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
Execution What sets Itiviti solutions and technology apart from the rest? Itiviti staff explain in their own words. Go to Itiviti solutions January 9, 2018
FIX Infrastructure Jim Northey, Senior Vice President Strategy and Research at Itiviti, talks about trends in trade automation and operational efficiency following the financial crisis. For many years resistant to the changes witnessed in other sectors, since 2010 the financial industry has started to come to terms with the need to standardize and automate to achieve operational […] October 18, 2017
FIX Infrastructure We learned last week that the ISO Technical Management Board (ISO TMB) has approved Jim Northey, the FIX Global Technical Committee Co-chair representing the Americas, as the next ISO TC68 Chair. Jim previously served seven years as FIX Americas Regional Committee Co-chair and was the initial Chair of the Global Derivatives Committee. Jim will serve as ISO […] October 8, 2017
Execution What makes Itiviti different? With deep insights into market drivers and challenges, Itiviti delivers solutions that help you stay ahead of the game. Using modular, high performance technology, the Itiviti trading platform guarantees high quality as well as extensive customization options. With new regulations consistently coming into play, Itiviti technology is built to ensure that […] October 3, 2017