Welcome back to the Forefront Week in Review, where we take another look at top recent stories from the action-packed world of trading and market structure.
It’s no secret that Silicon Valley is a popular place to look to for inspiration, and if there’s one firm that appears to have captured the imagination of Wall Street more than any other, it’s Netflix. While brokers have traditionally charged their clients on a per-trade basis, multiple firms have reportedly been considering adopting a monthly subscription model, which the streaming giant has ridden to tremendous profit. The most recent broker to join the fold was Charles Schwab, which last week announced its robo-advisor’s premium service saw assets jump by 25% after switching to a Netflix-style model, underscoring the new strategy’s tremendous potential for the financial services industry –if employed properly.
In other news, Rothschild made a significant investment in equity research firm Redburn, T. Rowe Price announced a plan to cover research costs globally, and floor traders clashed with the New York Stock Exchange.
This week’s Week in Review features stories by Alexander Osipovich of the Wall Street Journal, Hayley McDowell of The TRADE and Bradley Saacks and Meghan Morris of Business Insider, among others. Keep scrolling for more, and don’t forget to subscribe to the Forefront Fintech Digest if you’re not on our list already.
By experimenting with subscription pricing, Charles Schwab seems like its angling to be the Netflix of asset management. The discount brokerage and manager of hundreds of billions of dollars of mutual fund and ETF assets said its robo-advisor’s premium service, which also includes human advice, saw assets jump by 25%, or $1 billion, after switching to Silicon Valley-style subscription pricing from a traditional fee on assets. Flat subscription pricing has long been common for companies like Netflix, Spotify, and Hulu, but is uncharted territory for many financial services companies.
Exchange, ATS and Clearing News
Floor Traders Clash With NYSE
Wall Street Journal | Alexander Osipovich
Floor traders on the NYSE, who once numbered in the thousands, have been pushed to the brink of extinction by the rise of electronic trading. Now, some feel they have a new nemesis: the NYSE itself. The Big Board publicly celebrates the floor, one of the world’s last working stock-exchange trading floors and an essential part of the NYSE’s brand. Behind the scenes, conflict has broken out over a crackdown on floor traders that some say has driven smaller firms out of business.
Bloomberg Supports Itiviti with SSEOMS Client Transition
The TRADE News | Hayley McDowell
Bloomberg is working alongside Itiviti to transition clients from its sell-side execution and order management solutions (SSEOMS) platform, after announcing plans to withdraw the system from the market. Itiviti said in a statement that Bloomberg is now sharing key information about its SSEOMS and has enabled pre-integration of several products, including Bloomberg’s B-PIPE market data feed and sell-side sales platform DASH Enterprise. Bloomberg confirmed its plans to decommission the SSEOMS platform earlier this year in order to focus on its more valuable business lines.
Buy Side News
T Rowe Price Latest Fund Manager to Cover Research Costs Globally
Financial Times | Richard Henderson
T Rowe Price, one of the world’s largest asset managers, has become the latest — and largest — fund manager to cover research costs globally in response to sweeping changes to the investment research business. The fund group, which has $1tn in assets, will from January pay for third-party research costs globally, the company announced Tuesday, expanding its decision to pay for research in Europe to all the regions in which it operates. The move is the latest push in an overhaul to the $15bn investment research business prompted by the Mifid II rules, which came into force last year in Europe.
Rothschild Buys Minority Stake in Equity Research Firm Redburn
Reuters News | Sudip Kar-Gupta
Rothschild has agreed to buy a minority stake in British equity research and financial services firm Redburn for an undisclosed amount of money, as regulatory pressures push smaller companies to consolidate with larger players. In a joint statement, Rothschild said the deal would expand its range of services, while Redburn said Rothschild’s investment would help Redburn expand its business. The companies declined to provide details on how much Rothschild is spending to buy the stake in Redburn.
Regulatory & Legal News
Clearpool Agrees to Pay Fine Over Execution of Orders from Fund Suspected of Manipulative Trading
FinanceFeeds | Maria Nikolova
FINRA last Wednesday decided to fine Clearpool after it identified and reviewed potentially manipulative trading activity by a foreign, unregistered proprietary trading fund (Fund X) that was an affiliate and customer of Clearpool. From July 2014 to September 2016, Clearpool executed Fund X’s trades and introduced its order flow to other broker-dealers for execution. Fund X traded through more than 1,000 foreign, unregistered individual traders, and triggered thousands of surveillance alerts for spoofing at FINRA. Despite being on notice of potentially manipulative trading by Fund X, Clearpool terminated the trading access of hundreds, but continued to execute orders from Fund X.
Blockchain & Crypto News
High-Frequency Trading Is Newest Battleground in Crypto Exchange Race
CoinDesk | Anna Baydakova
A handful of cryptocurrency exchanges are rolling out the red carpet for high-frequency traders. Huobi, based in Singapore, and ErisX, in Chicago, have separately begun offering colocation, in which a client’s server is placed in the same facility or cloud as the exchange’s, officials at each exchange told CoinDesk. This allows those investors to execute trades up to a hundred times faster, giving them an edge over the rest of the market. These exchanges join Gemini, which was one of the first crypto firms to offer colocation at a popular data center in the New York area, and is about to expand the option to include a second site in Chicago.
Forefront Client News
Outsourced Trading: The Future of the Buy-Side Desk?
The TRADE News | Hayley McDowell
Outsourcing hasn’t historically been linked to front-office activities and the buy-side trading desk, but the notion of outsourcing trading and execution is starting to turn heads at asset management firms, both large and small. Industry headwinds and changes in market structure due to increased regulation have seen the buy-side evaluate the tangible benefits of outsourced trading, while the future of the industry remains somewhat uncertain. For this article, The TRADE spoke with executives from top outsourced trading firms like Tourmaline Partners to provide an overview of the space.
Hong Kong Hedge Fund Deploys TORA OEMS for Pairs Trading
The TRADE News | Hayley McDowell
OEMS provider TORA is set to deploy its software at Infini Capital Management to support the firm’s pairs trading activities. TORA said in a statement that the Hong Kong-based hedge fund chose to deploy its OEMS due to its configurable functionality, and its multi-asset, multi-region and broker-neutral pairs application. Pairs trading is the buying and selling of multiple securities when the prices hit certain thresholds. Trading pairs in large size requires sophisticated algorithms and OEMS to manage the orders.
Pico Looks to Expand Network Analytics for Outsourced Trading
Waters Technology | Emilia David
Infrastructure network provider Pico is looking to expand its outsourced-trading portfolio with last week’s acquisition of analytics firm Corvil. The move is meant to allow for more real-time insights into managed networks. Pico, which provides managed trading network access, aims to grow its services around outsourced trading using insights from Corvil’s products by providing more transparency around networks and systems. The plan is to provide deep data and analytics within real-time managed environments.
That’s all for this week. Don’t forget to subscribe to the Forefront Trading Digest for more headlines like these.