Embracing the Future: A Forward-Looking Recap of the Australia FIX Conference 2024

Sydney turned on the charm for the Australia FIX Conference 2024, with glorious weather and a jam-packed Fullerton Hotel buzzing with energy. Traders and technologists from Australia and beyond gathered to discuss the future of trading, technology, and everything in between. From regulatory deep dives to trading tech wizardry, it was a day filled with ideas, innovation, and plenty of barista-made coffee to keep everyone going.

The program kicked off with a theme song generated entirely by AI – to celebrate 30 years of electronic trading. (The Song Here) The catchy tune, which quickly became a bit of an earworm among attendees.

Regulatory Priorities: Kicking Off With the Tough Stuff

We dove headfirst into regulatory priorities—perhaps not the lightest topics, but one that set the tone for the serious conversations to follow. ASIC put operational resilience, cybersecurity, and climate risk at the forefront, reminding firms that it’s time to go beyond compliance checklists and thoroughly stress-test their systems to avoid cyber risks and market disruptions.

CHESS replacement was another topic. While the initial attempt with distributed ledger technology (DLT) faced setbacks, the current focus is on implementing more reliable and scalable systems. This is crucial, given the increasing volume of trades, and ensures the industry is prepared for the long haul—at least until 2032.

There was also much buzz around the transition to T+1 settlement cycles. While faster settlements promise reduced risk and improved liquidity, they require careful coordination with the CHESS upgrade to avoid bottlenecks. And, of course, digital assets weren’t left out. ASIC is closely monitoring developments in this space and emphasized the need for clearer regulations around custody, security, and licensing to help the market mature safely.

If anyone thought compliance was just box-ticking, the message here was loud and clear: think again!

ETF: The Swiss Army Knife of Finance

The?ETF session?focused on how?ETFs?have evolved from simple passive tools into versatile, all-encompassing vehicles. Whether thematically investing in tech trends or wrapping traditionally illiquid assets like bonds or commodities, ETFs have truly become the Swiss Army knife of finance. A key part of the discussion also covered how RFQ (Request for Quote) platforms in other markets improve liquidity and execution efficiency for larger ETF trades.

The rise of ETFs has had a significant impact on the trading desk - with the explosive growth in thematic and active ETFs, the trading desk now faces increased complexity in handling liquidity and execution. As ETFs have become more sophisticated, traders must navigate not just the ETF itself, but also the liquidity of the underlying assets—ranging from high-yield bonds to commodities. This requires traders to have a deeper understanding of both the ETF structure and the asset classes within them. Moreover, the panel noted that the increased use of ETFs is pushing trading desks to adopt more advanced technology and data-driven tools. The rise of ETFs has turned the trading desk into a more dynamic environment, where managing liquidity, execution, and underlying asset risks are critical to maintaining market efficiency.

The panel wrapped up by looking at the future, where ETFs are set to become even more prominent. They will provide flexibility, efficiency, and market access for both retail and institutional investors.

Tech Trends: Cloud, FIX, and the Fast Lane

The Tech Trends panel took us on a whirlwind tour of the?cloud,?the go-to solution for scalability and cost savings. But cloud migration is not all sunshine and rainbows. It comes with challenges, like keeping data secure and ensuring compliance with evolving regulations.

FIX Orchestra stole the spotlight for its ability to automate workflows and reduce errors. As more firms adopt straight-through processing (STP) and real-time data systems, orchestration is becoming vital for smoother execution.

Then came T+1 settlement—the future of faster settlements. While this shift promises efficiency, it comes with a catch: a major overhaul of post-trade processes, requiring real-time data processing and enhanced system coordination.

Of course, all the tech in the world won’t save you if you’re not keeping an eye on cybersecurity and regulatory compliance. In the end, it’s all about processing data faster and smarter—because, as we heard, "Get the tech right, and the future’s yours."

AI and Data: Where the Machines Are Taking Over (But We’re Still In Charge, Right?)

The excitement ramped up during the?AI and data session. The conversation revolved around how AI-driven insights and machine learning transform real-time trading strategies, optimise algorithms, and process oceans of data faster than humanly possible - AI can process huge amounts of data faster than you can say “spread tightening”.

Generative AI also made an appearance, with some playful speculation about AI-powered trading assistants. “Hey AI, what’s the best move?” - It’s not as far-fetched as it sounds. But one thing’s for sure: AI oversight is critical. No one’s ready for a full-blown robot takeover just yet!

The consensus was clear—AI is not here to replace traders but to make them sharper and more effective. As long as we maintain a balance between automation and human oversight, the future looks bright.?

Exchange Panel: Liquidity, CHESS, and a Little Kiwi Ingenuity

The Exchange Panel kept everyone on their toes with discussions about how liquidity is managed in a world where closing auctions dominate trading activity. While some believe this locks in solid end-of-day pricing, others wonder if cramming everything into such a short window distorts price discovery.

The T+1 settlement conversation continued, with North America leading the charge and Europe getting ready, while Australia faces the double whammy of T+1 and the CHESS replacement. Firms face a delicate balance between upgrading infrastructure and keeping pace with regulatory demands.

Collaboration also took center stage, as Cboe and ASX have been working together to streamline testing burdens. An example of this cooperation is seen in their coordination of Business Continuity Planning (BCP) testing, with joint efforts to ensure market resiliency through synchronized testing schedules, reducing strain on market participants.

Alternative markets got their moment in the sun, too, as new entrants are shaking up Australia’s market structure. And on a lighter note, New Zealand showed that even a smaller market can innovate with flair, aligning with global standards while keeping a local flavor.

Market Structure Panel: Balancing Liquidity and Global Innovation

The Market Structure panel broadened the conversation, looking at global liquidity trends across Asia Pacific, Europe, and the U.S.. In Europe, the rise of closing auctions has concentrated liquidity late in the day, with up to 55% of trading now happening at the close on rebalance days. While this benefits end-of-day pricing, questions remain about its impact on price discovery throughout the trading session.

Europe's fragmented market structure also raised concerns. Multiple CCPs and CSDs make clearing and settlement complex, prompting some firms to list in the U.S. instead, where the market structure is more streamlined. The U.S. has set a global benchmark with its smooth transition to T+1 settlement, providing a model for Asia and Australia to follow.

Meanwhile, RFQ platforms, discussed earlier in the ETF session, are helping traders in places like Japan find liquidity across time zones, boosting flexibility and execution efficiency.

As Australia prepares for the CHESS replacement and its own move to T+1, panelists stressed that global collaboration will be essential to ensure smooth transitions. Despite the challenges, there’s optimism that innovation in technology and liquidity management will drive progress in global market structure.

Digital Assets: Beyond Bitcoin and Into the Future

The Digital Assets panel took a lively turn, diving into the exciting, sometimes complex world of crypto and blockchain. The session quickly got down to business, discussing the rise of tokenization and its potential to disrupt traditional markets. One bold prediction? By 2030, tokenized real-world asset funds could leapfrog the ETF market, which is expected to hit $500 billion.

A significant part of the discussion revolved around the trade lifecycle for crypto assets. Just like in traditional finance, clients are seeking liquidity, smart order routing, and price discovery—except now, this is all happening in a world where atomic settlement is a game changer. No more waiting for delivery versus payment; in crypto, the transaction and settlement occur simultaneously, without human intervention, thanks to smart contracts.

A lighter moment came when a speaker joked about worrying her finger might be cut off for her YubiKey—a nod to the intense security protocols required for crypto assets. The discussion around the self-custody of crypto assets also reflected a growing trend of users seeking more control over their funds.

Closing out the discussion was some bold predictions, with one speaker forecasting that Bitcoin could skyrocket next year. Another predicted that stablecoin settlements would soon outpace physical credit card transactions, pointing to the growing use of stablecoins in everything from payments to tokenization.

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Buy-side Panel: Adapting to Change in an Evolving Market

The Buy-side Panel discussed how?asset managers?are navigating today’s rapidly changing market.?Liquidity management in increasingly volatile environments was top of mind, with firms turning to data analytics, automation, and strategic partnerships to get creative with sourcing liquidity and improving execution.

The pace of technological change was another key theme as firms struggled to keep up with new tools and workflows. AI and data science are playing an essential role in decision-making, with trading desks becoming more specialized and technology-driven.

Regulatory changes are reshaping market structures, highlighting the need to remain nimble. Greater coordination between trading and operations teams is essential to staying competitive.

In essence, the buy-side is embracing market complexity and leveraging technology to adapt, innovate, and deliver value.

Looking ahead, the buy-side is wearing more hats than ever. Trading, portfolio construction, and client performance are increasingly intertwined, creating challenges and opportunities. Rather than seeing this as a burden, the panel expressed optimism about the potential for innovation and new ideas.

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A Toast to 30 Years and Counting: The Cocktail Reception

As the formal discussions wrapped up, the cocktail reception in the bustling exhibition zone was where the real magic happened. Earlier, the zone was all about business—buzzing with demos, conversations, and rapid-fire networking. But by the evening, it transformed into a lively hub of celebration.

Attendees mingled long after the official end time, clearly in no rush to leave. The drinks were flowing, laughter echoed around the room, and there was no shortage of ideas being tossed around as glasses clinked.

The reception was more than just an opportunity to unwind—it felt like a celebration of 30 years of electronic trading, where conversations about the latest innovations effortlessly mingled with fond stories of how far the industry has come.

The event was a true showcase of the collaborative spirit that defines this industry. People were swapping stories, insights, and forging connections. As the night wore on, no one wanted to leave—proof that when you bring the brightest minds together, the conversations are endless.

The Australia FIX Conference 2024 didn’t just wrap up with a bang—it ended on a high note of collaboration, community, and plenty of laughs, setting the stage for another exciting year ahead.