This Week: WFE finds that permissionless DLT increases trading costs; JonesTrading/LiquidityBook & more

WFE finds that permissionless DLTincreases trading costs

The World Federation of Exchanges has published a study that warns that technologies without trusted third-party oversight, such as permissionless distributed ledger technology (DLT) can be harmful to overall market quality, despite radically reducing settlement times in certain instances.

The research suggests that adopting Bitcoin blockchain increases the costs of making a trade as well as the price reaction once the trade has been made, showing that a one-minute increase in settlement latency leads to a 1.3% increase in transaction cost and a 1.5% increase in price impact.

Pedro Gurrola-Perez, head of research at the World Federation of Exchanges, says that the trade-off between settlement time and market quality when using DLT has been a topic of great interest to the exchange community, and is related to previous studies the WFE has undertaken on how liquidity behaves in a Bitcoin blockchain.

Gurrola-Perez tells WatersTechnology that latency, or uncertainty around the time that trades will be settled, impacts both the liquidity landscape and pricing formation in the blockchain because there is no set time for traders to be sure that the trades have been settled.

“This brings uncertainty into the trading process, and the uncertainty has an impact on the liquidity because traders may not continue to trade with the same intensity if they realize there is some delay on the trades being settled,” he says. “It also impacts the price formation because you can have several different platforms not agreeing at the same time on the price because of the delay in the settlement process, which can open arbitrage opportunities across the different platforms.”

Gurrola-Perez says the study’s findings negate the previously held assumption that moving to instantaneous settlement such as a Bitcoin blockchain would not impact overall market quality. Although he emphasized that this is not necessarily a dealbreaker for using blockchain for settlement reasons, as DLT platforms structured with a trusted entity that validates the trades do not cause latency issues.

“If you have a centralized validator and there is no uncertainty in the validation process, then essentially you’re back in the traditional world—you’re just using DLT instead of a distributed database,” he says. “It’s an interesting aspect of DLT that has not been understood before, and that’s what makes the research relevant for policymakers that are thinking about what it will mean for the adoption of DLT in the markets.”

JonesTrading, LiquidityBook expand relationship

Trading platform and tools provider LiquidityBook announced that JonesTrading has moved its firmwide middle-office operations onto LiquidityBook’s LBX Post-Trade Hub, a suite of modular, cloud-native solutions for sell-side middle-office operations. The project took three months and replaces a legacy platform that was almost two decades old. The two companies have worked together since 2014.

LBX Post-Trade Hub will serve as a single, standalone middle office allocation system, interfacing with multiple front office OMS platforms and clearing brokers.

JonesTrading can now receive trades from disparate OMS platforms and shape them correctly for multiple clearing brokers; interface with CTM and third-party FIX networks to receive and match trades/allocation instructions from customers; and leverage LiquidityBook as a firm-wide reporting system for all trading & allocation activity.

Genesis and Inovotek announce partnership

Low-code application developer Genesis Global has announced it is partnering with IT consultant and Murex integration specialist Inovotek Solutions to work on software innovation in the financial markets.

The partnership will include Genesis leveraging its Genesis Application Platform and Inovotek’s more than 60 consultants and developers to increase the speed of deployment of new software and integration work for clients.

Meritsoft picks Taskize for query resolution

Software vendor Meritsoft, which is owned by IT services giant Cognizant, is integrating Taskize’s collaboration and workflow functionality into its Trade Tracking and Exception Manager (TTEM). The new functionality aims to minimize trade settlement fails through faster query resolution.

As the market prepares for the go-live of T+1 in North America and Argentina at the end of May, the shortening of the settlement cycle for equities and bonds will reduce the time to match by up to 80%. This puts greater pressure on market participants to successfully match trades in order to meet the settlement deadlines and avoid the associated costs of fails.

Meritsoft’s TTEM provides trade matching and settlement status updates throughout the trade lifecycle, helping users to identify at-risk trades. The Taskize integration is intended to help operations teams rapidly address issues that might otherwise lead to trade failures.

Users of TTEM can initiate a trade settlement query on TTEM by creating a secure workspace in the Taskize platform. The Taskize platform’s directory will connect the TTEM user to the best-placed individual for resolving the query at the counterparty. This will also allow TTEM users to interact with counterparties regardless of the communication tool they use without leaving the system.

IPC Systems and VoxSmart collaborate on transcription technology for financial institutions

IPC, a provider of communications and multi-cloud connectivity solutions, has joined forces with global communications surveillance tech firm VoxSmart to improve the accuracy and efficiency of multilingual transcription technology for financial institutions.

The technology will use AI alongside archived conversations from capital markets professionals. The firms say it will increase speed 50-fold compared to previous transcription technologies. The new technology helps front-office trading desks and sales teams to integrate insights into trading blotters, order management systems, and CRM applications by converting real-time audio into structured data.

Plenitude acquires Contineo to boost anti-financial crime coverage

Plenitude Consulting, a financial crime risk and compliance firm, has announced its acquisition of Contineo, a specialist provider of technical advisory services.

This move boosts Plenitude’s existing tech advisory and data analytics capabilities, and increases Plenitude’s profile among other AI-powered anti-financial crime solutions providers.