John Keogh, managing director of Susquehanna International Securities, has warned regulatory intervention is “urgently required” to deal with pre-hedging practices in Europe.
In a recent ETF Stream webinar, titled ETF Investigations: Pre-hedging or frontrunning: Are ETF Investors losing out?, Keogh said pre-hedging – when an order has been sent to multiple liquidity providers – is “detrimental” to market confidence.
The comments come after the European Securities and Markets Authority (ESMA) issued a ‘call for evidence’ last July on the issue of pre-hedging.
The regulator defines the practice as liquidity providers “hedging inventory risk in an anticipatory manner in presence of a potential incoming transaction”.
“A market maker should not trade based on the information until the client is filled,” Keogh continued. “Guidance is required and required urgently. We think the current pre-hedging practices of some market participants are detrimental to market confidence and price formation.”
Speakers in this webinar include:
John Keogh, Managing Director, Susquehanna International Securities
Jamie Hartley, European Head of Capital Markets, DWS
Alex Livingstone, Head of Trading - FX & ETFs, Titan Asset Management
ETF Investigations is a new webinar series from ETF Stream which examines the key issues facing ETF investors in Europe. To watch a full replay of this webinar, click here.