Sustainable Finance Paper I: “Enabling the Transition”

Sustainable Finance Paper I: “Enabling the Transition”

by | Nov 2, 2022 | Blogs, Reports

FIA EPTA members are committed to supporting the transition towards a greener and more sustainable financial services sector that supports the common goals of net neutrality in 2050. We understand the importance of sustainable finance in achieving this goal, which has inspired us to create a three-part series of Sustainable Finance Papers.

The series delves deeper into how we are supporting the transition to a sustainable finance framework to combat the devastating effects of climate change. This includes encouraging our members to accelerate the uptake of ESG products in European Capital Markets, include ESG products in the range that they provide liquidity for and establish functional internal policies to support their sustainability efforts.

In our first paper of the series, Enabling the Transition, we explore the crucial role that secondary markets play in a successful green transition and voice our concerns about unintended consequences under Sustainable Finance Disclosures Regulation (SFDR) in the EU, which restricts the use of Exchange Traded Derivatives that are becoming a core component of sustainable investment strategies and significantly reduces funding and financing costs and helps to manage risk.

Read the first paper on our website here Enabling the Transition; FIA EPTA member’s commitment to supporting the transition toward sustainable capital markets | FIA, where the full series will be published by the end of 2022.

Diversity, inclusivity and creativity: how modern market makers will deliver on the UN’s Sustainable Development Goals

Diversity, inclusivity and creativity: how modern market makers will deliver on the UN’s Sustainable Development Goals

by | Nov 8, 2021 | Blogs

Interview with Ian Firla, Co-Founder and Director, OSTC Group

Q. The #WeAreMarketMakers campaign aims to give people a new window in the world of modern market making. What does modern market making mean to you?

Market making was, is and always will be about providing liquidity to the exchanges. About helping to reduce risk, and making markets more efficient. But from OSTC’s perspective, what makes market making ‘modern’ is who is doing that. It’s the shift from market making being a very generic and predominantly white male occupation, to one that is much more diverse and inclusive.

OSTC is proud to be at the cutting edge of that change with our global education programmes, which are all about introducing the job of market making to a much more diverse audience

“What makes market making ‘modern’ is who is doing that. It’s the shift from market making being a very generic and predominantly white male occupation, to one that is much more diverse and inclusive.”

Q. In your opinion, how does greater diversity within the market making community help to benefit financial markets?
At OTSC we are seeing a real democratisation in the trading space as more and more individuals are joining who are not from the traditional talent groups that have been recruited into the industry in the past. These new participants could be seen as a threat to current incumbents who are in the markets, but the reality is that they bring huge benefits with them.

These diverse new individuals will come with a multitude of views on the world and the industry, and a multitude of experiences. And with these views and experiences, we’ll see a further investment of creativity and diversity of thought that is going to make the markets become even more robust and stable. They will help us to innovate in order to achieve the Sustainable Development Goals that the UN is asking our industry to achieve in order to create a more sustainable world.

This big picture benefit is one of the reasons we are very proud of our global education programmes at OSTC which are all about introducing market making to talented individuals who may well not otherwise have had the opportunity to discover, or try it.

“New participants could be seen as a threat to current incumbents who are in the markets, but the reality is that they bring huge benefits with them.”

Q. You’ve talked about the benefits to the market making community, and to the markets, of introducing diverse talent. What are the benefits to the individuals who participate in your programmes like yours?
From our experience, we see a really wide range of benefits. First of all, when individuals participate in our programmes, the improved financial literacy they gain benefits them and their communities. They better understand the markets they operate in, and what drives them, and how global markets have an impact on them and their livelihoods.
More broadly, we’ve seen the impact measured by GVA that we have been able to make in countries like Poland where we were one of the first, and certainly the largest, proprietary derivatives trading programmes coming into the country. By enabling individuals there to learn about the markets and how to trade, we opened up opportunities that wouldn’t otherwise have been there. Individuals who took part in the programmes are now at the head of a very wide variety of financial services firms in Poland; in the front and back office. The GVA studies on our impact in countries like Poland, or Wales, have been incredibly positive.
Q. You and your teams must meet lots of aspiring market makers. What do you think it takes to be a great market maker?
Well, while we are often seen as a London based company, we have a presence across the world, from Poland to India, China to Russia, and Wales to the Ukraine. These might not sound like obvious places for a firm like us to be, but that is absolutely in line with our vision that anyone, anywhere can learn how to trade.
We believe that anyone with a sharp mind, who is good with numbers – and who has a desire to succeed, has what it takes to be a great market maker. You do need to understand risk, of course, but you certainly don’t need to be tied to a particular location.
At the moment we are exploring a push into Africa, which presents a fantastic opportunity. It’s an opportunity for individuals there to learn to participate in the global markets which have a direct impact on many African countries because of the products traded. Take cocoa, for instance, and the impact of commodities markets on a country like Ghana. And of course, it’s also an opportunity for us, and the wider markets, to benefit from the incredible talent there. There are upsides for everyone.

“We believe that anyone with a sharp mind, who is good with numbers – and who has a desire to succeed, has what it takes to be a great market maker.”

OTSC is a global derivatives trading firm and educator providing liquidity globally on most of the major exchanges. It prides itself in its inclusivity and diversity programmes.
For more information on OTSC visit: www.ostc.com
Market Makers Enabling a Greener Financial Future

Market Makers Enabling a Greener Financial Future

by | Nov 3, 2021 | Blogs

As the world’s attention turns to Glasgow for COP26 this month, I wanted to explore the critical role that finance plays in sustainability and the climate crisis, and more importantly, the role that market makers play. Sustainable Finance is an essential enabler to work towards a more sustainable and climate-resilient world. It’s a critical part of unlocking the investment capital that is needed to support the green transition and protect our planet’s future.
The role of market makers currently can most easily be seen in regard to supporting ESG products which play a vital role in the green transition. ESG financial products incorporate the environmental, social and governance principles that make sure that a product is sustainable. This will be supported by, for instance, the EU taxonomy regulation which will give clear standards for what is considered green.
These ESG products are critical to society, investors and for the green transition towards sustainable capital markets. Developing ESG products also encourages transparency and consistency in reporting, while also raising awareness and building the expertise of investors. These products have environmental and/or social benefits that impact bigger goals set by COP 26 and help get to net zero in 2050.
So what role do market makers play in this? Market makers can help facilitate the shift towards sustainable investments by providing liquidity in ESG products, making them more attractive to invest in. They do this by making competitive pricing (tight bid-ask spread) and also through providing deep pools of liquidity, this helps minimise the cost of investing in ESG products, which in turn helps investors reorient their capital to sustainable investments.

“Market makers can help facilitate the shift towards sustainable investments by providing liquidity in ESG products, making them more attractive to invest in.”

ESG products are still fairly new to the market, but demand for them is growing, and with more and more investors who are conscious of the environmental impact of their investment strategies. As an industry, market makers play a crucial role in this transition. Market makers have the ability to support investors with the migration towards green investments, firstly, by making sure that investors can sell their ‘brown’ products while facilitating a smooth transition towards green products. And secondly, by giving trust in a product. When it comes to new financial products, investors want to be sure that there is always a market for that product. By providing continuous liquidity, market makers make sure that there is always someone present in the market, even in volatile circumstances.

 

“By providing continuous liquidity, market makers
make sure that there is always someone present in the market, even in volatile circumstances.”

Our members are already putting their commitment to our sustainable finance principles into action, taking active roles in ESG products. With market makers committed to trading these products, it gives investors the confidence that they need to include ESG products into their portfolios and investment strategies. I believe that ESG products are just scratching the surface in terms of how finance will help accelerate the green transition. Interest and confidence in these products will only continue to grow in the months and years to come, and I hope that this will lead to even more innovation in terms of new products in the future.

 

Meet the Institutional Trader, Tom Murphy (Maven Securities)

Meet the Institutional Trader, Tom Murphy (Maven Securities)

by | Oct 19, 2021 | Story

What is a typical day like for you?

A typical day for a trader involves a fairly early start. For me, this is just before 6am. I study what happened overnight, particularly in the US and Asia, before the European markets open. So when I arrive in the office, I already have an understanding of what has happened, and what the important events are that might be coming up in the next few days and weeks.

Then when the market opens, around 7am, I will engage all the electronic systems, make sure the phones are working and then start to stream my prices into the marketplace. Once trading begins, I will be observing what trades are happening, what prices and what instruments are being traded; and I will be looking at how all of this is feeding into risk and adding to our existing positions. I will be manually checking the automated decision-making to see if I think it is reasonable, as well as looking at our systems and how they are operating. 

Alongside this, I’ll be looking at what is happening in the world and I might also do some research projects or some coding. The day runs from 7am until 5pm and then once the market is closed, I’ll make sure all the trades are cleared correctly, review and write up the day and finish by around 6pm.

What is it about market making that appeals to you?

The appeal of market making is that it is a very complex and multi-faceted problem, with lots of ways to approach it and lots of ways to solve it. Alongside this, it’s also very immediately demanding. You have to price, take risks and be constantly present in the market. This is what creates such a buzz and a drive of adrenaline, that makes it a fun and interesting role.

“You have to price, take risks and be constantly present in the market. This is what creates such a buzz and a drive of adrenaline, that makes it fun and interesting role.“

How did you get into market making?

I always enjoyed maths, problem-solving, games and competition. I read up about trading and saw it involved those particular traits. Then with market making, it also added this layer of technology on top as well because it’s very code and developer driven. All of these combined made up my interests, and what led me here.


Tell us about who you work with? What are the other roles in your team?

There are the traders, like me, who are responsible for providing the prices, doing the trades and managing the risks. Alongside them are the Quants, who are responsible for providing the models to create the pricing. Then there are the data scientists who are responsible for finding, cleaning and providing the data that everyone can use. And lastly, there are the developers who are responsible for the coding. They ensure its production quality and working as it should be.

 

To find out more about Maven Securities visit www.mavensecurities.com

Lockdown restrictions liberated market making firms to reap the benefits of difference

Lockdown restrictions liberated market making firms to reap the benefits of difference

by | Oct 13, 2021 | Articles

Interview with Ian Firla, Head of Innovation, OSTC Ltd.

Q. The #WeAreMarketMakers campaign has been launched to help the world to better understand who market makers are and what they do. As a senior figure within a global market making firm, what would you want the world to know?

 

That market making is changing. It’s no longer that image perpetuated by the media and film, of traders in coloured jackets flailing their arms around. Yes, there are a lot of white men in the industry, but you don’t need to be one to take part. It’s really important for people to know that. You need a sharp mind. To be good with numbers. You need to understand risk. And you need a passion for the markets. But beyond that, it doesn’t matter.

There’s a growing focus now in this industry on diversity and inclusion in recruitment, and ensuring everyone has access to the right education opportunities. As a global proprietary derivatives trading firm and educator, I’m proud that OSTC is at the cutting edge of this. It’s a really exciting place to be.

“ You need a sharp mind. To be good with numbers. You need to understand risk.
And you need a passion for markets making may have several beneficial effects on markets. But beyond that, it doesn’t matter.”


Q. The first of FIA EPTA’s thought leadership reports for the campaign looks at how liquidity, and market making, changed during the pandemic. What effects did the pandemic have on you and the team at OSTC?

It’s been quite interesting to observe the impacts of the pandemics on the markets. There have been issues of liquidity, for sure. Though in our own experience, these have perhaps not been as profound as they have been for others.

But what we have found is that the pandemic has really emphasised the point that anyone can trade and do their job from anywhere. OSTC has had a programme allowing anyone to work from home, and we have found that it has really expanded and extended our latest recruitment drives. People who have been trained remotely, and developed remotely, are now operating as market makers and liquidity providers remotely.

In this respect, the pandemic has helped to emphasise that a well-trained and well-risked individual can do his or her job from anywhere. And that really liberates firms like ours to be able to recruit the best talent, and inject the best liquidity into the markets, from anywhere.

“The pandemic has helped to emphasise that a well-trained and well-risked individual can do his or her job from anywhere. And that really liberates firms like ours to be able to recruit the best talent, and inject the best liquidity into the markets.”

 Q. There can be a perception that market makers are just algorithms. How important is human direction in market making?

The human touch is extremely important in market making. It’s exactly why we have such a focus on recruiting diverse talent. If you have a group of people in your team who all think the same way, and are hoping to do the same thing, they will programme algorithms in the same way too. They will all point in the same direction.

The greater diversity of people you have within your team, the more creativity you get, and the more you are derisking what you do. Because you know that someone will always bring an alternative view point, in a way that they wouldn’t if you were only working with a group of very like-minded individuals. At OSTC we are really reaping the benefits of difference.

 Q. Given market makers, through liquidity provision, play an additive role in the markets and wider society, why do you think they were given a bad press in the past? 

Honestly, that has always been curious to me. Market makers are literally performing a function. We are providing liquidity, without which the markets would be a far riskier place for both the buy side and sell side to engage. In fact, the risk being introduced to markets without market makers’ presence would be highly amplified. Market makers help to make markets more stable, more secure, for everyone.

OTSC is a global derivatives trading firm and educator providing liquidity globally on most of the major exchanges. It prides itself in its inclusivity and diversity programmes.

For more information on OTSC visit: www.ostc.com