“Advanced Data, Diversifying Business, and Options Gain Traction”: Experts’ Perspectives

<p>In
a recent panel discussion at Finance Magnates London Summit 2023, moderated by
Rafah Hanna, the Director at Rafah Hanna, prominent industry figures gathered to
delve into the ever-evolving landscape of retail trading within the European
Union (EU). </p><p>The esteemed panel included Richard Barden, the Market Data Sales
Director at CBOE; Mazhar Saleem, the Sales Director for Enterprise Data &amp; Platform
at LSEG; Joe Craven, the Global Head of Enterprise Solutions at TipRanks; and
Richard Stoker, an Executive
Director, the EMEA Head of Proprietary and Retail Trading, and the Global Head of Platform
Solutions at CME Group.</p><p>Market
Dynamics: Consolidation, Diversification, and the Role of White-Label Services</p><p>The
central theme of the discussion revolved around the question of "Retail
Trading in the EU: Diversification or Consolidation?" Hanna kickstarted
the conversation by addressing the anticipated 40% growth in the <a href="https://www.financemagnates.com/tag/retail-trading/">retail trading</a>
market over the next five years, setting the stage for the exploration of
unique characteristics, opportunities, and potential winners and losers in this
dynamic landscape.</p><p>Stoker
highlighted the ongoing changes in the retail trading sector, underscoring the
significance of Regulation headwinds. He stated: "The changes we're
witnessing now in terms of regulatory headwinds are unprecedented. I believe
this holds more significance than the <a href="https://www.financemagnates.com/tag/esma/">ESMA</a> rules introduced in
2016.”</p><p>“Some
firms, relying on an extensive marketing approach and trading against their
clients, may find their business model unsustainable. Clients seek diversified
product offerings and educational resources. True access to the underlying <a href="https://www.financemagnates.com/tag/market/">market</a> is crucial for
long-term success. Moreover, success lies in diversifying into other asset
classes, whether it's crypto, options, futures, or any other, and that's where
substantial achievements are observed."</p><p>Saleem
acknowledged the simultaneous trends of consolidation and diversification in
the market. He noted a shift from supporting smaller players to larger firms
taking up market share. Saleem mentioned the growing interest in white-label
services, allowing larger players to offer solutions to smaller organizations
aiming to enter new markets.</p><p>Craven,
sharing insights from <a href="https://www.financemagnates.com/tag/tipranks/">TipRanks</a>,
provided a unique perspective, serving millions of retail end-users monthly.
He echoed sentiments of consolidation and predicted that well-established
firms would absorb more clients while late entrants might face challenges. He
noted a shift in product diversification, with increased interest in equities
and alternative investments like ETFs and <a href="https://www.financemagnates.com/tag/cryptocurrencies/">cryptocurrencies</a>.</p><p>Barden
discussed the interest in derivative products among retail brokers in Europe,
particularly options. He speculated that this could be driven by a belief that
options might serve as a regulatory hedge if leverage trading requirements
tighten. He also touched upon the consolidation trend, observing smaller <a href="https://www.financemagnates.com/tag/brokers/">brokers</a> being
integrated into larger networks.</p><p>Barden
mentioned: "Perhaps it's a mix of diversification and consolidation. In
terms of diversification, especially coming from a derivatives-heavy exchange,
we're witnessing increased interest from European retail brokers in derivative
products. Notably, options have entered the conversation, marking a noteworthy
trend.” </p><p>“Retail
brokers are considering introducing options as a product set next year, and
it's unclear whether this stems from the belief that options are a valuable
product for retail trading or if it's a cautious move to use options as a
potential regulatory hedge. The uncertainty lies in whether regulators will
tighten leverage trading requirements, making options an easier option for
leverage products."</p><p>Navigating
the Future: Trends and Considerations in Retail Trading</p><p>The
collective insights from the panelists pointed to increased accessibility of
professional-level data for retail traders. The impact of the <a href="https://www.financemagnates.com/tag/covid-19/">COVID-19</a> pandemic,
leading to a surge in stay-at-home trading, was discussed. The resulting influx
of new traders, combined with changes in commission structures and market data
licensing, reshaped the dynamics of the retail trading landscape.</p><p>Looking
towards the future, the experts refrained from explicitly naming winners and
losers, but they emphasized the importance of staying attuned to client needs
and offering relevant products. The growth of options trading emerged as a
notable trend, with micro-sized products gaining popularity among self-directed
retail traders.</p><p>In
a deeper exploration of TipRanks' perspective, Craven shed light on the
company's mission to empower retail investors. TipRanks consolidates analyst
recommendations from major financial institutions, synthesizes the information,
and presents it through graphical tools. The goal is to offer retail <a href="https://www.financemagnates.com/tag/investors/">investors</a> the ability
to conduct self-directed research with the same accuracy and data integrity as
professionals but at a significantly lower cost. </p><p>Craven
emphasized the disruption TipRanks brings to the alternative data space,
offering their platform at $20 per month for individual users compared to
competitors charging $1,500 to $2,000 per terminal. On the B2B side, they
provide cost-effective solutions for enterprise clients like Santander and
Morgan Stanley.</p><p>The
moderator underscored the significance of these new businesses, which did not
exist to this extent 20 years ago. The discussion then shifted to Barden, who
shared insights on the exchange's retail-friendly data licensing policies,
emphasizing the absence of end-user fees. He noted the evolution in
policies across various exchanges, highlighting the diverse approaches and the
competitive nature of the industry.</p><p>Barden also discussed the company's growth and
retail-friendly product innovations, particularly in the zero days to expiry
market for <a href="https://www.financemagnates.com/tag/sp-500/">S&amp;P 500</a>
Index options. He emphasized their efforts to make real-time data freely
available in Europe to facilitate low-cost and simple trading.</p><p>Saleem,
representing the data feed side, shared his views on the changing landscape over the past
five years, where there is greater respect for the professional retail
investor. He additionally noted a shift from providing raw <a href="https://www.financemagnates.com/tag/data/">data</a> to delivering more
advanced data sets, such as news sentiment and analyst recommendations. This
evolution has allowed brokers to offer better tools to retail investors, instilling
confidence in their decision-making process. The regulatory perspective is further considered, with a focus on ensuring fair treatment for customers.</p><p>Saleem
stated: "On the data feed side, our insights focus on points of interest,
not volumes. With global asset class connections, we provide advanced data,
including news sentiment and analyst recommendations, fostering a confident
decision-making environment. This shift recognizes and respects the
professional retail investor, allowing brokers to offer better tools for
informed decisions."</p><p>Disruption
and Adaptation: Evolution of Retail Trading Tools and Platforms</p><p>The
discussion highlighted the industry's evolution, with companies like TipRanks
disrupting the space by providing affordable and sophisticated tools for retail
investors. Exchanges, such as <a href="https://www.financemagnates.com/tag/cboe/">CBOE</a>, are adapting with
retail-friendly policies and innovative product offerings. The data feed side,
represented by Saleem, underscores the importance of providing advanced data
sets to enhance decision-making for retail investors and foster a fair and confident
trading environment.</p><p>The
conversation continued with questions about the correlation between Forex and Contract for Difference (<a href="https://www.financemagnates.com/tag/cfds/">CFD</a>) volumes and whether
one subsidizes the other. Richard Bon from CME Group emphasized the evolving
landscape, with brokers recognizing the need to pay for data and understanding
the importance of transparency and data integrity.</p><p>The
complexity of market data pricing models was also discussed, with a shift from
flat fees to more sophisticated structures. The importance of understanding
market data intricacies was emphasized, and the challenges faced by brokers in
this dynamic environment were acknowledged.</p><p>Craven
remarked: "Our focus is on retail investors and breaking down entry
barriers. Through our B2C platform, we offer free access to a wealth of tools.
Our mission is to democratize self-directed research and level the playing
field for retail investors. At the most sophisticated level, our raw data,
traditionally institutional, is now utilized by hedge funds, enabling them to
trade off it with their algorithmic systems and generate Alpha."</p><p>The
discussion involved various viewpoints on market data pricing, especially in
the context of <a href="https://www.financemagnates.com/tag/foreign-exchange/">foreign
exchange</a>. The participants mentioned challenges related to wide
spreads in currency markets and the importance of accurate pricing. Stoker
emphasized the disparity between underlying prices and those on wider platforms
during times of stress, citing examples such as the truss mini-budget and the
Swiss de-pegging.</p><p>The moderator
prompted for a quick response, and Craven briefly discussed the relationship
between volumes in the underlying market and CFD trading. He noted that volumes typically flow through the underlying market
first, and CFDs are now more widely available on various financial instruments.
Additionally, Craven mentioned the tax benefits of trading CFDs, which may
attract institutional investors.</p><p>In
conclusion, the panel discussion provided valuable insights into the current
state of retail trading in the EU, emphasizing the need for adaptation,
diversification, and a keen understanding of regulatory changes to navigate the
evolving landscape successfully. The collective expertise of the panelists shed
light on industry trends, challenges, and opportunities, offering a
comprehensive view of the intricate world of retail trading in the <a href="https://www.financemagnates.com/tag/european-union/">European Union</a>.</p>

This article was written by Tareq Sikder at www.financemagnates.com.