While many in the financial industry share in my substantial concerns over market regulations and the resultant market structure impacts, there is a glimmer of hope.
Before we examine the current landscape, I think it is only appropriate to remind everyone of the history of proprietary trading firms in Chicago. Starting in the 1980s, these firms drove considerable financial and technological innovation that still continues today. They were some of the first to adopt UNIX and TCP/IP for systems. A couple of more well-known proprietary trading firms that were instrumental in pushing Sun Microsystems to support the software from Steve Jobs’ failed NeXT Computer company. This “life line” provided a bridge for Job’s return to Apple. Of course, that same software, Objective-C, is the basis for Apple today. When the derivatives markets in Europe converted to electronic trading systems, Chicago markets were some of the first participants. Orc Software, now Itiviti AB, arrived on the scene along with a few other platforms in 1987 and has continued providing cutting edge solutions to proprietary trading firms continuously for these past 30 years.
During September’s FIX Trading Community’s Chicago Briefing hosted by Thomson-Reuters, I was asked to moderate a panel discussing the future of proprietary trading in Chicago. The panel of industry veterans included Brennan Carley, Global Head of Frameworks at Thomson-Reuters, Keith Fishe, Founder and Managing Partner of TradeForecaster, and Rajeev Ranjan, Policy Advisor, Financial Markets Group, Federal Reserve Bank of Chicago.
The discussion started out with a dreary forecast on the future of proprietary trading in Chicago. Concerns over market regulations and the resultant market structure impacts dominated the initial part of the discussion. However, Carley took a more optimistic position regarding proprietary trading. He pointed out that as large banks comply with the Volcker rule that prohibits trading, this should create opportunities for independent firms. Even the move from active investment to passive investment should create arbitrage opportunities to help align pricing within the growing ETF segment.
This brings up another topic–in 2015, FIX Trading Community decided to open the technical standards process up to non-FIX members in order to draw on the best technical minds in the industry. All FIX technical products are now housed on GitHub (http://fixprotocol.io).
Despite challenges due to regulatory response, the Chicago markets will continue to be a vital part of the global financial markets and innovations in trading and technology will originate from LaSalle Street. If you missed this engaging debate, I invite you to join me in Boston as I’ll also be moderating a panel on the bond liquidity crisis at the November FIX Boston Americas Trading Briefing.
FIX Boston–Americas Trading Briefing
Monday, November 14th
State Street Global Markets, Boston
Jim Northey, Principal Consultant and Industry Standards Liaison, Itiviti
FIX Infrastructure The financial industry is constantly evolving, driven by a mix of new business and regulatory requirements. The imminent application of MiFID II in Europe is a case in point that is spurring a tectonic technology change. With a high pace of industry change and the cost of errors even higher, the quality assurance function is […] June 21, 2017
FIX Infrastructure It was a pleasure to have an opportunity to speak at the 2017 Americas Trading Briefing, which was graciously hosted by Goldman Sachs. As usual, the room was filled with more than 250 senior market participants and 25 expert speakers to discuss important topics, trends and issues we face together as the FIX Trading Community. […] June 7, 2017
FIX Infrastructure As the speed and complexity of automation rises, market participants have a duty to ensure that they pursue and maintain best practices. Read the full article here. This article by Jim Northey, Senior Vice President, Strategy and Research, Itiviti was first published in the Electronic Trading Journal-GlobalTrading, Q2 2017 Issue #62. June 1, 2017
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