LATEST ARTICLES | BUYSIDE
The Depository Trust & Clearing Corporation (DTCC), the premier market infrastructure for the global financial services industry, today announced that its DTCC Money Market Kinetics service has been enhanced to deliver more frequent updates to critical data, helping to provide increased transparency into the volatility that has been impacting money markets since the start of the COVID-19 pandemic.
FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura Company.It is said that data is the lifeblood of a trading desk. Sell-side firms in particular need to effectively manage the torrents of data flowing across the desk, as the brokers who extract the most insight out of data will be best positioned to meet the needs of their buy-side customers.
As the head of fixed income trading at a European bank in 2007, Jens Kramarczik was troubled by the early stages of the US subprime mortgage crisis.He shifted out of risk assets, shorted Italian government bonds and bought the yen as a flight to safety. In this case, human judgement was the key, and the shift was made “long before the rocket science told us to,” he says.
Financial markets have held up largely unscathed during the COVID-19 pandemic, helping prevent a health and economic crisis transcend into a financial one. That doesn’t mean there hasn’t been a profound impact on financial services as buy-side and sell-side firms scrambled to maintain service levels while working from home. But has the change been different for each?Markets Media caught up with Nasser Khodri, Sell-side Group President, Capital Markets at FIS, to discuss the findings of a COVID-19 survey at the height of the great work from home shift.
Most investors buy and hold stocks to capitalize on long-term growth. That’s called a “long” position. When those purchases settle, the cash in the investor’s account is reduced and stocks owned increased. When that investor sells stock, the opposite happens.But sometime traders need to be able to short sell a stock too. That means they need to sell a stock they don’t already own.
The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today issued its latest whitepaper, “From Physical to Digital: Advancing the Dematerialization of U.S. Securities,” outlining the necessary steps to reduce, and ultimately eliminate, certificated U.S. securities. Dematerialization, the transition from physical certificates to electronic records, would reduce the risks and costs associated with manual processing and human touchpoints, as well as increase efficiency and resiliency across the industry at a time when automation is more important than ever.
Market volatility has been the order of the day in 2020, as firms across the globe react instantly to the latest developments, whether that be Covid-19, the global economic downturn or geopolitical tensions. This volatility shows no signs of letting up, with the uncertainty around this year’s presidential election stoking yet another wave of uncertainty.
Hedge Funds are absorbing a punishing $8 million annual hit to their Assets Under Management (AUM) due to high levels of manual processes and outdated trading systems that are causing delays in sending orders out to market. According to a new analysis from TradingScreen, a typical mid-sized long/short equity hedge fund ($5 billion AUM) wastes, on average, 2.5 hours per day dealing with 200 orders.
Cerulli Associates’ latest report, European Exchange-Traded Funds 2020: Adding Variety to Low Costs and Transparency, shows that the future is bright for the exchange-traded fund (ETF) market in Europe, with nearly all the ETF issuers surveyed by Cerulli expecting healthy levels of annual growth in the ETF market over the next two years.ETFs have gone from playing a minor, tactical role in European investors’ portfolios to standing strong as core building blocks; their lower costs may be sustainable as part of long-term buy-and-hold strategies. Cerulli’s research shows that the fastest growth is likely in Switzerland and the U.K., where 50% and 45% of survey respondents respectively expect the passive ETF market to expand at an annual rate greater than 10%.Several factors are driving European investors’ increasing use of ETF products. More than one-third (35%) of the ETF issuers Cerulli surveyed in Europe consider institutional investors’ increasing adoption of ETFs the major driver of ETF asset growth. A similar number (32%) see the increased availability of fixed-income ETFs and the use of ETFs by digital platforms as two of the other main drivers of ETF asset growth.
heir bios tout massive returns. They trade calls and puts. They’re Tesla perma-bulls. Meet FinTok, Gen Z’s version of #FinTwit. FinTok, or StockTok, depending on who you ask, is a growing corner of TikTok where Robinhood traders, “6-figure investors,” and misinformation collide. For the uninitiated, TikTok is an app where users post short videos often dubbed with audio clips already uploaded to the app. Users can add text to their videos, record their own audio, and “duet,” or add on to another user’s video. Think Vine, but bigger and more memeable. In its early days, the app was inundated with videos of users copying viral dances. While those dances remain a mainstay of TikTok content, niches for makeup, politics, and sports have since flourished.
Hedge fund managers with prestigious degrees aren’t necessarily smarter than their peers. But they do use their networks and the reputations of their alma maters to better structure their funds and deliver higher returns, according to new research published in the fall Journal of Alternative Investments. The study, called “Manager Characteristics and Hedge Fund Returns, Liquidity, and Survival,” found that the educational pedigrees of hedge fund managers directly affected arcane, but crucial, characteristics like the liquidity of their portfolios.
Buy-side firms have sought to expand their outsourcing options to include certain trading and middle-office functions, as they look to alleviate the operational pressures caused by the global pandemic. A new report from Northern Trust has claimed investment managers of all sizes and strategies have been prompted to undertake a comprehensive review of their operating models, and has led to an increase in outsourced dealing and other functions, such as foreign exchange and transition management.
Briefly describe Harvest Global Investments and outline your role and responsibilities as CIO.Harvest Global Investments is a fully owned subsidiary of Harvest Fund Management, one of the largest asset management companies in China with almost USD 140 billion in secondary market assets under management. As the international arm of the Harvest Group, Harvest Global Investments has been serving as the global gateway for global investors to access to China’s capital markets and the opportunity to participate in its rapid growth since 2008. As the CIO of Harvest Global Investments, I oversee all investment activities conducted by Harvest Global Investments and lead ESG initiatives for the Harvest Group.
A large number (81 percent) of asset management firms are unprepared to comply with the Uncleared Margin Rules (UMR) despite deadline extensions to September 2021 and September 2022, according to a new survey by State Street.Preparedness was measured by the perceptions, plans and readiness of 300 asset managers and allocators in 16 countries.Of those surveyed, 86 percent of respondents were preparing for either a phase V (September 2021) or phase VI (September 2022) deadline, as many more buy-side firms are set to be included in the scope of UMR in the next two years.
When the COVID-19 crisis is over, or more likely being effectively managed, one of the many post-mortem exercises that will be performed is the impact of home-working and social-distancing on risk, particularly operational risk. In 2002, I was working in a huge American investment bank as a relationship manager. My clients were all investment managers owned by insurance companies – some of the biggest buy-side firms in the world. One of the key skills of being an effective relationship manager in a bank that has a strong risk management function is to know how to navigate the many intricacies of bringing in new business.
How the 2020 Presidential election may shape buy-side market dynamics Irrespective of whichever candidate wins the Presidential election in November, the incumbent will be saddled by a Covid induced recession, one of the worst economic crises on record. According to data from the Commerce Department, US GDP between April and June contracted by 32.9% on an annualized basis, a decline which dwarfs by some measure the Great Depression almost a century ago. The US economy is experiencing a very fragile rebound. Although payrolls grew by 1.76 million in July and there was a moderate bounce-back in retail sales, unemployment is at levels three times greater than what it was pre-pandemic while many schools remain shut.1 A recovery is also contingent on the virus levelling out or a vaccine being found, both of which do not seem imminent
New capabilities support SEC Rule 6c-11 around the publication of ETF portfolio holdings for pricing purposes and allow ETF Agents to submit create/redeem instructions with settlement dates beyond the standard date.The Depository Trust & Clearing Corporation (DTCC) announced today that its subsidiary, National Securities Clearing Corporation (NSCC), has received regulatory approval and has begun implementing rule changes designed to enhance the consumption and distribution of the ETF Portfolio Composition File (PCF) process in support of regulatory changes calling for increased transparency for Exchange-Traded Funds (ETFs) under SEC Rule 6c-11.DTCC’s recent enhancements to the ETF PCF process include the introduction of multiple basket types to provide flexibility for Create/Redeem order customization, pricing baskets and additional data elements to support the clearance of fixed income ETFs in a future release.According to DTCC, the new features and automated controls expand the firm’s existing ETF primary market clearing process to include processing of multiple basket types and flexibility for order customization. The enhancements clearly differentiate all basket types within the PCF based upon their intended use, such as distinguishing between pricing and multiple trading baskets, said DTCC. Basket types include Standard, Restricted, Pricing, Rebalance, Create Only, Redeem Only, and Negotiated.“Enhancing the PCF to...
Vanguard Group, the second largest asset manager after BlackRock with $6.3 trillion in assets under management, reported Tuesday that it voted on 168,000 proxies in fiscal year 2020, and engaged with almost 800 companies, down slightly from the year before.Vanguard has also named John Galloway, who joined Vanguard in 2017, to be global head of its investor stewardship program, succeeding Glenn Booraem. Booraem, who headed the group for two decades, will continue on as an adviser, helping Vanguard deal with future regulatory and other changes it expects in corporate governance, according to a statement from Tim Buckley, chairman and CEO.
The remixing of the Dow Jones Industrial Average should signal the need to make room for technology themes in portfolios, even for investors who prefer other indexes, according to UBS Global.“The shuffle highlights the importance of diversification in ensuring that investors are well exposed to the winners in a post-Covid-19 world,” UBS’s chief investment office said in a research note dated August 31. The bank pointed to renewable energy, technology disruption, 5G networks, and health-care tech as winning themes over the long term.
CME Group, the world’s leading and most diverse derivatives marketplace, announced the launch of options on its Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 futures contracts, which became available for trading today. Options on the Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 futures are 1/10th the size of their E-mini options counterparts. The listing cycle for the new options consists of five Friday weekly options, three end-of-month options and two quarterly options contracts.
Exchange operator Cboe Global Markets has confirmed it will list new S&P 500 ESG Index Options in a bid to expand its S&P Dow Jones Indices product offering.The Cboe S&P 500 ESG Index Options, which will be available from September 2021, are designed to help market participants trade, hedge or gain exposure to US equities sustainability criteria.“Many market participants across the globe are increasingly pursuing a sustainable investing agenda that aligns with their own environmental, social, and governance preferences,” said Ed Tilly, chief executive of Cboe Global Markets.
In the aftermath of March’s coronavirus crash, numerous fund managers and data providers determined that companies with high ESG scores outperformed during the rapid sell-off — and a surge of money followed into funds focused on environmental, social, and governance issues.A new academic study, however, raises questions about the link between ESG considerations and stock performance during crises.Researchers from Canada’s University of Waterloo, Tilburg University in the Netherlands, and New York University’s Stern School of Business challenged the “widespread claims by fund managers, ESG data purveyors, and the financial press” that companies with high ESG scores were better situated in the pandemic. In particular, the authors — Elizabeth Demers, Jurian Hendrikse, Philip Joos, and Bauch Lev — cited reports from BlackRock, Morningstar, and MSCI, which all found that ESG funds outperformed during the crash.
The Alternative Investment Management Association and consulting firm Albourne Partners on Monday published a new questionnaire to interrogate asset managers on diversity and inclusion issues.The questionnaire was developed to “increase transparency around the alternative industry’s efforts in embracing D&I,” the two groups said in a statement Monday. “The motivation to adopt D&I best practices is becoming widely accepted; the practical aspects of this, however, remain a work in progress.”
Renaissance Technologies famed hedge fund, Medallion, along with other AI-driven funds including Citadel, D.E. Shaw and Two Sigma, are on the verge of facing off against a new generational hedge fund fueled by the latest AI technologies with one key difference: a 100 percent model-driven, alpha-learning, AI algorithm designed to pinpoint market demand projections while actively applying real-time data analysis insights without human interruptions. The new hedge fund is Project One.The brainchild of Andrew Sobko and Rami Jachi, the Project One hedge fund, targets $1B under management by 2021 and projects an average of 60 percent annualized returns, surpassing the success and performance of the Medallion predecessor. Interested investors must meet the minimum $1M threshold.The Project One hedge fund is built to fuel performance and provide resilience toward volatile markets due to global unrest or global pandemics that have roiled markets of late. The algorithm is designed with an alpha-learning AI model that continues to develop and apply all future predictive models without human involvement. Comparatively, traditional hedge funds rely on AI algorithms that become obsolete in a short period due to its need for human management in the process of how data is collected and analyzed.“If you missed out on Medallion, don’t miss Project One,”...
T. Rowe Price entered the exchange-traded fund industry on Wednesday with the debut of four active ETFs listed on the New York Stock Exchange.The ETFs, which will be actively managed by T. Rowe Price portfolio managers, include the Blue Chip Growth ETF (TCHP), the Dividend Growth ETF (TDVG), the Equity Income ETF (TEQI), and the Growth Stock ETF (TGRW).T. Rowe Price Head of Exchange-Traded Funds Tim Coyne said today, for the first time, T. Rowe Price is extending its time-tested strategic investing expertise to the ETF industry.