Are equities simpler than FICC@@

I agree that FICC products are more complex, even if we exclude derivatives

  • FI product valuations are sensitive to multiple factors such as yield curve, credit spread
  • FI products all have an expiry date
  • We often calculate a theoretical price since market price is often unavailable or illiquid.
  • I will omit other reasons, because I want to talk more (but not too much) about …

I see some complexities (mostly) specific to equities. Disclaimer — I have only a short few years of experience in this space. Some of the complexities here may not be complex in many systems but may be artificially, unnecessarily complex in one specific system. Your mileage may vary.

  • Many regulatory requirements, not all straightforward
  • Restrictions – Bloomberg publishes many types of restrictions for each stock
  • Short sale — Many rules and processes around short sale
  • Benchmarks, Execution algorithms and alphas. HFT is mostly on equities (+ some FX pairs)
  • Market impact – is a non-trivial topic for quants
  • Closing auctions and opening auctions
  • Market microstructure
  • Order books – are valuable, not easy to replicate, and change by the second
  • Many orders in a published order book get cancelled quickly. I think some highly liquid government bonds may have similar features
  • Many small rules about commission and exchange fees
  • Aggregate exposure — to a single stock… aggregation across accounts is a challenge mostly in equities since there are so many trades. You often lose track of your aggregate exposure.
  • Exchange connectivity
  • Order routing
  • Order management
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