I was the guest of

href="https://www.dnbnor.no/markets" target="_blank">DnB

NOR in Oslo earlier this week where I participated in

their Nordic Market Structure and Best Execution Summit. The

event was well attended and included a number of significant

buy-side firms. One of the themes that emerged was that liquidity

demand seems to be consolidating into a smaller number of large

investment firms whilst, conversely, liquidity supply is

fragmenting across different lit and dark venues.

This sets the stage for the "Great

Game" between the large investment firms and the HFT

community. Every time a buy-side releases an order (however

small) into a market, it releases with it an equivalent sized

indication of its trading intention. The perception of some in

the industry is that the HFT guys will trawl through these

orders, and then attempt to profit by stepping ahead of any

intentions they can identify. To my mind, both sides have a

completely legitimate part to play in the marketplace but you can

see how each has a different objective.

This

is one reason behind the success of firms like title="Liquidnet" href="http://www.liquidnet.com/"

target="_blank">Liquidnet that help buy-sides find

natural liquidity between themselves. The only challenge with

this approach is that it depends upon finding another institution

with an equal and opposite trading intention at the same time.

Failing this, then, the ideal market structure for a buy-side

institution would be one exchange and one daily auction.

Conversely, the HFT community wants liquidity as widely dispersed

as possible. Maybe this dichotomy helps explain the

"push me/pull you" nature of

consolidation/fragmentation that we are seeing across both the

lit and dark spectrum of venues.

Anyway, my

thanks to everyone at DnB NOR for a very interesting

day.