As Regulation NMS comes into place, financial pros in specialist posts and at smaller and less technically competent firms should be worried.
After years of discussion, Reg NMS is a reality on the exchanges and ECNs, Clearly, it will impact those working on the exchange floors and "upstairs," not to mention all the broker-dealers who will have to eventually comply.
Although traders lamented the March 5 implementation of Regulation NMS on the exchanges and ECNs, there was also a collective sigh of relief that it was done. Short of scattered glitches impacting order routing at a variety of firms throughout the first day, the long-term effect of the ruling has yet to be seen. Reg NMS seeks to modernize the National Market System as the trading process moves to a more electronic approach. But the upgrades and order routing required by the regulation is sure to place some jobs on the line.
Reg NMS addresses order routing by pushing trades to those with better execution systems and the best price. According to the Tabb Group research report Reg NMS: Launching the Next Arms Race, the bulge bracket firms will be best-equipped to handle the changes. Developing real-time monitoring, compliance, and transparency - as well as the ability to rout orders effectively - means that less tech-savvy firms on both the buy and sell side, and those with less capital to afford necessary upgrades, are at a serious disadvantage. The new technology and more efficient order processing systems required by Reg NMS also appear to decrease the need for the number of specialist trading posts.
Upgrading to Reality
Broker-dealers, not yet under the regulation, will need to meet the challenge head-on, says Bill Hobbib, spokesperson for StreamBase Systems, a Lexington, Ma., provider of high-performance event processing software.
"The goal is certainly transparency and to ensure that customers are getting the best price and execution. But as far as opportunities for people, those who are familiar with the IT side of it, and the newest systems available, will be at an advantage," he says. If you're wondering if your job is in danger, he suggests understanding how your employer plans to deal with the changes. "No one wants to be tied to the equivalent of Betamax," he points out.
Reg NMS also deals with the ability to make liquidity more transparent. Notes Hobbib: "There's so much complicated trading algorithms going on in most of these firms. There's execution logic to help route orders, and you need to store all of this data." If someone is familiar with the systems and languages needed to deal with these matters, he says, they will find themselves quickly advancing up the career ladder.
"This will be a great time for people who have the trading knowledge and the ability to understand stored data and the real-time world," he believes. In addition, those working as applications developers, as well as the individuals responsible for trading infrastructure, compliance, and risk, will be critical in the post-Reg NMS world.