Market access – what is it?
Whether with my loved ones or even in a finance-oriented environment, people ask me what I do. I tell them that I am a Business Analyst on market access.
And the answer is often the same: “OK… I guess I know what a Business Analyst is, but Market Access not at all! “
I therefore take this opportunity to write this article so that in future there will not be for me to return to this page!
The biggest European markets are:
- The LSE for London Stock Exchange, the London Stock Exchange
- Deutsche Boerse, the German stock exchange based in Frankfurt
- Nasdaq Europe, the Nordic countries of Europe, Finland, Norway and Sweden based in Vasby in Sweden
- La Borsa Italiana, the Italian stock exchange based in Milan
The counter parties can be brokers, investment banks.
A broker is the intermediary between a client and the financial market. He has all the legal authorizations to be able to trade on this market on behalf of a client. Generally, the broker is connected to several markets. Thus, the client only has to connect to the broker only in order to place orders.
Investment banks can sometimes deal on behalf of their clients, but also for themselves. There are often different trading activities such as market animation, hedging to limit exposure of risk or arbitrage, and those on different types of products such as stocks, bonds or derivatives, etc. .
In order to be able to process (send orders) on a market, the counter party must find a way to access it, and this is where Market Access comes in .
In market finance, an order is a buy or sell instruction made by a trader on a financial product.
An example ? I’m on my cell phone and I think Carrefour’s action will go up. I will then place an order on the stock exchange which will be: Purchase of 10 Carrefour shares at the current market price, for example € 16. If by luck and other factors the action goes up, I can resell it and earn the difference!
They are there to ensure physical and logical connectivity between a counter party and the financial market
The 2 main actions expected are:
- Establishing physical connectivity
Use of telecom line such as copper or fiber (microwaves are under development) in order to connect client servers to those on the stock exchange.
The technical platform on which stock market executions are carried out is called Matching Engine.
In order to reach the market even faster, the main players will seek to place themselves as close as possible to the stock market. We then say that they are in shared accommodation.
Indeed, the stock exchanges make their data center available and rent (at rather high prices €€€) servers so that banks and other players can install their software there. So they gain a few milliseconds of latency over their competitors.
- Establishing technical connectivity
Internal development of software to communicate with the market (or use of an application provided by an external seller). The market provides specifications for its communication protocol so that clients of the stock exchange can exchange. Obviously, these protocols evolve during their life especially for regulatory issues, speed and new functionalities.
More specifically, the market access teams manage following tasks:
- Defining the physical connection to the market and deciding where to locate the data center
- Understanding the life of an order in a market
- Develop and maintain the market connector
- Be careful not to degrade performance
- Test developments
- Ensure proper operations in software production
- Monitor technical market developments
- Understand and implement the rules imposed by regulators
- Deliver business requests
To summarize ?
The role of market access is to physically and technically connect a client to a financial market.
Happy reading to all!
Mario, Business Analyst at Alenia Consulting
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