One of the readers of the Finanser saw my write-up on asset and wealth management, and asked if I could talk about what’s happening in investment banking. Answer: yes, I can.
It’s more difficult to see the Fintech stars and unicorns in the investment space however, as it’s more opaque having been disrupted by technology fundamentally over the past twenty years. The rise of program then algorithmic and now high frequency trading created a strong move to low latency, server farms co-located along with the Exchanges. The Exchanges themselves were attacked by new Fintech firms like BATS, Chi-X, NASDAQ and more, and these companies are now dominating much of the equities trading areas. Trading on BATS in the USA now represents 20% of all equities, doubling their market share in just two years by acquiring Direct Edge. Pretty good for a ten-year old garage Fintech start-up based in Kansas. Similarly, in Europe, BATS Chi-X trading now exceeds the London Stock Exchange and Euronext, not bad for an eight year old start-up.
Admittedly these guys are owned by institutions – BATS lists GETCO as its largest shareholder. Other owners include Morgan Stanley, Credit Suisse Group AG, Nomura Holdings and Citigroup. The same with Chi-X that was initially launched under the leadership of Nomura and investments from BNP Paribas, Citadel, Citigroup, Credit Suisse, Fortis, GETCO, Goldman Sachs, Merrill Lynch, Morgan Stanley, Optiver, Société Générale and UBS. In other words, the low latency high frequency markets are pretty much dominated by players that are owned by the market makers.
Read more at Iris.xyz.