Greetings from DC!

Notes from FIA Law & Compliance 2018

When it comes to conferences, FIA Law & Compliance is one of our very favorites. Other shows may focus on networking like Boca or sheer size like FIA Chicago,  but L&C gets to the heart of the issues that make the markets tick and that’s what we get excited about at Eventus: improving market transparency and safety by helping our clients manage risk - compliance, surveillance, operational and financial.

Some of the tidbits that we picked up at L&C last week included:

• On the regulatory front, Europe and the U.S. are diverging, at least when it comes to regulating automated trading. In the U.S., Reg AT is viewed as not quite dead but definitely on life support as it is not a major focus for Chairman Giancarlo. In Europe, on the other hand, MiFID II is proving to be quite onerous when it comes to automated trading with more proscriptive moves expected ahead.
• Both the CME and ICE indicate that the industry is doing a good job when it comes to adopting best practices and standards. In the case of ICE, they receive 750 million orders/messages per trading day and yet they had only 12 cases of issues with algos last year.
• Some interesting stats from the CME: while there are over 250,000 unique Tag 50s and 40% of them have sent at least one automated trade, only 4% of all Tag 50s(1) are totally automated. In fact, most market manipulation cases are perpetrated by manual traders and usually involve some form of self-trading.
• There is a lot of debate on whether or not the global code for FX conduct is working with particular issues around electronic trading around “last look”, the FX cash market practice of cancelling bids and offers after they are acted upon by a counterparty but before they are confirmed. More work needs to be done here for disclosure and transparency.

There are real challenges and risk associated with being a legal and compliance professional in the capital markets as the rules are ever changing and the complexity of the markets continues to increase.  Being able to leverage an organization like the FIA and a conference like L&C is essential to strengthening and understanding best practices and increasing one’s knowledge base. We applaud FIA for continuing to be a source and forum for great information and guidance and we’re proud to have joined FIA as associate members in 2018.

(1) Tag 50 IDs are used to identify CME Globex Operator IDs (traders, terminal / algorithm operators) authorized to send and receive non-administrative order messages. Tag 50s are assigned to individuals and must be unique at the Clearing Member Firm level.