8 n THE TRADE n ISSUE 49 n AUTUMN 2016 n www.thetradenews.com
n News
Buy-side firms in the US are shifting control of dark order
routing from brokers or other buy-
side firms towards a more collabo-
rative approach that includes third
party analytics specialists, accord-
ing to research from TABB Group
A poll of 100 heads of trad-
ing revealed an increase in the
number of buy-side institutions
working with brokers and third-
party analytics firms, to improve
execution quality and dark order
routing effectiveness.
As of 2015, 56% of US buy-side
firms now take this approach to
dark order routing, compared to
43% in 2014.
The report suggested that the
shift stems from the “portability of
order flow across venues in which
undesirable counterparties/liquid-
ity readily moves from one venue
to the next.”
One large asset manager
explained it seeks brokers that
have a data-driven approach when
routing to dark venues.
It said: “They should use things
like fill rates and execution quality
to decide whether they should
continue to route there.”
TABB said some buy-side firms
have completed real-time efforts
to normalise and review routing
and execution quality, but the data
collection process has evolved into
a post-trade tool to analyse part-
ners’ performance.
Other statistics from the report
revealed a significant shift in the
number of buy-side institutions that
are satisfied with the level of transparency received from their brokers.
In 2014, only 28% of respondents said they were completely satisfied, but in 2015 this increased
to 51%. n
Buy-side continue shift
towards collaborative dark
order routing
Buy-side institutions are less reliant on brokers and
other buy-side firms to route dark orders, opting for a
more collaborative approach.
Position limits
failures sees
HSBC fined $2.5
million
Investigation found HSBC
lacked knowledge on
regulatory requirements for
position limits.
HSBC has been fined $2.5
million for failing to identify its
position limits and comply
with regulatory requirements
in Hong Kong.
An investigation carried out
by the Securities and Futures
Commission (SFC) found HSBC
had breached the set position
limit for the Hang Seng China
Enterprises Index (HSCEI)
futures and options contracts.
The limit was breached on 18
occasions between 2014 and
2015.
The SFC said the bank had
“failed to identify its position
limit breaches promptly.”
“There were no policies and
procedures in place for
position limit monitoring and
controls in relation to the Hong
Kong Futures Exchange listed
products,” it added.
It was also found that HSBC
lacked adequate knowledge
on its position limits in relation
to regulatory requirements and
compliance in Asia.
The SFC said the bank has
now “taken steps to
strengthen its internal controls
on monitoring positions.” n
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