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Friday, March 14, 2025
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Northern Trust Asset Servicing Aims for Clients to Reach Zero-Touch Processing

By
Shanny Basar
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Northern Trust has partnered with technology provider CloudMargin to launch an enhanced active collateral management platform, so that the majority of clients will have zero-touch processing in 12 months time.

Barney Binder, head of collateral management at Northern Trust Asset Servicing, told Markets Media that collateral management for over-the-counter derivatives and repo continues to become more automated but there is still room to move forward.

 Barney Binder, Northern Trust

Binder, who is based in London, joined Northern Trust in November 2023 to lead the firm’s continued strategic evolution of its global collateral capabilities across operations, product development and client service. He was previously at HSBC where his roles included global head of collateral and global head fixed income derivatives and collateral.

In November this year Northern Trust said it was launching an enhanced active collateral capability with CloudMargin to provide increased transparency on a real-time basis and platform resiliency. CloudMargin is used by 225 buy-side and sell-side institutions across the globe and said it is the first cloud-native collateral management workflow solution,

Nadia Ivanova, head of business services at Northern Trust Asset Servicing, said in a statement: “Our clients must be strategic and nimble in managing their investment portfolios, including collateral management, to optimize asset deployment and minimize performance drag.”

Binder continued that Northern Trust liked CloudMargin as the firm has a “very good” capability centered on automation, which is key to drive zero-touch straight-through-processing (STP).

“The most important point is that we have the ability to codify what a client sees as being optimal for their collateral into the system,” he added. “That was part of our selection logic for CloudMargin and ensuring they could apply those types of rules during a trial period.”

 Stuart Connolly, CloudMargin

Stuart Connolly, chief executive of CloudMargin, said in a statement that Northern Trust clients will benefit from full automation in their collateral workflow, and unprecedented levels of transparency.  “The collaboration is another important milestone in our continued growth trajectory in our 10th anniversary year,” he added.

Northern Trust has onboarded its first clients to the platform and is working through a migration plan to complete the rest. In 12 months the majority of clients will have zero-touch processing according to Binder.

For example, electronic messaging is used to communicate margin calls. Northern Trust is now trying to ensure that processes are fully automated from those messages, so that a good proportion of margin call processes are zero-touch. Binder said only a minority of counterparts to their clients are not using electronic messaging and it is invariably for their repo business.

“If you look at the trend of where we want to take our clients, it is very much around increasing visibility and increasing automation,” Binder added.

For example,Northern Trust wants to be able to offer seamless placement of collateral in securities lending programs, together with the reporting and transparency. Northern Trust is also thinking about how to give clients the benefits of using data in more ways to understand their portfolios and risk.

“We are also trying to drive quicker completion of our processes to give clients certainty earlier in the day,” said Binder. “Regulations have driven accelerated, same day movement of collateral. T+1 has clearly added pressure around where inventory is coming from, or where it needs to be returned to fund transactions.”

ON THE MOVE: Societe Generale Names Sylvain Cartier; Michael Beattie to Linedata

By
Anna Lyudvig
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Sylvain Cartier

Sylvain Cartier has been appointed as Head of Global Markets for the Americas at Societe Generale, effective January 1, 2025. Based in New-York, Cartier will report locally to Stephane About, Chief Executive Officer for Societe Generale Americas, and globally to Francisco Oliveira and Hatem Mustapha. He will remain part of the Group Management Committee. In addition, Francisco Oliveira has joined Societe Generale as Co-Head of Global Markets Activities and Head of Fixed Income and Currencies, effective January 6, 2025. Succeeding Sylvain Cartier, Oliveira will work alongside Hatem Mustapha, Co-Head of Global Markets Activities and Head of Equities & Equity Derivatives. He joins from BNP Paribas where he was most recently Co-Head of Global Macro & Global Credit. Oliveira will report to both Anne-Christine Champion and Alexandre Fleury, Co-Heads of Global Banking and Investor Solutions (GBIS). 

Michael Beattie

Michael Beattie has joined Linedata Services as Global Head of Product Strategy, Asset Management. He has focused his 25-year career on financial services technology and the role it plays in shaping market structure. Previously, Beattie served as the Head of Product Strategy at Charles River Development, where he was responsible for product strategy & global partnerships. While at CRD he played a lead role in shaping the firm’s long term vision in global trading, front office technology, and expansion into new market segments. He also has held numerous roles at Fidelity Investments, most recently serving as the Head of Product Management for Fidelity Stock Plan Services.

Rajashree Datta

The Bank of New York Mellon Corporation has appointed Rajashree Datta as Deputy Chief Risk Officer. Datta will join the company on December 15 and be a member of BNY’s Executive Committee. She will succeed Senthil Kumar as BNY’s Chief Risk Officer in 2025 following a transition. Datta joins BNY from Goldman Sachs where she most recently served as a Partner and Global Head of Finance Risk, responsible for overseeing Liquidity, Capital and Accrual Rate Risks.

Northern Trust has appointed Jordon Voss as President of the Pacific Northwest Region. Voss will lead Northern Trust’s Seattle-based team in the delivery of holistic advice and superior client service, while accelerating the growth of the wealth management business throughout Washington, Oregon and Idaho. Voss joined Northern Trust in 2014 as a private banker and has held several senior roles, including Managing Director of the Seattle office. Earlier in his career, Voss was a decorated pilot for the U.S. Navy.

TMX Group has appointed Peter Rockandel to its Board of Directors. Rockandel brings a depth of Canadian capital markets experience to TMX Group, specializing in the global resources and mining sectors. He most recently served as Chief Executive Officer of Lundin Mining Corporation from 2021 until his retirement in December 2023.

Western Asset Management Company has named Thomas J. Gahan as President and Chief Executive Officer. James W. Hirschmann III will assume the role of Chairman. In addition, Gahan will continue in his role as Chairman of Benefit Street Partners. With over 35 years of experience, Gahan is an industry veteran with expertise in fixed income, alternatives and other asset classes, as well as executive leadership. Most recently, Mr. Gahan served as Founder and Chairman of Benefit Street Partners

Coinbase alumni Rob Witoff is re-joining the company as its new Head of Platform and member of the Executive Team. He will lead Coinbase’s platform, which powers the most trusted & easiest to use products in crypto.

If you have a new job or promotion to report, let me know at alyudvig@marketsmedia.com

MFS Enters Active ETF Market

By
Press Release
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MFS® launched the firm’s first actively managed exchange traded funds, marking its entry into the fast-growing active ETF market, which now accounts for nearly $700 billion in assets in the United States.1

The following five actively managed ETFs began trading on the New York Stock Exchange on Dec. 6:

 MFS® Active Value ETF (NYSE: MFSV)

 MFS® Active Growth ETF (NYSE: MFSG)

 MFS® Active International ETF (NYSE: MFSI)

 MFS® Active Core Plus Bond ETF (NYSE: MFSB)

 MFS® Active Intermediate Muni Bond ETF (NYSE: MFSM)

Commenting on the launch, Michael Roberge, CEO and chair of MFS, said, “Since the creation of the mutual fund a hundred years ago, MFS has continually evolved how we deliver long-term value to our clients. These new active ETFs are an exciting next step in that journey. They bring the firm’s capabilities to this market for the first time. The ETFs give investors greater choice, allowing them to access MFS’ investment capabilities across five popular investment categories: US Value, US Growth, International Equity, US Core Plus and Intermediate Muni Bond.”

The new active ETFs represent a well-diversified mix of popular MFS investment capabilities and will be distinct, fully transparent portfolios, disclosing holdings daily. Authorized participants will benefit from the support of a dedicated MFS ETF capital markets team in addition to market-leading trading and liquidity support from the NYSE.

“Today, as investors’ needs become more diverse and complex, we are pleased to be able to offer this next level of vehicle choice. These new active ETFs complement our existing lines of mutual funds, retail separately managed accounts and other investment vehicles and provide significant choice for investors building long-term, diversified portfolios,” added Roberge.

Each of MFS’ active ETF strategies are managed by teams of experienced investment professionals, who bring the same disciplined, long-term active approach that has been the firm’s hallmark since its founding in 1924. More information about MFS’ active ETFs can be found on MFS.com.

Source: MFS Investment Management

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Paul Atkins’ SEC Nomination is ‘Regulatory Singularity’

By
Shanny Basar
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President-elect Trump has nominated Paul Atkins, a former commissioner at the Securities and Exchange Commission, as chair of the US regulator.

Jake Chervinsky, chief legal officer at crypto venture capital firm Variant, said:

Greg Xethalis, general counsel at Multicoin Capital, a thesis-driven firm that invests in tokens and blockchain companies, said:

Stuart Alderoty, chief legal officer at Ripple, which builds crypto solutions, said:

Atkins is on the advisory board member at Securitize, the tokenization platform which was used by BlackRock to launch the asset manager’s tokenized money market fund. Carlos Domingo, co-founder & chief executive at Securitize, which has reached more than $1bn in tokenized onchain assets, said:  

Jeremy Hogan, partner at law firm Hogan & Hogan, said: “He won’t be the bull in the china shop many in the crypto space want. He will make measured and deliberate changes. Overall, I give his appointment a B+ for the digital asset industry, and that was good enough to get me a law degree so, yeah!”

Cody Carbone, president of blockchain trade association The Digital Chamber, said:

Hunter Horsley, chief executive of Bitwise Asset Management, the US crypto index fund manager, said:

Bitcoin reaches $100k

Overnight on 4 December Bitcoin surpassed $100k for the first time ever, which Stocklytics.com said in an email was stoked by a series of appointments by the incoming administration, including Atkins.

Neil Roarty, analyst at Stocklytics.com, said the growth in crypto since the US election has shown that digital assets are very much a Trump trade, and his appointments in the SEC have cemented this.

“However, investors can look beyond the raw currency of Bitcoin and take advantage of the huge growth across the whole digital asset industry,” he added. “ETFs can offer a great way to invest in a basket of companies across a specific sector while taking advantage of the market volatility, which has been hugely positive for crypto enthusiasts in 2024 so far.”

 Source: Stocklytics

Equities markets 

Dave Lauer, chief executive at technology company Urvin Finance and advocate for fair markets, said:

Richard Johnson, founder and chief executive of Texture Capital, an SEC registered broker-dealer supporting digital securities issuance and trading, said: “The combination of ongoing dissatisfaction with equity market structure, Atkins’ influence within a new administration looking to scale back financial regulations, and the review initiated via the Regulatory Flexibility Act mean that a fundamental review of equity market structure, including the trade through rule, is increasingly likely.”

Joe Saluzzi, partner at broker Themis Trading, co-author of the book Broken Markets and CFTC Technology Advisory member, said:

Better Markets, an independent, nonpartisan, nonprofit organisation objected to Atkins’ nomination and warned : “If the SEC again abdicates its mission as it did when Mr. Atkins was a Commissioner in the years before the 2008 crash, then investors, markets and financial stability will suffer.”

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Retail Investors Want More Education, Support

By
Press Release
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Retail investors call for more financial education and greater support according to research

Finimize report out today reveals key opportunities for financial brands for 2025 with education and advice as top priorities

06.12.24 – LONDON: Retail investors want to see more meaningful education from financial brands, according to the latest findings from Finimize’s Modern Investor Pulse survey out today.

In an evolving financial landscape where 13 million UK adults hold £430 billion in cash deposits that could otherwise be invested, the findings highlight a significant opportunity for financial brands. Yet, many are missing the mark: nearly half (46%) of retail investors surveyed perceive them as too similar, while 48% feel that financial brands often lack a distinctive personality.

The survey of 2,000 retail investors found the following key opportunities for financial brands in 2025:

  • Demand for financial education and advice: The number one need from retail investors from financial brands is more educational content (20%), followed by more financial advice (19%) in comparison to just 1% looking for tools and advice in financial planning. This coincides with the FCA’s on-going Advice Guidance Boundary Review, underlining the clear appetite for improved resources. A previous Finimize survey highlighted this trend, with 80% of UK retail investors expressing a desire for better access to direct advice from the financial services industry.
  • Personal values are a priority: Nearly half of retail investors (48.2%) choose financial brands based on alignment with their values, indicating a growing demand for purpose-driven relationships in financial services. 
  • Education builds brand loyalty: Over half (57%) of investors value brands that educate or inspire them, underlining the importance of brands serving as knowledgeable guides rather than mere service providers.
  • Differentiation and memorability matter: Over half (51%) of investors are more likely to remember and consider a brand that uses unique content, reflecting the importance of standing out in a crowded market. 

Max Rofagha, CEO and Founder at Finimize, commented, “Retail investors want more than just a platform, transaction or bank; they want financial brands that understand and align with their personal values and provide genuine educational value. For financial institutions across the board – old and new – this represents a real opportunity to differentiate through personalised content and authentic engagement that meets clients where they are.”

“With the Great Wealth Transfer taking place, which will see the transfer of $84 trillion over the next two decades, and will place Gen Xers and Millennials in control of half the world’s wealth by 2030, the financial landscape is changing irrevocably. Now is the time for brands to become trusted, memorable partners in the financial journeys of so many. As retail investors become more selective, it’s clear that focusing on education, values, and unique, insightful content can drive stronger client relationships”.

 -ends-

About the Modern Investor Pulse
The Modern Investor Pulse is a quarterly survey capturing insights from Finimize’s global community of retail investors. For access to the full survey data, please reach out to our press team.About Finimize
Finimize empowers retail investors with concise insights from world-class analysts. With over two million subscribers to its newsletter and mobile app, Finimize boasts one of the largest retail investor communities globally. Over 70,000 members attend their events annually. Finimize for Business, launched last year, supports over 350 financial institutions in engaging modern investors and creating content that drives engagement, revenue, and retention. Through its network of partners, Finimize content reaches over 40 million individual investors worldwide.

FLASH FRIDAY: Outrageous, and not so Outrageous, Predictions for 2025

By
Shanny Basar
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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.

It is time of year for decorations, mince pies, parties, carols and also for firms to make their predictions for 2025. 

Saxo, the online trading and investment firm, has taken the approach of making annual Outrageous Predictions. These are a series of events that, while highly unlikely, could just happen. If they did, they would send shockwaves across financial markets. 

John Hardy, Saxo

John Hardy, chief macro strategist at Saxo, said in a statement: “The Saxo Outrageous Predictions are not exactly news and not exactly real—at least not yet. While we don’t know which stories will drive the global economy in the coming year, our 2025 predictions, from Nvidia trouncing its Mag 7 peers to the fall of OPEC, from a bold bet on reflation in China to a great leap forward in biotech, are just as promised: outrageous.”

Saxo’s first outrageous prediction is that Trump 2.0 blows up the US dollar:

“In 2025, the new Trump administration overhauls the entire nature of the US relationship with the world, slapping massive tariffs on all imports, while slashing deficits with the help of an Elon Musk-run Department of Government Efficiency (DOGE). “The implications for the US dollar are dire for trade around the world, as it cuts off the needed supply of dollars to keep the wheels of the global USD system turning, ironically risking a powerful spike higher in the US dollar. Instead, safety valves are found, as global financial actors scramble for alternatives.

Potential market impact: The crypto market quadruples to more than USD 10 trillion, the US dollar falls 20% against major currencies and 30% versus gold. The US economy continues to reflate, but wages keep up with goods inflation, as production resources reshore to the US, giving US exporters an advantage.”

A16z, the venture capital firm has dropped its Big Ideas List for 2025. 

The list consists of “big ideas” tech builders may tackle in the year ahead. For example, one idea is that ‘unconventional’ assets may start being tokenized. Aaron Schnider, technical operations specialist, wrote: 

“Just as fracking unlocked oil reserves once considered unreachable, tokenizing unconventional assets could redefine income generation in the digital age. Seemingly sci-fi scenarios become more possible as a result: For instance, individuals could tokenize their own biometric data; and then lease the information through smart contracts to companies. We are already seeing early examples of this through DeSci companies bringing more ownership, transparency, and consent into medical data collection using blockchain technology, for instance.”

BlackRock published its 2025 Global Investment Outlook

The asset manager said: “We are not in a typical business cycle. Mega forces like AI are transforming economies, breaking historical trends. We stay risk-on as we look for transformation beneficiaries – and go further overweight U.S. stocks as the AI theme broadens out. We have more conviction inflation and interest rates will stay above pre-pandemic levels.”

State Street Global Advisors, the asset management business of State Street  launched its 2025 Global Market Outlook: Finding the Right Path.

Jennifer Bender, SSGA

The firm expects rate cuts and macroeconomic resilience to continue in 2025, and its long-standing forecast of a US soft landing to materialize. 

Jennifer Bender, global chief investment strategist, said in a statement: “While spreads across both investment grade credit and high yield debt are near historic lows, we are optimistic about prospects for fixed income assets next year, and see a generally favourable environment for advanced economy sovereign debt. Market sentiment swings and volatility could potentially create opportunities for investors to manage or extend duration.”

BofA Global Research expects 2025 to be a year of further equity market strength amid macro uncertainty

The bank’s global research economists and strategists expect US economic and earnings growth to outpace that of other developed economies, while US equities should start the year off strong and end 2025 with the S&P 500 at 6666. As the year progresses, international opportunities should present themselves: European stocks are forecasted to slow but rebound to current levels by year-end 2025, and in China, domestic stimulus measures should offset any slowdown brought on by changes to trade policies.

Candace Browning, head of BofA Global Research, said in a statement that in 2024, growth surprised to the upside and inflation moved in the right direction, allowing central banks to start easing, risk assets to perform well, and global equities to reach new high. 

“But as we head into 2025, policy uncertainty has increased substantially,” she said. “Many of the expected policy shifts should be positive for US equities, but a lot depends on their timing and how the rest of the world responds.”

Morgan Stanley Sustainable Signals survey shows institutional investors expect continued growth in sustainable investing

The survey said the majority of fund managers (78%) expect assets under management in sustainable funds to increase over the next two years, due to both new mandates and higher allocations from existing clients. Similarly, 80% of asset owners expect the proportion of their assets allocated to sustainable investment options to increase during the same period.

Jessica Alsford, chief sustainability officer and chair of the Institute for Sustainable Investing at Morgan Stanley, said in a statement: ”Institutional investors see a growth trajectory for sustainable assets globally in the coming years to meet increasing client and stakeholder demands in a more mature sustainable investing market.”

JP Morgan Structuring Provides Bespoke Solutions for Buy-Side Clients

By
Editorial Staff
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Structuring is commonly defined as to construct or arrange according to a plan; to give a pattern or organization to.

It sounds straightforward and benign enough, but in financial markets, structuring is perceived as one of the more esoteric business lines, sometimes misunderstood and perceived as overly complex.

Rui Fernandes and his team are on a mission to help change that perception– one client solution at a time.

 Rui Fernandes

“Structuring doesn’t necessarily mean complexity,” said Fernandes, Global Head of Markets Trading Structuring at JP Morgan. “What it is, is bespoke. It is a very specific way to address a very specific client need.”

“We tailor it, we make it bespoke in terms of the wrapper, the delivery mechanism, and the payoff,” Fernandes continued. “All of these are dimensions that can be adjusted to address a precise client need, which typically you can’t always do with a standardized product.”

Structuring clients range from the largest long-only investment managers and insurance companies, to hedge funds, wealth managers and private banks. If a buy-side firm has a certain scale, chances are that firm will at least periodically need a custom solution that may include a hedge, currency exposure, yield enhancement, and spot funding. This emphasizes the value of structurers on Wall Street.

Three Pillars

In an interview with Markets Media, Fernandes emphasized the importance of the three pillars of JP Morgan Structuring: innovation, customization at scale, and interoperability of platforms.

“We are a sophisticated provider of solutions for clients, with a thriving e-trading agenda that’s central to our markets business and our technology adoption,” Fernandes said.

Regarding interoperability, Fernandes noted that platforms at investment banks are often spawned and developed in silos – it’s the job of the structuring team to promote interoperability across platforms. “If a credit client wants something that combines an element of a credit derivative with an equity option, delivered to a client in an emerging market where we have a local entity structure, then we will aim to deliver all of that.”

Fernandes, who holds a Doctorate in Philosophy in Economics from the University of Oxford, is a managing director and 17-year JP Morgan veteran who was appointed to his current position in January 2024. He had been global head of equities and credit structuring. Based in New York, Fernandes oversees a global team with coverage across all asset classes and JP Morgan offices globally. Other key structuring leaders include Arnaud Jobert, Global Head of Equities Structuring, and Denis Gardrat, Global Head of Credit Structuring.

Sell-side structurers face the challenge of working with the often complex needs of global asset managers with tens or hundreds of billions of dollars under management, amid an always-shifting macro landscape that currently features expectations of lower interest rates, election and geopolitical risk, elevated stock valuations, and the threat of market volatility.

Capital requirements, regulatory compliance, and liquidity needs and constraints are among a number of factors that large pension plans and insurance companies need to manage on an ongoing basis.

Understanding the tradeoff

“It’s not just ‘I want exposure to this asset class or that asset class’,” Fernandes said. “There’s a lot of expertise that goes into delivering solutions for them, and there’s a lot of work that goes into customizing the types of exposure that clients may be seeking.”

“And let’s face it, generally there is a trade-off in going from standardized to customized, in the sense that the more customized you go, the more potentially illiquid a position is,” Fernandes added. “So part of our job is optimizing that, in an iterative process with clients, so they better understand what any give-up might be in terms of cost or in terms of liquidity.”

Fernandez highlighted two services that JP Morgan is increasingly providing for structuring clients: quantitative investment strategies (QIS), and financing.

Hedge funds in particular are deploying capital into QIS, though overall the product is in the early innings of client adoption. “We want to be part of that story, which means a lot of product innovation and customization – as well as knowledge-sharing. Knowledge-sharing is crucial for successfully guiding clients on this journey, involving both in-person interactions and a continuous narrative.”

As for financing, “we’re a bank and we have a strong balance sheet,” Fernandes said. “Prime brokerage and repo are the classic financing products, but we’ve been doing a lot of work on how we can grow our financing businesses on a cross-asset basis and better meet evolving client needs for more illiquid assets.”

Lastly, Fernandes emphasized that, in his view, any lingering negative perceptions of structuring from the 2008-2009 global financial crisis should be reassessed in light of a strong regulatory response that has sought to increase transparency and tighten capital requirements.

Fernandes added: “Structured isn’t necessarily complex or esoteric. It’s just bespoke.”

ICI Welcomes Paul Atkins as SEC Chair Nominee

By
Press Release
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Investment Company Institute (ICI) President and CEO Eric J. Pan released the following statement in response to President-elect Trump’s nomination of Paul Atkins as Chair of the Securities and Exchange Commission (SEC):

“ICI congratulates Paul Atkins on being nominated as the new Chair of the Securities and Exchange Commission. His distinguished record, years of experience in the industry, and history of service at the SEC make him a supremely well qualified nominee.

Atkins understands that registered fund companies play a major role in the US economy. His leadership will be vital to ensuring the strength, fairness, and integrity of our financial markets. We look forward to working with him to promote the interests of registered funds and the more than 120 million investors they serve.”

Source: ICI

EXECUTION MATTERS: High Volume Days Test Options Market Structure

By
Editorial Staff
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(EXECUTION MATTERS is a Traders Magazine content series focused on the topics most important to traders and technologists in US equities and options markets. EXECUTION MATTERS is produced in collaboration with Lime Trading Corp.)

It’s well known that options markets are booming. Institutional and especially retail trading of puts and calls has been robust since the early days of the pandemic almost five years ago, and the strength has endured – 2024 trading volume is already at a record with almost a month left in the year.

What’s less well known are the spikes in daily volume that are redrawing the market’s historical top 10 lists.  

To wit, at the SIFMA Market Structure Conference – held in New York on November 6, the day after the US presidential election – Pat Hickey, Managing Director, Participant Services and Solutions for Options Clearing Corp., noted that day was on track to be one of the highest-ever volume days.  

That proved true, and the 69.4 million total options contracts traded on Nov. 6 landed it in the 4th spot. But the perch was short-lived, as a follow-up query to OCC revealed that 64.8 million contracts traded on Nov. 7, and then 70.9 million contracts traded on Friday, Nov. 15.  

Notably, seven of the ten biggest-ever volume days have been in 2024, with the other three in 2023. OCC has compiled data since 1973 and has tracked daily volumes since 2008, and numbers that would be considered spikes ten or even five years ago are more like a current-day new normal. 

10 Highest-Volume Days in US Options   

  1. August 2, 2024: 72,625,891
  2. November 15, 2024: 70,856,016
  3. February 2, 2023: 70,140,192
  4. December 14, 2023: 70,010,022
  5. November 6, 2024: 69,396,953
  6. March 10, 2023: 68,475,965
  7. March 8, 2024: 65,431,346
  8. November 7, 2024: 64,761,447
  9. August 1, 2024: 64,562,658
  10. July 11, 2024: 64,285,935

Source: OCC

Recent options trading numbers are a testament to the strength and resilience of options market structure, which spans exchange, trading platforms, and market makers. The highest-volume days require an uninterrupted flow of critical information in real time, especially around the open and close of trading; that’s no mean feat when daily message traffic is measured in the tens of billions. And trade execution must be efficient.

At the SIFMA conference, the What’s Next for Options Market Structure panel discussed volume growth, the competitive landscape among trading infrastructure providers, and whether the market ecosystem can continue to expand without compromising resiliency.

One panelist noted that minor issues always crop up when there is a surge in traffic, but overall, days such as Nov. 6 are helpful tests to market structure. “It’s always a good thing when we have these moments,” the panelist said. “It’s important to our understanding of how we operate as companies, and from a technology perspective.”

For its part, an OCC spokesperson told Traders Magazine that the equity derivatives clearing organization has made several key investments over the last several years to strengthen the resilience of its operations and technology. The company’s infrastructure consistently meets the demands of increased volumes, even as it works diligently on its future platform, Ovation.

Options market participants and observers expect high-volume days to continue, at least for the foreseeable future that includes inauguration day on Jan. 20. Following that will be the early days of the new Republican administration, which may include market-moving policy rollouts such as new tariffs and regulatory changes, as well as signals on fiscal and monetary policy that can impact interest rates. 

According to a poll conducted at the SIFMA conference, 56% of respondents expect US listed options volume to increase between 5% and 10% in 2025, while 23% expect growth to be less than 5%.   

Hedge Funds Use Technology, Systems Integration to Manage Risk

By
Press Release
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HEDGE FUNDS ARE USING ADVANCED TECHNOLOGIES AND SYSTEM INTEGRATION TO IMPROVE RISK VISIBILITY 

  Beacon Platform Inc. research identifies the most important risk management capabilities 

But not many hedge fund executives describe their existing systems as “Excellent”

London December 4, 2024 New global research* by Beacon Platform Inc. shows that advanced technologies and system integrations are playing vital roles as hedge funds strive to improve their visibility in an increasingly risky and volatile investment environment. 

The surveyed executives were asked to rate the importance of five essential risk management capabilities. Almost all of those surveyed (93%), described seamless integration with existing systems, including compatibility with current tools and near-real-time data on positions, PnL, and risk, as an important or very important source of competitive advantage of their systems. Advanced technical features, such as cloud-based architecture for scalability and integrated development environment for proprietary models and customisation, were the next most important (87%).

Table 1: How important will these aspects of modern portfolio analytics and risk management systems be as a source of competitive advantage?

Very Important + Important
Seamless integration with existing systems – Compatible with current Portfolio and Order Management tools – Provides near real-time data on positions, profit and loss (PnL), and risks93%
Advanced technical features – Cloud-based architecture for scalability – Integrated development environment for customization87%
Broad market coverage – Supports multiple asset classes across global markets – Allows funds to capitalise on diverse opportunities86%
Powerful reporting capabilities – Scalable framework for customizable reports – Enhances risk transparency and PnL explanations84%
Single, extensible platform – Consolidates analytics and risk management in one solution – Adaptable to evolving fund strategies and market conditions79%

To identify the leading funds, executives were then asked to rate the competitiveness of their existing systems. Surprisingly, the study by Beacon Platform Inc., with 100 executives in the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway, and Asia responsible for a collective $901 billion assets under management, found that just 20% of those surveyed describe the competitive edge gained from their portfolio analytics and risk management system as “Excellent”. 

Systems integration is leading to greater success. 

Integrated systems are playing an important role in competitiveness and risk visibility. Half of those who rated their competitive edge as “Excellent” said their systems were extremely well integrated, compared with just 5% of those who had a “Good” competitive rating and none of the “Average” funds. Similarly, 60% of the group with “Excellent” risk visibility said their systems were extremely well integrated, compared with 10% or less of the “Good” and “Average” funds.

Table 2: System integration and competitive edge

Thinking about the hedge fund you work for, how well How would you describe the competitive edge of the portfolio analytics and risk management  systems at your fund?
integrated are its technology systems?ExcellentGoodAverage
Extremely well integrated50%5%0%

Table 3: System integration and visibility of risks

Thinking about the hedge fund you work for, how well How do you rate your hedge fund’s visibility of the risks it faces??
integrated are its technology systems?ExcellentGoodAverage
Extremely well integrated60%4%10%

Increased technology investments are paying off.

All of the funds who described their current system as excellent were more likely to have increased their risk management budget dramatically over the past 2 years (55%), compared to 13% of those who describe their system as good, and just 6% of those who rate it average.

Table 4: Competitiveness and risk management budget

How has the risk management budget at your From a competitive perspective, how would you describe the portfolio analytics and risk management processes around your fund management firm’s work?
organisation changed over the past two years?ExcellentGoodAverage
Increased dramatically55%13%6%

As a result, funds in the “Excellent” group have experienced greater improvements in risk visibility, with 60% saying visibility has improved dramatically over the past 2 years, compared to less than 10% of those rating their system as good or average.

Table 5: Competitiveness and visibility of risks

How has its visibility of the risks you fundFrom a competitive perspective, how would you describe the portfolio analytics and risk management processes around your fund management firm’s work?
faces changed over the past two years?ExcellentGoodAverage
Improved dramatically60%8%6%

Asset Tarabayev, Chief Product Officer at Beacon Platform Inc. said: “Hedge funds clearly understand that data and systems integration are essential components of both risk visibility and competitive advantage—even if only 1 in 8 think that their current systems are extremely well integrated.”

Notes to Editors

* Beacon Platform Inc. commissioned independent research company Pure Profile to interview 100 senior hedge fund executives in the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway and Asia collectively responsible for $901 billion assets under management. The research was conducted during August 2024 using an online methodology.

For more information please contact

Phil Anderson at Perception A on 044 7767 491 519

About Beacon

Beacon is a financial technology firm that provides everything quantitative developers need to rapidly build, test, deploy and share trading and risk applications, analytics and models. Developed by a team with unmatched financial markets experience, Beacon’s unified platform includes the apps, tools and infrastructure firms need to migrate their software and infrastructure to the cloud, manage risk across all asset classes, and focus on building innovative strategies that provide a competitive edge. For more information visit www.beacon.io 

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