Electronic Trading Trends and
Fragmentation in Asia Pacific

Oct 2010
Hani Shalabi
Head of AES Asia - Credit Suisse
Agenda



   High Frequency Trading


   Electronic Trading: Advanced Execution Services (AES®)


   Internalization Engin...
High Frequency Trading
Who Are They? What Do they Do?

                                 Market Making (Spread
            ...
High Frequency Trading
Asia vs. Rest of the World


High Frequency (% of Total Market Volume)


                          ...
High Frequency Trading
Market Heat Map – barriers to entry




                       Source: Credit Suisse   5
High Frequency Trading
Trading Costs - roundtrip




               Source: Credit Suisse, Exchanges, Alternative Venues  ...
High Frequency Trading
Abusive Practices

   Flash Orders


   Order ID Information Leakage


   Use of certain order type...
High Frequency Trading
The Case of Japan: Trading By Investor Category




                         Source: TSE           ...
High Frequency Trading
The Case of Japan: Trading Characteristics




                         Source: TSE         9
High Frequency Trading
The Case of Japan: Order Book Volatility




                         Source: TSE       10
Algorithmic Trading
Algorithmic Trading
Global Trends




                      Source: Credit Suisse   12
Algorithmic Trading
Client Venue Usage


                                              Japan has the
                     ...
Algorithmic Trading
Strategy Description
   Smart DMA                  Pairs
   VWAP                       Gamma
   Percen...
Algorithmic Trading in India
Growing Fast




                      Source: Reuters   15
Algorithmic Trading
Upcoming Trends


    Sophisticated customization


    Co-locating latency sensitive strategies


   ...
Darkpool Crossing
Crossfinder ™
Venue Size




                18
Smart Order Routing
Smart Order Routing
Fragmentation in Japan




                         20
Smart Order Routing
Liquidity at Alternative Venues Strikes Back




                   Source: Credit Suisse; Bloomberg  ...
Conclusions



   Fragmentation is starting to take off in Asia but has a long
   way to go


   HFT and trading costs wil...
CONTACTS & DISCLAIMER
                                                                                                 The...
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(Cs증권+발표자료) 하니+살라비

  1. 1. Electronic Trading Trends and Fragmentation in Asia Pacific Oct 2010 Hani Shalabi Head of AES Asia - Credit Suisse
  2. 2. Agenda High Frequency Trading Electronic Trading: Advanced Execution Services (AES®) Internalization Engines/Dark Crossing: Crossfinder™ Smart Order Routing: Pathfinder (SOR) 2
  3. 3. High Frequency Trading Who Are They? What Do they Do? Market Making (Spread Capture) Used to be secret Index Arbitrage Now household names Market Neutral Statistical Arbitrage Trend Following / Reversion 3
  4. 4. High Frequency Trading Asia vs. Rest of the World High Frequency (% of Total Market Volume) Japan: 30% Australia: 15% HK, Singapore, Taiwan, Korea: <10% Others: <3% Source: Credit Suisse 4
  5. 5. High Frequency Trading Market Heat Map – barriers to entry Source: Credit Suisse 5
  6. 6. High Frequency Trading Trading Costs - roundtrip Source: Credit Suisse, Exchanges, Alternative Venues 6
  7. 7. High Frequency Trading Abusive Practices Flash Orders Order ID Information Leakage Use of certain order types to detect hidden liquidity Quote Stuffing Crowding the book 7
  8. 8. High Frequency Trading The Case of Japan: Trading By Investor Category Source: TSE 8
  9. 9. High Frequency Trading The Case of Japan: Trading Characteristics Source: TSE 9
  10. 10. High Frequency Trading The Case of Japan: Order Book Volatility Source: TSE 10
  11. 11. Algorithmic Trading
  12. 12. Algorithmic Trading Global Trends Source: Credit Suisse 12
  13. 13. Algorithmic Trading Client Venue Usage Japan has the highest electronic trading usage Hong Kong is a distant second followed by Australia, Korea and Taiwan New markets like India are on the rise Source: Credit Suisse 13
  14. 14. Algorithmic Trading Strategy Description Smart DMA Pairs VWAP Gamma Percent of Volume I Would Multi level POV Close Implementation Shortfall Custom1 Float Custom2 Iceberg …. Sniper Custom140 Sector/Index Relative Dark Pool Only 14
  15. 15. Algorithmic Trading in India Growing Fast Source: Reuters 15
  16. 16. Algorithmic Trading Upcoming Trends Sophisticated customization Co-locating latency sensitive strategies Algo protection against sudden price / order book (Fair Value Limits) Taking advantage of exchange driven new order types Source: Credit Suisse 16
  17. 17. Darkpool Crossing
  18. 18. Crossfinder ™ Venue Size 18
  19. 19. Smart Order Routing
  20. 20. Smart Order Routing Fragmentation in Japan 20
  21. 21. Smart Order Routing Liquidity at Alternative Venues Strikes Back Source: Credit Suisse; Bloomberg 21
  22. 22. Conclusions Fragmentation is starting to take off in Asia but has a long way to go HFT and trading costs will increasingly be the focus Trading stock manually is getting more difficult Traders regard access to cutting edge technology and smarter algos as core competency Source: Credit Suisse; Bloomberg 22
  23. 23. CONTACTS & DISCLAIMER The products and services mentioned may be restricted by law in certain jurisdictions and are not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Credit Suisse (“CS”) does not provide any tax advice. Any tax statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any penalties. Any such statement herein was written to support the marketing or promotion of the transaction(s) or matter(s) to which the statement relates. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. These materials have been provided to you by CS in connection with an actual or potential mandate or engagement and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with CS. In addition, these materials may not be disclosed, in whole or in part, or summarized or otherwise referred to except as agreed in writing by CS. The information used in preparing these materials was obtained from or through you or your representatives or from public sources. CS assumes no responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. Principal is not guaranteed in the case of equities because equity prices are variable. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by or reviewed or discussed with the managements of your company and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). These materials were designed for use by specific persons familiar with the business and the affairs of your company and CS assumes no obligation to update or otherwise revise these materials. Nothing contained herein should be construed as tax, accounting or legal advice. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction. CS has adopted policies and guidelines designed to preserve the independence of its research analysts. CS’s policies prohibit employees from directly or indirectly offering a favorable research rating or specific price target, or offering to change a research rating or price target, as consideration for or an inducement to obtain business or other compensation. CS’s policies prohibit research analysts from being compensated for their involvement in investment banking transactions. Commission is the commission rate or the amount agreed with a customer when selling up an account or at anytime after that. Trade name, etc.: Credit Suisse Securities (Japan) Limited, Financial Instrument Dealers, Director of Kanto Local Finance Bureau (Financial Instruments) Number 66 Memberships: Japan Securities Dealers Association, Financial Futures Association of Japan 23
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