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SIFMA, EY Publish U.S. Treasury Clearing Compliance Considerations Report

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Press Release
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SIFMA and EY Publish U.S. Treasury Clearing Compliance Considerations Report to Guide Industry Transition to Central Clearing

New York, NY, November 13, 2024 – SIFMA and Ernst & Young LLP (EY US) today published “U.S. Treasury Central Clearing – Industry Considerations Report,” designed to capture and organize the various considerations and activities market participants should evaluate while assessing and completing preparations for the upcoming U.S. Securities and Exchange Commission (SEC) Treasury Clearing Rule compliance dates. It is intended to be utilized as a guide by sell-side and buy-side market participants alike as they implement changes in response to new U.S. Treasury clearing requirements.

“Treasury securities play a key role in the U.S. and world economies.  SIFMA has long supported efforts to make the Treasury market more resilient.  At the same time, we recognize the need to ensure liquidity is not negatively impacted,” said Joe Seidel, SIFMA Chief Operating Officer.  “As we transition to central clearing in compliance with the new SEC rules, it is important that the industry focuses on preparedness efforts to ensure as little market disruption as possible.  The report is designed to offer a roadmap of considerations and actions firms need to take now to be ready for the coming deadlines.  This is also part of SIFMA’s broader efforts, including the development of standard clearing documentation, to coordinate a smooth transition with the industry.”

Clearing transactions involves a clearing agency stepping in between a buyer and seller to handle certain elements of transaction processing, manage risk and pay down obligations.  In December 2023, the SEC approved a final rule which mandates the clearing of certain eligible secondary market transactions in U.S. Treasury securities. It triggered a significant structural change to the U.S. Treasury market and will have significant impacts on broker-dealers, institutional investors, asset managers, hedge funds, interdealer brokers, principal trading firms, banks, and covered clearing agencies (CCAs). The first compliance date is March 31, 2025, by which time CCAs must implement enhanced practices as outlined in the respective rulebook of each CCA, which include risk management, margin, customer asset protection, and access to clearance and settlement services. The second compliance date is December 31, 2025, by which time direct participants of CCAs must comply with the requirements to clear eligible cash secondary market transactions. The third compliance date is June 30, 2026, by which time direct participants of CCAs must be compliant with the requirements to clear eligible Treasury repo transactions.

“The SEC’s new Treasury clearing requirements represent a pivotal shift for the U.S. Treasury market, and firms must act quickly to meet the upcoming compliance deadlines,” said Brendan Maher, Managing Director, Financial Services Consulting, EY. “This report offers market participants a practical framework to navigate this complex transition, highlighting key considerations and actions. At EY, we are committed to helping our clients adapt to these new regulations by providing actionable insights and strategic guidance to ensure a seamless and efficient transition to central clearing.”

The SEC Rule will drive a number of changes to the overall U.S. Treasury market structure and require the integration of market participants who will now be mandated to centrally clear transactions for the first time. New CCAs may also emerge, and market participants may decide to connect to one or more CCAs to support their trading and clearing strategies. Such changes to the market will require new operations and capabilities to accommodate increased clearing volumes and new relationships between firms.

The report details the critical activities that institutions should consider as they design and implement a process for Treasury clearing. The primary objectives of the report are to:

  • Provide an implementation blueprint for industry participants on implementation priorities.
  • Identify the key steps to operationalize change across different clearing access models.
  • Surface key issues, open questions, and gaps in market structure and provide recommendations on the path to resolution.
  • Provide views on the target state transaction lifecycle from execution through margin processing, including proposed high-level transaction flows.
  • Provide insights on implementation dependencies across work efforts, where possible.
  • Serve as an educational resource on the rule and its implications.

The report includes input and subject-matter analysis from market participants on both the buy-side and sell-side that was gathered 1) via a survey issued to SIFMA member firms by SIFMA and EY, 2) from information workshops hosted with SIFMA member firms, and 3) from bilateral conversations with market participants. It is available at the following link:  https://www.sifma.org/resources/general/us-treasury-central-clearing-industry-considerations-report/

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development.  SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).

Liquidnet Releases New Liquidity-Seeking Algorithm

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Press Release
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SmartDark features prioritized routing to venues with larger executions sizes and better price stability

NEW YORK, LONDON – November 12, 2024 – Liquidnet, a leading technology-driven agency execution specialist, today announced the release of SmartDark, its latest algorithm for its equities platform, designed to enhance how institutional traders can execute their trades through prioritized routing with larger executions and better price stability.

Alan Polo, Head of Sales and Trading, Americas, said: “Today’s markets remain volatile and complex for buy-side traders to navigate. Although many algorithms in the market boast exceptional performance, the reality is that an algorithm’s effectiveness depends entirely on the quality of the liquidity it can reach. SmartDark is a great illustration of our ability to develop innovative solutions for the buy-side that help traders access liquidity.”

Available in the U.S., SmartDark incorporates a variety of yield and quality metrics to give traders an optimal blend of targeted liquidity-seeking strategy and maximum liquidity exposure, resulting in the opportunity to trade on high quality venues with better price stability.

Scott Kartinen, Head of Global Algo Products, commented: “Our algorithms are one of our core differentiators and we’re proud to offer a new addition to our lineup. As one of the few unconflicted, agency-only brokers with expertise in lit, dark, and block markets, we are in a unique position to craft execution strategies that effectively navigate complex markets and secure the liquidity buy-side traders need. We’re excited to see SmartDark aid our Members in executing their orders more efficiently.”

The algorithm sits within the Liquidnet Dark space and leverages the existing framework to offer a new tool to enhance traders’ execution abilities. Liquidnet Dark has an average block execution size of 28,000 shares for all trades crossed by Liquidnet and an overall block participation rate of 44%[1].

[1] Liquidnet internal data, January 1, 2024 – June 30, 2024

About Liquidnet

Liquidnet is a leading technology-driven, agency execution specialist that intelligently connects the world’s investors to the world’s investments. Since our founding in 1999, our network has grown to include more than 1,000 institutional investors and spans 57 markets across six continents. We built Liquidnet to make global capital markets more efficient and continue to do so by adding additional participants, enabling trusted access to trading and investment opportunities, and delivering the actionable intelligence and insight that our customers need. For more information, visit www.liquidnet.com and follow us on X @Liquidnet.

About TP ICAP Group plc

TP ICAP is a world-leading markets infrastructure and data solutions provider. The Group connects buyers and sellers in wholesale financial, energy and commodities markets. We are the world’s largest wholesale market intermediary, with a portfolio of businesses that provide broking services, trade execution, data & analytics, and market intelligence. www.tpicap.com

[1] Liquidnet internal data, January 1, 2024 – June 30, 2024

TECH TUESDAY: State of the Options Industry

By
Editorial Staff
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TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.

Growth in the U.S. options market has outpaced that of equities in recent years, and there is enough runway for that dynamic to continue for the foreseeable future.

That was the broad takeaway of the State of the Options Industry panel on day one of SIFMA’s 2024 Market Structure Conference held on November 6 in New York. Panelists were Arianne Adams, Chief Strategy Officer at Webull Financial; Greg Ferrari, VP & Head of North American Exchange Trading at Nasdaq; and Larry Tabb, Director of Market Structure Research at Bloomberg.

Ferrari noted that options trading volume has seen a 19% compound annual growth rate over the past decade, driven by increased retail participation and liquidity enablement. 

“Liquidity provisioning, retail education and underlying market infrastructure are driving confidence in market quality and risk mitigation,” Ferrari said. “Overall, there is great emphasis on the good we’ve done as an industry.”

“Demand is real and continues to accelerate,” said Adams of Webull, a trading platform operator. “We are seeing more customers using options to mitigate risk and trade around events in a more precise fashion.” 

Adams said retail has indeed been strong, but the market’s expansion has also included institutions trading more options, especially contracts with shorter maturity profiles.

Ferrari cited two secular trends underpinning options market growth: more ETF listings with embedded options components, and greater demand for U.S. options market access from abroad. “We see this in inbound calls asking how to participate [in options],”  he said. “Data is being consumed much more broadly.”

Bloomberg’s Tabb asked whether 18 options exchanges were too many. 

Ferrari noted there are many different segments within the options market, which support a variety of exchanges. “The overall landscape is incredibly dynamic,” he said. With its six options exchanges, Nasdaq is “spending less time on fee models and fee schedules and more around the market maker experience. We are focusing on the architecture of the technology and ensuring that it meets and exceeds the needs of the market, as well as ensures confidence in the infrastructure.”

Adams commended some of the newer options exchanges for building decent market share but also said exchange consolidation would be a good idea at some point.

The panel was constructive on newer short-maturity options, including zero-days-to-expiration options (ODTEs), which have gained traction in recent years with little or no cannibalization of more traditional monthly or weekly expirations. Ferrari said 21% of options trading volume is in contracts expiring that same day.     

“The ability to take views on specific days is really important to help manage risk and to take advantage of news, information and what’s happening in the world,” Tabb said. 

The panel also touched on flex options, whose share of the market has more than doubled in recent years to about 2% of average daily volume on greater demand for bespoke products; and floor trading, which has retained a critical role in the market ecosystem as a venue for complex transactions but has limited growth prospects.

Creating tomorrow’s markets today. Find out more about Nasdaq’s offerings to drive your business forward here.

Webull Launches 24/5 Trading

By
Anna Lyudvig
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Retail traders all over the world are showing increasing interest in the US stock market, which operates on ET – commonly considered the peak trading period, according to Anthony Denier, Group President & US CEO at Webull.

Anthony Denier

“However, global news and events can occur at any time, driving market movements and fueling trading ideas, strategies, and opportunities,” he told Traders Magazine.

Today, Webull, announced the launch of Overnight Trading, powered by Blue Ocean ATS to expand trading hours for its users in the United States. 

“By offering Overnight Trading, Webull is giving users the flexibility to trade on their own schedule, free from the constraints of regular market hours or pre- and post-market sessions,” commented Denier.

“This expanded access allows traders to seize opportunities whenever they arise, regardless of time zone,” he added.

The 24/5 Overnight Trading session will operate from 8:00 pm to 4:00 am ET Sunday through Thursday, giving users the opportunity to trade in and out of U.S. stock and ETF positions during the overnight session.

“As of now, Overnight Trading is available for stock and ETF trades,” Denier said.

As investors increasingly seek the flexibility to trade around the clock, Webull has partnered with Blue Ocean Technologies to offer Overnight Trading, providing their clients with the ability to trade whenever opportunities arise.

Not only can users react to market movements overnight, but they can also respond to timely events outside of regular, pre, and post-market sessions. 

Whether it be company earnings, breaking news, or international market activity, users can respond quickly to market developments and be proactive about their investments.

According to Denier, this partnership empowers our customers to make well-informed trading decisions and capitalize on opportunities outside of regular market hours. 

“With Overnight Trading, they can now seamlessly trade in and out of positions during overnight market movements, ensuring they never miss a chance to act when markets shift,” he commented.

Webull Corporation, headquartered in St. Petersburg, Florida, operates in 15 regions globally and is backed by private equity investors located in the United States, Europe and Asia. 

Webull serves 20 million registered users globally, providing retail investors with 24/7 access to global financial markets.

Webull currently offers level one overnight market data free of charge, with the ability to subscribe to more in-depth data packages. 500+ symbols are now available, with the goal to continue expanding the available security list.

“Webull has always prioritized listening to our clients, continuously striving to provide innovative trading solutions for our expanding retail investor community,” Denier said.

“This new offering is a direct result of that commitment—ensuring our clients have the tools and flexibility they need to make informed, effective investment decisions,” he added.

Hedge Funds More Concerned About Risk Management, Regulation

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Press Release
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HEDGE FUND RISK MANAGEMENT AND REGULATION CONCERNS RISE

These issues could also be impacting successful fundraising

All funds plan to boost spending on risk management over the next two years 

More than half believe regulation challenges will rise over the next three years, Beacon Platform Inc. study shows

London November 12th, 2024 Hedge funds are boosting spending on risk management as concerns about navigating regulatory challenges increases, new global research* by Beacon Platform Inc. shows.

Almost all (99%) of the hedge fund executives questioned in Beacon’s study in the US, UK, Germany, Switzerland, France, Italy, Sweden, Norway, and Asia say their fund will increase spending on risk management over the next two years.

More than half (56%) of the executives, whose funds are responsible for a collective $901 billion assets under management, say spending on risk management will rise by 20% or more, the study by Beacon, the open and cross-asset portfolio analytics and risk management platform for hedge funds, found.

The majority are concerned about their ability to navigate regulatory challenges – around 56% say that will become harder over the next three years although 39% expect the pressure to ease. C-level executives were almost twice as likely to think that regulatory challenges would become harder (73%) than their Investment Analyst or Portfolio Management colleagues (38%).

Transparency was identified as a major issue in the study – around 90% questioned admit transparency provided to clients and investors has to improve with 23% saying it has to improve dramatically.

Regulators are seen as the main drivers behind greater data transparency although industry trade bodies and hedge funds themselves are also pushing for increased transparency. Beacon, a portfolio analysis, risk management, and development platform that enables capital markets firms to increase the transparency and efficiency of their operations, notes that improved transparency helps hedge funds to attract investment and scale their business.

The research found hedge funds are generally happy with their risk management systems but identified some areas of concern. Around a third (33%) said their fund’s systems were only average for latency – the ability to get complex calculations within an acceptable time frame – and 30% said it was only average for accuracy (the ability to mark to market and use industry standard models for all products) with 5% saying its was poor.

Around a fifth (22%) said their systems were only average for transparency, with 6% saying it was poor or very poor. More than a quarter (26%) said their systems were average for flexibility, with 2% saying it was poor. More than four out of five (82%) who rate their system as poor plan to replace it in the next 12 months, while 65% will use more systems to compensate for their system’s weakness.

Investment in systems has paid off for funds doing it – around 55% who say visibility of risk at their fund has improved over the past two years attribute that to greater investment in technology, while 47% attribute improvements to greater use of specialised third parties.

Asset Tarabayev, Chief Product Officer at Beacon Platform Inc. said: “As regulatory challenges increase and clients demand greater transparency, our research shows that hedge funds are gearing up to respond to these concerns. Spending is expected to grow across the sector as funds look to leverage the advanced reporting features of modern risk management and portfolio analysis systems to improve transparency for investors and regulators alike. Technology-leading funds are already benefiting from these advanced technical capabilities, increasing the transparency of analytic models, accelerating their time to compliance, and delivering real-time views of risk limits and exposures.”

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 open 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

Trader TV: Market Reaction to US Election & What to Expect

By
Trader TV
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Sally Bartunek, trader at Ninety One, discusses the main takeaways from the market’s reaction to the US election results, in addition to the US Federal Reserve’s and Bank of England’s decision to cut interest rates by 25 basis points. She looks at how fixed-income markets performed and where she saw surprises in emerging markets.

In this episode, Bartunek unpacks how she trades and strategizes “a game plan” during highly volatile events. Looking ahead, Bartunek discusses how trading desks could approach the final few weeks of 2024, as they wrap up the year.

Vimeo Link – https://vimeo.com/1028172904?share=copy#t=0

Social link – https://www.linkedin.com/feed/update/urn:li:activity:7261512624608100353

Trader TV is a Markets Media Group platform.

EXECUTION MATTERS: Innovation Empowers Retail Traders

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.)

Innovation, both in technology and in product offerings, is increasingly empowering retail traders, boosting a segment that has more than doubled its presence in the market since the early 2010s.

Whether it’s a more intuitive trading app with greater functionality, more targeted hedging and risk management vehicles, or expanded trading hours, the financial services industry is enabling novices to participate in markets for the first time, and also helping more experienced retail traders level up to be more active and self-directed, with a toolkit that can rival institutional capabilities. 

Retail traders’ share of stock market trading volume increased from just above 10% in 2011 to more than 22% in 2021, according to Bloomberg Intelligence data cited by Forbes. Retail trading share in the options market is well above 40%. The ‘meme stock’ craze peaked in 2021 and retail trading has leveled off since then, but the absence of a significant market decline and a much-improved user experience have kept many retail players involved. 

Market participants and observers say the industry’s focus on expanding and improving education has helped retail investors, as have technological advancements. For trading platform operators, the rise of the retail trader is an opportunity to gather more order flow, but it’s also a challenge to meet the demands of this much-more sophisticated market participant.    

“Retail has become smarter, trading various types of strategies which could include ETFs and options, in combination with single stocks,” said Johan Sandblom, President and Head of Business Development at Lime Trading Corp, an agency-only broker-dealer providing low latency market access to the U.S. equities and options markets.

Johan Sandblom, Lime Trading
Johan Sandblom, Lime Trading

“Individual investors also have a better understanding of the US market structure,” Sandblom continued. “They are asking questions around the quality of the execution rather than just accepting a ‘free’ trade, and they are requiring more from their broker in order to execute their strategies efficiently.”

In a September 2024 blog post, Cboe Global Markets CEO Fred Tomczyk noted that retail traders have been a major growth engine in the options market over the past several years, and that can continue as long as the financial services industry continues to be good stewards. 

“The options trading ecosystem is supported by a diverse range of participants who each play an important role in the market’s functionality and stability,” Tomczyk wrote. “As members of the financial services industry, it is our job — first and foremost — to provide trusted systems that enable people to confidently participate in the markets and economy. With that foundation set, our responsibility is to empower and educate people to participate in those systems to the best of their ability.”

Product innovation and the transformative impact of technology and education for retail were discussed at the Security Traders Association’s 91st Annual Market Structure Conference, which was held in Orlando, Florida in September.

In the panel Continued Democratization of Retail Investing, it was stated that competition between retail trading platforms generates constant improvements to the retail experience, with innovation in areas such as options products, fractional shares and ‘24/5’ trading. 

Importantly, the panel noted an increase in active traders who are comfortable trading and actively managing their portfolios around major news events – these market participants are being provided sophisticated tools and more products to better construct their portfolios. The industry must continue to meet the needs of the retail trading segment as these participants continue to gain knowledge and sophistication.    

“We now hear questions from retail about what type of application programming interfaces (APIs) are offered for their automated strategies, what order capacities are, questions around various order types, how orders are processed, what latencies are, and how all of it impacts their overall execution,” Lime Trading’s Sandblom said.

Added Sandblom: “For Lime, the transition to a more sophisticated retail trader has been very smooth. Our system was initially built for professional sophisticated traders – we have made this same technology available to the retail market, with several ways to direct their order flow to various markets.”

ON THE MOVE: Prudential Financial Hires Jacques Chappuis; CME Extends Terry Duffy’s Contract

By
Anna Lyudvig
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Jacques Chappuis

Prudential Financial has appointed Jacques Chappuis as president and CEO of PGIM, its $1.4 trillion global investment management business, effective May 1, 2025. Chappuis will report to Andrew Sullivan, head of International Businesses and Global Investment Management for Prudential Financial. He succeeds David Hunt, who will retire as president and CEO and stay on as chairman of PGIM until July 31, 2025, remaining actively involved throughout the transition period. With nearly 30 years of investment management experience, Chappuis joins PGIM from Morgan Stanley, where he was most recently co-head of Morgan Stanley Investment Management. At MSIM, he played a key role in the transformative and successful integration of Eaton Vance. From 2006 to 2013, he held senior leadership roles in Morgan Stanley’s Investment Management and Wealth Management businesses.

Terry Duffy, CME Group
Terry Duffy

CME Group has extended Chairman and Chief Executive Officer Terry Duffy‘s contract through December 31, 2026. The company also announced Lynne Fitzpatrick will take on the expanded role of President and Chief Financial Officer. Additionally, its Chief Operating Officer Julie Holzrichter has decided to step down from her role to begin serving as an advisor to the company. Suzanne Sprague will succeed Holzrichter as Chief Operating Officer and Global Head of Clearing. Sprague, who has served as Senior Managing Director and Global Head of Clearing and Post-Trade Services since 2022, joined CME Group in 2002. She has served in a range of leadership positions in financial and risk management since that time, including Managing Director, Credit & Liquidity Risk, Risk Policy & Banking.

Tom Darnowski

Tom Darnowski has been promoted to Schroders CEO Americas, effective January 1, 2025. Darnowski has been with Schroders for over ten years and most recently served as the firm’s Global Head of Product Strategy, where he oversaw Schroders’ global product range and explored innovative ways to meet client needs. Prior to this role, he served as Head of Product Development, North America, and eventually of the Americas. He joined Schroders in 2013 from The Hartford, a U.S.-based investment and insurance company.

Blackstone has announced that Chris James – currently Chief Operating Officer (COO) and a founding member of Blackstone Tactical Opportunities (Tac Opps), with nearly two decades of experience at Blackstone – will become Global Head of Tac Opps. He will succeed David Blitzer, who will transition to chairman of the business at year end. Blackstone has also announced the elevation of two long-time senior Tac Opps partners to expanded leadership roles for the business. Jas Khaira will be Head of Tactical Opportunities Americas and Qasim Abbas will be Head of Tactical Opportunities International.

MarketAxess Holdings has announced that Founder and Executive Chairman Rick McVey will retire at the end of the year. McVey stepped down as CEO of MarketAxess in April 2023 after 23 years in that role, and has since been serving as Executive Chairman of the Board. Carlos Hernandez will succeed McVey as Chairman of the Board of Directors, effective January 1, 2025. McVey has agreed to remain as the Chairman of the Board of Directors of MarketAxess, the Company’s international holding company.

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

Data Everything Everywhere All at Once 

By
Shanny Basar
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The Pyth network has introduced a staking system to reward contributors for the quality of their data as the decentralized blockchain-based distribution platform aims to make financial market data across asset classes cheaper, and more accessible.

Timely and accurate market data has historically only been available to institutions who can afford to pay for direct connectivity to exchanges, vendors or other providers.

Pyth was launched to find a  better ways to make financial market data available on blockchain to projects and protocols using smart contracts, as well as to the general public. Mike Cahill, chief executive of digital asset infrastructure provider Douro Labs and a core contributor to Pyth, told Markets Media tha the network was designed to solve the oracle problem in blockchains.

On a blockchain, trust or verification from the user is not needed because data is stored on a decentralised ledger with global consensus. However blockchains need a way to securely access some off-chain data, such as asset prices which are constantly changing. Oracles were designed to provide secure access from blockchains to off-chain data using smart contracts to connect to external data providers.

Menno Martens, crypto specialist and product manager at fund manager VanEcK , described the Pyth network in a report on 5 November 2024 as a high-frequency oracle using Solana blockchain technology. This offers a robust solution for off-chain data sharing for primarily decentralized finance applications (DeFi), and provides services such as real-time price feeds and benchmarks. VanEck has a Pyth exchange-traded note.

 Source: VanEck

“Pyth’s data pull model provides data directly from the source, such as exchanges, market makers or DeFi protocols,” added Martens. “Because data is pulled only on demand and not pushed at a given interval, it scales efficiently, and costs are offloaded to users where updates are demand-based.”

Cahill said Pyth was designed to allow DeFi to compete with the traditional financial world by having the lowest possible latency and cost, and run as efficiently as possible. The initial pitch for the network was to approach high-frequency traders and highlight that they had valuable data which could be contributed to this blockchain project to solve the oracle problem.

“We are able to generate a very high quality but zero-cost data stream,“ Cahill added. “This revolutionizes how people think about data and is completely orthogonal to the existing data economy, because we are relying on this found resource from so many different trading firms.”

 Doug Cifu,
Virtu Financial

Pyth began by approaching the biggest trading firms and some of the largest exchanges, but now has a comprehensive set of about 110 contributors across 550 symbols, according to Cahill. For example, in 2021 market maker Virtu Financial began to contribute financial market data across equities, foreign exchange, futures, and cryptocurrencies to Pyth. Douglas Cifu, chief executive of Virtu Financial, said at the time that with growing support from the trading community, the Pyth Network would become an integral piece of infrastructure in the evolving DeFi ecosystem,

In 2022 Cboe Global Markets became the first major global exchange operator to join the Pyth Network and contribute real-time, derived market data, starting with 10 symbols from one of its four US equities markets. This year Laser Digital, the digital asset subsidiary of Japanese bank Nomura, became an institutional data provider across crypto, equities, commodities, and FX.

“From the very beginning, the idea around who should publish on this network was the only trust it had,” added Cahill. “So they are institutions who have got too much reputation to lose than they have to gain by manipulating data.”

In order ensure the quality of the data there are mechanisms in place such as never having just one publisher in a symbol and needing a minimum of 10 publishers in order to generate an aggregate. Cahill said: “We have made some refinements, and think we will be able to scale those numbers up tremendously over the next several months.”

Pyth has just rolled out oracle integrity staking which Cahill described as adding economic trust to the network. Providers are incentivized to help maintain data quality by receiving rewards from an open-ended pool. However, they also face the risk of having their stake slashed as a penalty for failing to maintain data accuracy.

“Imagine this sci-fi world where you have everything that is traded reports its price to Pyth because we have incentivized all the traders to earn rewards,” said Cahill.

Users can see on-chain how much each publisher has been rewarded for providing the highest quality data, and validators can also receive a portion of the rewards.

 Mike Cahill, Douro Labs

“Using these game theory mechanisms can reinforce the outcome for higher quality,” Cahill. “Pyth is designed to optimise trust at speed, which is vitally important for financial services.”

Pyth price feeds currently update every 400 milliseconds according to Cahill, which is very fast for blockchains but relatively slow for institutional finance who operate in microseconds, or sometimes nanoseconds.

“The end goal is to get all symbols on Pyth as close to T0 as possible,” he added. “The roadmap is to make things faster, make more data available and keep it very cheap.”

Cahill has ambitions that as Pyth starts to scale up into the many thousands, hundreds of thousands or millions of symbols, it will become an alternative to visual data for traders, which has historically been prohibitively expensive.

“Projects like OpenBB are already plugged into Pyth data and they are making it available to retail traders who have relied on 15-minute delayed data,” he added. “This is a global project and we think that giving equal access to everyone is a huge endeavor, which will be a game changer.”

Pyth data has also been integrated with TradingView, which allows users to view Pyth prices on their own website. Cahill said: “We are very aligned to being able to make data available everywhere.”

Data is currently available on 80 different blockchains in 425 applications, and has been used by 65% on-chain derivatives markets, according to Cahill. He said  close to $1 trillion of volume in derivatives have been executed at the Pyth price over the network’s lifetime.

 Source: VanEck

Market data pricing

In traditional finance, market participants have raised concerns about the cost of market data. Trade bodies including The Association for Financial Markets in Europe (AFME) and EFAMA, the European Fund and Asset Management Association, issued a joint statement on significant issues with the supervision of market data costs in October this year.

They told regulators that proposed new regulation does not ensure that the pricing of market data must be based on the actual cost of production and dissemination with a reasonable margin, bearing in mind that market data is a by-product of the trading activity.

“The present proposal will, if not changed significantly in line with the associations proposals, imply that the trend of considerably increasing costs of market data and complexity of terms & conditions will continue to exist to the detriment of the key-stakeholders in the capital markets meaning investors and pension savers will face less investment choices, less transparency, higher costs, lower savings, and companies may face reduced access to capital and higher cost of capital,” they said.

SEC Charges Invesco Advisers for Making Misleading ESG-Related Statements

By
SEC
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SEC Charges Invesco Advisers for Making Misleading Statements About Supposed Investment Considerations

Washington D.C., Nov. 8, 2024 — 

The Securities and Exchange Commission today charged Invesco Advisers, Inc. for making misleading statements about the percentage of company-wide assets under management that integrated environmental, social, and governance (ESG) factors in investment decisions. The Atlanta-based registered investment adviser agreed to pay a $17.5 million civil penalty to settle the SEC’s charges.

According to the SEC’s order, from 2020 to 2022, Invesco told clients and stated in marketing materials that between 70 and 94 percent of its parent company’s assets under management were “ESG integrated.” However, in reality, these percentages included a substantial amount of assets that were held in passive ETFs that did not consider ESG factors in investment decisions. Furthermore, the SEC’s order found that Invesco lacked any written policy defining ESG integration.

“As stated in the order, Invesco saw commercial value in claiming that a high percentage of company-wide assets were ESG integrated. But saying it doesn’t make it so,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement. “Companies should be straightforward with their clients and investors rather than seeking to capitalize on investing trends and buzzwords.”

The order charges Invesco with willfully violating the Investment Advisers Act of 1940. Without admitting or denying the order’s findings, Invesco agreed to cease and desist from violations of the charged provisions, be censured, and pay the aforementioned $17.5 million civil penalty.

The SEC’s investigation was conducted by Jonathan T. Menitove of the Asset Management Unit and Richard Rodriguez of the Atlanta Regional Office with assistance from Robert K. Gordon. It was supervised by Ruth Hawley of the San Francisco Regional Office, Stephen E. Donahue of the Atlanta Regional Office, and Andrew Dean and Corey Schuster of the Asset Management Unit. 

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