Despite concerns about high frequency trading (HFT), European financial industry participants haven’t changed how they interact with markets, a survey from ConvergEx points out.
In its “European Equity Market Structure Survey” results released on May 15, 2014, ConvergEx highlights that less than a third of respondents believe that European equity markets are currently fair for all participants.
The ExodusPoint Partners International Fund returned 0.36% for May, bringing its year-to-date return to 3.31% in a year that's been particularly challenging for most hedge funds, pushing many into the red. Macroeconomic factors continued to weigh on the market, resulting in significant intra-month volatility for May, although risk assets generally ended the month flat. Macro Read More
Interestingly, in April, a survey by ConvergEx Group of U.S. industry participants also found similar results.
Not fair to all participants
ConvergEx Group’s ‘European Equity Market Structure Survey’ was conducted during May 6th to May 9th, 2014, with 131 respondents from buy-side firms (asset managers, hedge funds), sell-side firms (banks, broker-dealers), trading venues, service providers and other financial industry participants.
The survey highlights that respondents to the survey expressed significant concerns about the way European markets are currently structured and the role that HFT plays. As can be deduced from the following graph, 28% of respondents believe European equity markets are fair for all participants, while a significant 43% believe European equity markets are not fair for all participants:
The survey also highlights that almost twice as many respondents believe that HFT is harmful (28%) as believe it is helpful (14%). The following graph highlights only 19% of respondents believe HFT is helpful or very helpful to market participants:
In wait-and-watch mode
Interestingly, the survey highlights that despite concerns, the HFT debate hasn’t led to a significant changes by industry participants. For instance, less than one-quarter (21%) reported making any changes at all. The following graph points out that 68% responded that the recent debate regarding HFT has not caused them to change the way they interact with the European equity markets, while only 19% have made slight changes:
The survey also points out that financial industry participants are almost evenly split on their view of regulatory changes. As can be deduced from the following graph, only about one-third (34%) of respondents believe current level of regulations are appropriate for today’s market structure:
The respondents to the ConvergEx survey were divided on whether European equity markets could withstand the volume resulting from a geopolitical crisis or other large volatility shock. As revealed in the following graph, 40% respondents are confident that markets could handle a large volatility shock, while 32% of the respondents are not confident or not-at-all confident that markets could handle a large volatility shock: