets become noisy, volatile, or outright misleading.

Night Trading Resurgent

Today, after-hours trading is making a comeback, driven by several structural changes in markets. First, trading volume has exploded over the last decade as equity ownership has broadened and barriers to access have fallen. Commission-free trading platforms, fractional shares, and app-based brokers have dramatically lowered barriers to accessing markets, a trend that accelerated during the pandemic. With more participants willing and able to trade at all hours, extended sessions are likely to command greater liquidity than they did two decades ago.

It goes without saying that we are also in the midst of a powerful bull market, with the S&P 500 up nearly 70 percent from late 2022 to late 2024. Rising markets attract trading activity, and investors are eager to capitalize on any perceived advantage—including the ability to trade before the regular session opens or after it closes. Unlike the dot-com era, when the post-4pm EST session quickly became a relic of exuberance, today’s environment reflects both a surge in volume and an unprecedented ease of access to capital markets. Part of that has been propelled by the arrival of cryptocurrency trading, the first truly 24/7 asset class.

Perhaps most importantly, and just like nearly every change over the past thirty years: technology has fundamentally altered the equation. In the past, extended hours trading was limited by constraints that now sound almost quaint: Who’ll staff the desk? How do late trades clear? And will the revenue justify the costs? 

Today, those barriers have been all but eliminated. Algorithmic trading and AI-driven systems can operate seamlessly around the clock, managing orders, matching trades, and maintaining liquidity with little human oversight. For financial institutions, automated systems make overnight trading operationally feasible. But this raises a deeper question: Does “intelligent” automated trading foster meaningful price discovery, or does it merely “babysit” markets?

Price Discovery or Noisemaker?

Price discovery depends on liquidity, diversity of market participants, and informed trading. In regular sessions, those conditions are met because markets are flooded with buy and sell orders from large financial institutions, hedge funds, and retail investors—all with varying motivations for trading, responding to news and fundamentals with arrays of strategies. After-hours markets, by contrast, remain thin relative to daytime sessions. While algorithms can provide liquidity, much of this trading occurs through limit orders, which are pre-set to buy or sell at specific prices rather than responding dynamically to new information. Those dynamic responses to market conditions will tend to be driven by risk parameters as opposed to trading instincts, market consensus or economic shifts. Overnight markets may simply become mechanical, driven by automated systems executing trades without meaningful intent.

Algorithms might place bids and offers to minimize spreads or capitalize on arbitrage, but those frequently lack the kind of informed judgment that underpins true price discovery. News released after the normal market close might prompt overnight trading, but with fewer participants and thinner liquidity, prices can become exaggerated or unstable. When regular trading resumes, these overnight movements often reverse, suggesting that after-hours prices were, at best, provisional guesses.

That dynamic raises important questions for investors, financial managers, corporate executives, economists, and policymakers alike. Can overnight markets reveal significant information if they are dominated by algorithms rather than active decision-makers? Prices in markets are used for everything from fund weightings to corporate actions and investment banking. If automated systems are merely maintaining order flow and matching trades for eight or ten hours, do the resulting prices represent anything more than placeholders? And if price discovery is impaired, does this undermine the broader function of markets as tools for economic calculation?

The Broader Implications

The resurgence of after-hours trading reflects both the opportunities and limitations of modern markets. On one hand, extended trading offers flexibility for participants, providing a way to respond to global events or economic data released outside regular sessions. On the other, less liquid and more automated markets run the risk of producing prices that distort, rather than reveal, underlying economic signals. For now, the volume and interest in extended trading are growing, but whether indicative price discovery can be generated remains uncertain. Generating commission revenue and responding to client demands is something all firms can and should do, but will prices after 5pm and before 8am carry any significance? Does extending market hours create a two-tiered market of more versus less information-fueled trading?

A quarter of a century after the dot-com era flirtation with after-hours trading that was carried aloft by such firms as Market XT and Wit Capital, new firms are filling those roles. While learning technology can keep the machinery of markets running, true price discovery requires more than automated systems. It requires a diversity of informed participants acting on new information—the very conditions that regular trading sessions provide. As extended trading hours expand, we must consider whether we are revealing new insights or merely babysitting the markets until the real price discovery begins.

Peter C. Earle, Ph.D is a Senior Economist covering financial markets and monetary policy at the American Institute for Economic Research (AIER).

FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.

Outlook 2025: Keith Todd, Trading Technologies

By
Anna Lyudvig
-

Keith Todd is CEO, Trading Technologies.

Keith Todd

What were the key themes for your business in 2024?

Multi-asset expansion, traction in new services and continued momentum. In 2024, we made significant progress in our continued transformation into a true multi-asset platform with services across the trade lifecycle. Trading Technologies has long been known as the go-to platform for exchange-traded derivatives. Our establishment of six business lines in 2024 enabled us to truly diversify our business, with the ability to meet client needs across asset classes as well provide the X factor to improve trading and compliance through analytics, algos and surveillance. These six areas of focus include product areas, such as futures and options, fixed income and foreign exchange (FX), along with trade lifecycle offerings in data and analytics, compliance and quantitative trading solutions.

Our acquisition of ATEO SAS in February was significant, giving us an entry into the post-trade world with a powerful middle-office solution for exchange-traded derivatives. TT Clearing – formerly ATEO’s LISA Clearing Engine – now has 40 clients ranging from Tier-1 banks to futures commission merchants (FCMs), agency brokers and buy-side participants. They’re using TT Clearing for trade matching, allocation and clearing for their operations throughout North America, Europe and Asia, and it’s now available to clients as a global managed service.

Our expansion into new asset classes in 2024 also included the world’s two largest physical energy markets in Europe – the European Power Exchange (EPEX Spot) and Nord Pool – that our clients can now trade side by side with energy financial markets.

In mid-2024, following our acquisition of Abel Noser Solutions in 2023, we introduced TT Futures TCA – a comprehensive transaction cost analysis tool for futures trading that leverages the largest collection available of anonymized, microsecond-level futures market and trade data. Only TT could provide this sort of underlying real-world data because our platform has handled more than 2.5 billion transactions in 2024 alone.

We also expanded our compliance offering with the launch in 2024 of TT Trade Surveillance as a solution combining new multi-asset coverage and dozens of new configurable models to supplement the machine learning-driven models from TT Score, our first-generation trade surveillance platform.

The year was momentous on many fronts, including 14 global and regional honors and awards for the TT platform, trade surveillance capabilities, algorithmic trading solution, TCA tool, execution management system (EMS), order management system (OMS) and market data services.

What are your expectations for 2025?

Our revenue is now double what it was just three years ago when we embarked on this expansion. We have only just begun building our new lines of business and helping our clients understand what’s coming so we have substantial opportunity for growth in 2025 and beyond. We anticipate growth across all six lines of business in the coming year.

We’ve also previewed plans to make inroads into the rapidly growing equity options trading space with the early 2025 introduction of access to Cboe equity index options. This will provide our institutional and professional trading clients with the ability to use the TT platform and breadth of tools to trade these immensely popular index options, including the SPX and VIX.

As you will hear a lot around TT, business is a team game, and I believe we have the best team in the business, with a culture that fosters empowerment throughout the organization. I believe we’ll see record organic growth in 2025 because we are firing on all cylinders.

What trends are getting underway that people may not know about but will be important?

The capital markets trading industry is in for an interesting year in 2025. With the change in the U.S. political environment, the big question is: will regulation be rolled back? The early signs are that the digital assets stakeholders are expecting light oversight at the most. Will this lead to more professional asset managers and traders joining the market, or will they join in markets that have tighter regulations? There is no doubt that the continued growth in trading volumes will occur, driven by uncertainty as well as the ever-increasing retail participation globally. The sophistication of trading will continue with data and AI improving traders’ effectiveness, particularly as multi-asset trading accelerates.

Outlook 2025: Alex Knight and Tucker Dona, Baton Systems 

By
Anna Lyudvig
-

Alex Knight is Head of EMEA, Baton Systems; Tucker Dona is Head of Business Development, Baton Systems.

Alex Knight

What was the key theme for your business in 2024? 

From geopolitical tensions to the global equities sell-off this summer, the events of 2024 have been a wakeup call for banks to look closer at the adequacy of their intraday liquidity management processes. Hampered by legacy technology and sluggish settlement cycles, post-trade inefficiencies and a lack of real-time transparency into liquidity positions have become glaringly apparent and even more restrictive during the many periods of market stress we have seen this year. Today’s world demands real-time, data-driven liquidity management decisions so even minor balance sheet inaccuracies can become significant vulnerabilities – especially in a bout of turbulence.  

What are your expectations for 2025? 

As we enter a new year, banks should resolve to invest in advanced real-time intraday liquidity management systems. The focus should shift from managing the size of the buffers towards having the tools that allow for real-time visibility, reliable predictions and automated control. Tools that are available now provide on-demand access to real-time data – using this data more smartly in conjunction with historical insights, treasury managers can predict the timing of inbound payments, and their impact on intraday liquidity demands with greater precision and generate recommendations as to how outbound payments can be intelligently sequenced and scheduled based on priority and liquidity usage. This reduces the risk of a liquidity shortfall, lowers funding costs and the size of intraday buffers required.  

In this era of persistent market volatility, intraday liquidity risk management is not just necessary — it is the cornerstone of financial stability and investor confidence. Supervisory bodies are also starting to acknowledge its importance in today’s financial markets, as we have seen with the ECB’s Nov 2024 identification and publication of sound practices for intraday liquidity risk management.

Tucker Dona

What regulations will have the biggest impact on the industry in 2025?

We are one-year away from the mandatory central clearing of US Treasuries, which is going to have a material impact on the way that firms post margin for this product. Firms wanting to offset the impact of higher margins need to spend 2025 making operational changes and upgrades to optimize their systems for trading and clearing US Treasuries. However, there is still more clarity needed on which CCPs market participants will choose to clear these products, and which model participants will use, such as sponsored or done-away. Thankfully, much of the operational preparation and workload can be done efficiently with support from vendors providing direct connectivity into the CCPs.

If firms are not able to efficiently optimize and mobilize available assets across the range of CCPs they will use for clearing US Treasuries, they are going to face operational and cost challenges. By using data-driven insights to select the most eligible and opportunistic collateral for the different clearing venues and then being able to execute all movement instructions, firms can manage the higher margin levels more effectively. They will also be able to reduce associated costs, and more efficiently manage better their collateral usage and its impact on available liquidity.

1...181920...2,164Page 19 of 2,164

MOST READ

✕

SUBSCRIBE FOR TRADERS MAGAZINE EMAIL UPDATES

[activecampaign form=12]