Communities of value at the world’s liquidity hubs

Communities of value at the world’s liquidity hubs Posted in: Connectivity, Cost of Ownership, Infrastructure & Managed Services, Technology Innovation · 4 Dec 2014 REUTERS/Keith Bedford New interactive communities are growing around all the world’s major trading hubs. These communities are ecosystems where trading institutions and innovative suppliers operate alongside trading venues to create better infrastructure and data solutions for smarter, more agile trading operations. There are perhaps a dozen or so key liquidity hubs around the world for exchange-traded and highly liquid assets such as cash equities, derivatives and FX. Some of these are already mature markets (for example, New York, London and Tokyo); others are developing rapidly (for example, Shanghai, Mumbai and Sao Paulo). At each of these locations, there are some 20 major financial market data centers – proprietary exchange data centers and those housed in centers by providers such as Equinix, Interxion and @Tokyo. Choice creates value Today, a significant proportion of mission-critical trading infrastructure is located in those data centers. There are agency brokers, prime brokers, hedge funds, quant trading firms and other active buy-side companies –the hubs are becoming interactive financial communities. And with the increasing electronification of OTC markets, this trend can only increase. Initially, existing markets showed a predilection for keeping things proprietary, but this has changed. It is the opposite approach – building community – that has increased their value as liquidity hubs. Venues are naturally keen to grow new revenue lines and drive trading volume across their matching engines; they have found that offering choice is the best way to do this. Any firm that can add value to the community is welcome. Perhaps the best example is the Chicago Mercantile Exchange (CME). More than 100 trading firms are located at its Aurora data center – along with a multitude of service providers, connectivity firms and other vendors. If you can help these people trade smarter, cheaper, quicker, with less risk or more profit, then you are pretty much guaranteed a seat. The annual Tech Talk conference at Aurora attracts over 200 people from all parts of the community. From capex to opex Data centers at the main liquidity hubs have the highest level of resilience and performance so they are entitled to charge for the privilege. Undeniably, co-location is expensive; but easy access to pre-built, shared and multi-tenant services can significantly reduce costs. Accessing market data or trading connectivity via a simple cross-connect is significantly cheaper than operating your own dedicated comms and server footprint. That’s what is happening in our London Elektron Managed Services site in Interxion where firms are accessing low-latency, normalized direct feeds for 11 markets via two resilient cross-connects. Other meaningful benefits include rapid time to market for new services, reduced management and staffing overhead, and shifting from capital expenditure (capex) with multi-year ROI to operating expenditure (opex) with the ability to scale up or down. It might not yet be the democratization of market data and trading infrastructure that some are demanding, but it does offer some interesting commercial options. Tiers create cost benefits Similarly, where latency is not an issue, market data platforms, test and development environments, risk management, compliance and middle-office systems can all now be handled by hardware provisioning, virtualization and cloud services to bring down the overall TCO. These are backed-up by a broader set of managed services, such as capacity management and proactive incident monitoring. So we see a clear two-tier model forming in the market – the first being liquidity proximity sites with interactive communities of trading counterparties, and the second offering cost-effective, scalable data centers catering to the broader infrastructure requirements of financial firms. Those firms now have more options to effectively outsource parts of their workflow, infrastructure provisioning and management. That is why Thomson Reuters has pre-built multi-tenant or scalable capabilities within client communities – reducing the cost of ownership and improving the time to market for anyone who uses those services. To date, Elektron Managed Services operates from 19 data centres globally incorporating all key financial centres as well as the four BRIC countries. This offers data, platform, connectivity and infrastructure, together with an end-to-end monitoring and real-time service dashboard as a pre-integrated service – all based on defined SLAs. Excellence is clustering around the world’s major trading hubs. That is a good thing in a changing global industry. It creates choice, innovation and agility – key qualities for future success. Related reading: TABB Report sheds new light on TCO The question isn’t just ‘What does it cost?’ but, ‘What can you save?’ cta-1 Share Tweet Share +1 Email Print Elektron LinkedIn Visit the Elektron LinkedIn page Speak to us Speak to us ------------- Stockspot BlogSign up How it works Who we are Insights Blog What are ETFs and why are they becoming so popular? (infographic) http://blog.stockspot.com.au/what-are-etfs-and-why-are-they-becoming-so-popular/?utm_source=dianomi&utm_medium=cpc&utm_campaign=etf_explained&utm_content=fum 5 December 2014 Chris Brycki ETFs, Uncategorized While exchange traded funds (ETFs) are rapidly growing in popularity, many Australians are still not familiar with their benefits. Less than 10% of money invested by Australians goes into ‘passive’ strategies (either index funds or ETFs) with most people still preferring to either invest directly into stocks or employ traditional “active” managed funds. Compared to Do-It-Yourself investing, ETFs can usually diversify a portfolio in a more cost effective manner. They also attract lower fees than most managed funds. We’ve decided to bring it back to basics and explain what ETFs are and why they’ve taken off in the recent years, growing to $14 billion in funds under management as at November 2014 (up 40% in one year!) ETFs explained An exchange traded fund (or ETF) is an investment fund that is traded on Australian Securities Exchange (ASX). It generally holds a wide range of investments which are representative of a particular asset class (e.g. Australian shares or bonds) and most track against an index (e.g. S&P/ASX 200). It gives investors access to a broad range of securities through a single trade. ETFs-explained-infographic Benefits Low costs ETFs generally have lower fees than other investment products because they are not actively managed and do have to pay for additional fund managers to try and beat the market. The reality is that majority of funds underperform the market return after you include their fees.1 ETF also typically have lower marketing, distribution and accounting expenses plus lower portfolio turnover which helps to defer the payment of tax. Diversification ETFs provide a diversified investment to entire markets within an index. They do not have any over-concentration in one company or sector, as a result enabling easy access to a wide range of investments. Potential tax efficiency Because ETFs typically have low turnover of their portfolio securities, it helps minimise capital gains. While this is an advantage they share with other index funds, their tax efficiency is further enhanced because they do not have to sell securities to meet investor redemptions. Transparency Each ETF issuer provides daily information to the market including the ETF basket and Net Asset Value (NAV). They are also priced throughout the trading day. Liquidity Ability to buy and sell during ASX trading hours and at a price quoted on the ASX, unlike unlisted manage investment funds that can only be traded at one price per day. It should be noted that along with the benefits, ETFs also carry risks like all investments. This includes market risk, currency risk and liquidity risk. Growth of ETFs In the aftermath of the global financial crisis (GFC), many investors are finding ETFs to be a compelling alter­native to higher cost managed investment funds. This is especially the case when you factor in that most actively managed funds had negative returns during this period but still charged their high fees. ETF assets in Australia have steadily been increasing over the years and has more than doubled in 2012. The growth has continued in 2014 and has increased by $4.1 billion (40%) since the beginning of this year. Australian-ETF-capitalisation Source: ASX We believe they will continue to grow with many more Australians adopting low-fee ETFs within their investment portfolios and superannuation. Stockspot has chosen ETFs as part of our portfolios because we believe that they provide clients with the best low-cost exposure to different asset classes and geographical regions. The also enable investors to reduce risk with diversifications, and their low-fees help to optimise investment returns. This is backed-up a study by Gratten which shows that fees have the highest impact on the balance of investments.2 About Stockspot Stockspot can help you build and manage a diversified portfolio of ETFs with as little as $2000 – low-fees, fully online 24/7, no paperwork, automated investment advice with portfolio rebalance. Our vision is to enable anyone to access professional investment services at a fraction of the cost. Try it now and see what portfolio we recommend for you. Related posts Is your Super in a Fat Cat Fund? 3 lessons on diversification 5 Smart Super Tips Stay up-to-date with the latest news, tips and insights. You will also receive a copy of the Stockspot Fat Cat Funds Report. 1 Stockspot Fat Cat Funds Report 2014 2 Gratten Institute – Super Sting – April 2014 inShare 21 ASX Diversification ETF ETFs Exchange Traded Funds fees Funds management Grattan Investing Low fee Self Managed Super Funds SMSF Stockspot CHRIS BRYCKI Stockspot Founder and CEO LEAVE A REPLY Your email address will not be published. Required fields are marked * Name * Email * Website Comment Post navigation RECENT POSTS Stockspot portfolios: what stocks and bonds are they invested in? 2014 : Stockspot end-of-year update 3 tips for investing in your 20s What the Murray FSI Report means for super & technology What are ETFs and why are they becoming so popular? 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