Anthony looks at 10 major trends that developed on the buy side in 2017.
The buy side experienced tectonic shifts in 2017. Take, for example, cryptocurrencies. The year started with the talk being less about the products and more about the distributed-ledger technologies powering these assets. By the end of the year, and practically overnight, by the industry’s standards, the Chicago Mercantile Exchange and Cboe Global Markets were offering bitcoin futures, and Nasdaq its own futures in 2018. Also, while machine learning has been around for decades, this year saw some major advancements in use cases, and the regulators are starting to take notice. And while it hasn’t even gone live yet, the revised Markets in Financial Instruments Directive, or Mifid II, proved to be a major disruptor for asset managers across the globe, and not just in Europe.
Below are 10 stories that capture these shifts:
- Big Tech May Take a Bite out of Asset Management: Asset managers could find themselves disrupted by technology companies in the near future, a study finds.
- ESG: Turning Green into Green: Studies have shown that there is quantifiable value from investing in companies conscious of environmental and social issues. Technology advancements are also making investing in these instruments more enticing.
- Frontier Finance: Shaky Foundations Hinder Digital Currencies: Digital currencies are going through birth pains as an asset class, but some believe they can become the next commodity of choice for traders
- Malaysian Investors Turn to Analytics for Alpha Generation: Artificial intelligence and advanced technology are powering the next generation of investment in Malaysia.
- CFTC Warns on Bitcoin Futures as Exchanges Ready Contracts: The US commodities regulator has warned that it has “limited statutory authority” to oversee bitcoin cash markets—which it has described as “largely unregulated”—as one major exchange group announced plans to forge ahead with bitcoin futures by the end of the year.
- The Research Renaissance: An Examination of How Quantitative Analysis is Evolving: Although it still needs more time in the oven, technology is powering a quiet revolution in research and analytics—and the fusion of the two may transform the investment process.
- FSB Warns Artificial Intelligence Could Present Systemic Risks: An influential body of regulators has said that while artificial intelligence is showing great promise, it also brings with it a series of concerns for the stability of the financial system—chief among them that the technology may be too complex for regulators to understand.
- Vendors Accused of Over-Promising on Liquidity Rule: Two buy-side risk officers believe that the SEC put too much faith in the vendor community when making its liquidity rules, specifically for fixed income.
- After Building an AI Black-Swan Detector, Compellon Mulls Path Forward: The California-based company has built a quantitative analysis engine using machine learning to help score sell-side analysts and search for potential black-swan events.
- FCA Urges Buy Side to Make Assumptions on Mifid II Provisions: Speaking at this year’s Buy-Side Technology European Summit in London, Stephen Hanks of the FCA said he recognized that some key provisions around Mifid II remain unclear, and urged firms to decide how to comply based on what they assume the provisions suggest.
Should regulators take a more active role when it comes to AI oversight, or leave it to the professionals? What will M&A look like in 2018?Subscribe to Weekly Wrap emails