BIS Publishes Report on Monitoring of Fast-Paced Electronic Markets
BIS published a report on the results of a study on monitoring of fast-paced electronic markets. The report examines major developments in the evolution of market structure and their implications for central banks. It also offers and overview of core components (in terms of data, tools, and analytics) of effective fast-paced electronic market monitoring, includes statistics on notable trends, and outlines the priorities and approaches of central banks in undertaking near-time and medium-term market monitoring.
Foreign exchange and other fast-paced electronic markets have undergone significant structural changes in recent years. Trading has become increasingly electronic and automated, the use of machine learning is nascent but growing, incumbents are responding to the emergence of new participants, and activity has migrated across a range of trading venues. Moreover, the availability of data for market monitoring has increased substantially. The report points to an overall trend among central banks toward greater use of high-frequency, transaction-level data.
The study also found limitations in the use of Markets in Financial Instruments (MiFID II) data to monitor foreign exchange and other fast-paced electronic markets. Although the use of these data seems promising, it faces three challenges in the form of limitation due to the scope of the legislation, the frequency of the collection, and the lack of centralization of aggregated data. As per the report, amid all these developments, the following key structural trends have emerged:
- Trading is increasingly fragmented across a range of new venues, while the frequency of activity and speed of information flows have accelerated significantly, especially in foreign exchange markets.
- Liquidity provision has become more concentrated among the largest banks, as smaller players resort to an agency model of market-making or exit the business altogether. Additionally, a new set of non-bank intermediaries, most notably principal trading firms, have strengthened their positions.
- Greater electronification has led to the commoditization of large quantities of high-frequency data.
Related Links
Keywords: International, Banking, Securities, PMI, Electronic Trading, Market Monitoring, Foreign Exchange, MiFID II, Data, BIS
Previous Article
EBA Publishes Work Program for 2020Related Articles
OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks
The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
