What were the trends in market structure and electronic trading this past year, and where are they headed? This edition of Forecast 2021 introduces movers and shakers in the market structure and trading space who offer their outlook for what’s next for the industry.
Old Mission, a quantitative market maker — Bryan Christian, Head of Business Development and Strategy
2020 saw major spikes in volumes and volatility. What was your experience during this period and what have been the long-term effects?
With few exceptions, the markets globally performed extremely well throughout the year. Clearly that was due in large part to the work of countless IT folks who helped virtually the entire industry begin working from home over the course of just a few days in March.But it’s also a testament to the work that everyone in the capital markets ecosystem — exchanges, broker-dealers, liquidity providers, investors, issuers, regulators, etcetera — have done over the last decade-plus to prepare for this type of market event. Obviously, none of us should rest on our laurels, but I think the entire industry should be proud of how we helped millions and millions of investors worldwide efficiently manage their risk during conditions that only a few years ago could have been catastrophic.
What are the most important trends in electronic trading to keep an eye on in 2021?
Over the last several years, the buy side has been steadily creating the infrastructures needed to access additional sources of non-traditional liquidity. Those efforts paid clear dividends during the year, both in terms of transaction cost reduction and the efficiency with which they were able to transfer risk. We see this trend only accelerating as these new liquidity sources further develop across additional asset classes.
What’s the most consequential market structure change you’d like to see made in the coming years?
We’ve seen a tremendous amount of AUM migrate from traditional mutual funds to ETFs over the last 18 months. Dimensional Fund Advisors’ announcement last month that they’ll be converting six of their mutual funds into ETFs next year was just the latest example, joining firms like T. Rowe Price, American Century, Fidelity and others who’ve done the same. The SEC’s approval last year of the first crop of non-transparent ETFs has been a big driver of this shift, which we see as a major positive for the industry. We think ETFs provide a highly liquid and cost-effective way for investors to express their view of the market, and hope that regulators globally allow issuers worldwide to continue to innovate in this manner.
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