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Connectivity for Liquidity:  Exchanges Look to Make It Easier for Clients

Connectivity is critical for capital market participants – but that’s nothing new. Those of us in the financial markets industry have been talking about the importance of connectivity for data and voice communications for quite some time.

by Tim Carmody, Vice President, Global Network Engineering and Product Management, Financial Markets Network, IPC

Connectivity is critical for capital market participants – but that’s nothing new. Those of us in the financial markets industry have been talking about the importance of connectivity for data and voice communications for quite some time. But what is new is the growing trend of exchanges around the globe to proactively work with network providers to get closer to clients and empower them to source liquidity more easily.

The ever-increasing need for connectivity stems from several things.

First, the proliferation of players in the global markets including numerous emerging markets. Not too long ago most firms were just focused on BRICS – Brazil, Russia, India, China and South Africa – when discussing emerging markets. Today, Malaysia, Indonesia, Taiwan, Korea, the Philippines, Turkey, Colombia and Argentina – to name a few – are also part of the connectivity conversation.

Second, we are moving quickly toward the implementation of MiFID II regulations which will require better transparency by capital market participants. While the burden is on the exchange’s clients to demonstrate that they received the best price for their transactions, the burden for better business and commercial connectivity appears to be shifting from the customer to the exchange.    

Exchanges Reaching Out to Broader Financial Community

To meet this growing need for connectivity, IPC has been among the recent leaders in network expansion and innovation to help exchanges and trading firms alike come closer together through a global, purpose-built network that facilitates liquidity sourcing. In August 2015, IPC acquired ASPone which enriched our network in Russia and throughout the northern Asia-Pacific region. This was followed by our acquisition of Etrali in January of this year which further bolstered IPC’s network across Europe. Points of Presence (POPs) have also been enhanced in a number of cities such as Shanghai, Beijing, Taipei, Kuala Lumpur, and Moscow.

All of these elements have helped IPC to support global exchange requirements such as what the Singapore Exchange (SGX) announced in May – a Chicago Hub with IPC. “The goal of establishing a hub for SGX in Chicago is to make Asia's financial markets more accessible to investors in North America and broaden SGX’s international footprint,” said Ng Kin Yee, Head of Market Data and Connectivity at SGX.

Similarly, IPC is enabling market participants to continue to trade in Brazil with the IPC Financial Markets Network. This is important given CME’s recent announcement that effective end of day Friday, October 28, order routing and market data for BM&F BOVESPA (BVMF) products will no longer be available via the CME Globex platform.

This appears to be only the beginning of exchanges working to establish a greater global presence to facilitate more order flow and easier access for end users. While we see significant demand among North American institutional investors, asset managers, hedge funds and market makers to securely and quickly access markets in Europe, Latin America and the Asia-Pacific region, this trend is certainly not limited to the buy-side community in one continent. By partnering with IPC, exchanges can create a remote presence in any one of 700+ cities on our global network providing access to more than 6,000 market participant locations.

As the competition to generate alpha and source liquidity continues to heat up, exchanges and other liquidity venues are among those entities for which connectivity to the financial community is vital. Putting a purpose-built network to innovative use is helping to meet this critical need by providing market participants with more options for trading and sourcing liquidity across multiple asset classes.