LSEG reportedly likely to reject HKEx bid | Banks seek independent FX code compliance | Outage forces Euronext to halt equity derivatives trading
September 12, 2019
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SIFMA SmartBrief Operations & Technology
News on the capital markets for operations and technology professionals
Top Story
SEC: Exchanges must not delay CAT
The Securities and Exchange Commission has warned of financial penalties if exchanges don't meet an April deadline to complete the consolidated audit trail. "CAT needs to be implemented without further delays," SEC Chairman Jay Clayton says. SIFMA will host an industry conference Monday to review the Firm's Guide to the CAT, including reporting requirements and implementation considerations.
The Wall Street Journal (tiered subscription model) (9/9) 
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Operations Update
LSEG reportedly likely to reject HKEx bid
London Stock Exchange Group is poised to reject Hong Kong Exchanges and Clearing's £32 billion purchase bid and remains committed to a takeover of data provider Refinitiv, sources say.
Financial Times (subscription required) (9/12) 
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Banks seek independent FX code compliance
Foreign exchange market participants are concerned about the potential for algorithms and automation to give the appearance of market abuse. Top banks reportedly are tapping e-surveillance provider Ideal Prediction to provide standardized FX Global Code analytics and independent verification of compliance with the code.
FX Week (UK) (subscription required) (9/9) 
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Outage forces Euronext to halt equity derivatives trading
Euronext had to temporarily suspend single stock options trading Monday on its Paris, Brussels and Amsterdam stock exchanges after its platform was disrupted by two technical glitches. Equity options trading was halted from 8:41 a.m. to 12:15 p.m. Central European Time.
Financial News (UK) (subscription required) (9/9),  Futures & Options World (subscription required) (9/10) 
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HKEX addresses software glitches, cyberattack on website
Hong Kong Exchanges and Clearing resumed its derivatives market during local trading hours on Friday after determining that Thursday's outage was caused by software issues in the vendor-supplied trading system. HKEX says its website continues to suffer from unrelated intermittent outages that it attributes to a distributed denial-of-service attack on the site.
Reuters (9/5),  South China Morning Post (Hong Kong) (9/6),  Regulation Asia (subscription required) (9/6),  Financial Times (subscription required) (9/5) 
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Alternative-data market projected to top $1B
The market for alternative data is expected to exceed $1 billion this year as fund managers seek an information edge amid growing competition from passive funds. Buy-side spending will reach an estimated $1.1 billion this year and $1.7 billion next year, compared with $232 million in 2016, according to AlternativeData.
MarketWatch (9/7) 
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Mixed picture for AI-based hedge fund performance, data show
AI-based strategies have returned 26.96% for hedge funds over the past three years, outperforming the Preqin All-Strategies Hedge Fund benchmark of 23.87%. However, Eurekahedge data for the past seven months show AI-focused funds have posted returns of just 2.77% while funds using other strategies gained 6.36%.
Opalesque (Cyprus) (free content) (9/8) 
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Where are you in the race to innovate?
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Technology Update
US banks outspend European rivals on tech
European banks' $77 billion budget for technology this year is outmatched by US banks' plans to spend $105 billion, Celent says. European banks are expected to spend less than a quarter of funding on new tech, focusing instead on patching old systems.
The Wall Street Journal (tiered subscription model) (9/10) 
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Survey: Cloud to take 48% of banks' IT spending in 2020
Banks and buy-side institutions plan to spend nearly half of their IT budget on cloud technology and services next year, according to a Refinitiv survey of 300 financial technologists. The budget for cloud services will reach 48% of technology spending, up from 41% this year, the survey finds.
The Trade (UK) (9/9) 
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UBS taps AI to automate front office, transcription
UBS has been working with trading-technology and communication specialist Cloud9 to deploy artificial intelligence for automation of front office functions and to provide real-time transcription of conversations between traders and customers.
WatersTechnology (subscription required) (9/10) 
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Exec: Financial crooks use increasingly sophisticated tech
Criminals are finding innovative ways to use technology to target banks, said Colin Bell, chief compliance officer at HSBC Holdings. "We see innovation on the criminal side at a tremendous pace, and there is no question they are using technology against us, and they are doing it in a way that isn't hampered or harnessed by privacy legislation, cross-border legislation and so on," he said.
MLex (subscription required) (9/12) 
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Regulatory and Legislative Update
FINRA CEO stresses SEC will take lead on Reg BI
Financial Industry Regulatory Authority CEO Robert Cook has emphasized that FINRA will take the role of examining broker-dealer compliance with Regulation Best Interest but that decisions on implementation rest with the Securities and Exchange Commission. FINRA must "develop a really good process with the SEC" to handle questions that might arise from exams but will refrain from interpreting Reg BI, Cook says.
InvestmentNews (tiered subscription model) (9/9) 
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SEBI to establish cybersecurity monitoring system
The Securities and Exchange Board of India plans to collaborate with other national and international regulators to establish a Cyber Security and Compliance Reporting System that includes a Cyber Capability Index to gauge the preparedness of market infrastructure institutions.
Business Standard (India) (tiered subscription model)/Press Trust of India (9/5) 
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EU consolidated tape plan runs into resistance
The EU's plan to create a consolidated tape for all the stock markets in its member states has drawn criticism from current market data providers and participants. Refinitiv and IHS Markit say the system could restrict competition and innovation, and market participants worry it would increase their overall costs for data.
MLex (subscription required) (9/12) 
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SIFMA News
Join us on Monday: CAT Industry Conference, September 16 in NYC
The SEC is creating a Consolidated Audit Trail (CAT) that would enable regulators to track all activity throughout the U.S. for listed-equities and options. SIFMA and Deloitte will host an industry conference in NYC on September 16 to discuss the reporting requirements, technical specifications, SIFMA CAT Guide and the project management considerations to ensure a successful implementation of the CAT. The program will also include a one-on-one conversation with the SEC's Special Policy Advisor for the Consolidated Audit Trail. Webinar also available.
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Two Weeks Away: SIFMA's Fintech Conference, September 25 in NYC
Innovators and industry leaders will discuss how financial firms can ensure successful fintech implementation. Don't miss this opportunity to see the latest demos as well as examine issues across risk, operations and compliance and how to innovate within existing regulatory frameworks. Sessions include: Operationalization of AI, Effective Use of RegTech to Meet Compliance Challenges, Are Smart Contracts too Smart?, Cloud Governance and Implementation, and more.
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