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WFE Focus April 2011
The evolution of screen-based trading
Peter Clifford
Deputy Secretary General,

The technology used by exchanges, always a crucial element in competition between market participants as well as between competing venues, has become a subject of discussion among regulators and policy makers around the globe. 

From the current consultation on technology by the International Securities Commissioners Organization (IOSCO) to the proposed controls on direct market access (DMA) and high frequency traders (HFT), suspicions about the benefits for the marketplace of new technology and defenses of those innovations are daily features in the marketplace dialogues.

As Professor Michael Gorham points out in this month’s Focus, the evolution of technology in financial markets has always been a mix of what the market participants will stand and what regulators will allow.  In part one of a two-part history, he traces the rise in on-screen trading that occurred first in the exchange-traded futures and options markets and later in the world’s stock exchanges. The WFE will publish the second part of this paper in a future edition, as well as insights into HFT, algo trading and direct market access.

In November 2011, the WFE will hold an exchange technology workshop at MIT where we will have a chance to study some of these topics.  This briefing for exchange managers is organized every two years on campus at MIT to look at the current state of the markets and anticipate the next steps in their evolution.   Attendance is free for WFE members, affiliates and correspondents, and open by invitation to selected guests.

Among the topics on this year’s agenda:

• IT security for exchanges: the new hacking threat

• Artificial intelligence application in finance

• HFT: what is the limit?

• The impact of HFT on:

     - Surveillance

     - Risk management

     - Capacity

• Regulation and technology: the challenges of co-location, DMA, HFT

• Exchanges data centers

• Turning exchanges into IT provider – what new services can exchanges offer?

• Next trends in hardware and software for exchanges

• IT strategies for smaller exchanges



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