Navigating Market Change: Insights from the WFE MIC Programme

In the ever-evolving landscape of financial markets, the infrastructure that underpins trading activities plays a crucial yet often unseen role. As a technology professional with over 15 years of experience at Korea Exchange (KRX), I have directly experienced how market operations and their supporting technologies work together to create efficient, reliable trading environments. This experience extends beyond our domestic market, as I've had the opportunity to help other exchanges implement and modernise their trading systems. This dual perspective – as an operator and a solution provider – has given me a distinctive perspective on the challenges and opportunities facing market infrastructure providers today.

This journey has led me through various aspects of market infrastructure. Starting with trading systems development at KRX, I've gradually expanded into the domains of Central Counterparty (CCP) and Central Securities Depository (CSD) operations. Working with various exchanges has given me first-hand experience in how markets evolve and adapt to changing demands. While each market presents its own unique challenges, these experiences have revealed a common theme: the growing complexity of market infrastructure in an increasingly interconnected world.

This complexity has become particularly relevant as we enter a new era of competition. KRX has long held a monopoly position in the Korean financial market, but competition is imminent as a new Alternative Trading System (ATS) will launch this year. Market fragmentation, a transformation that has already reshaped many global markets, will soon become a reality in Korea.

These emerging challenges highlighted the need to develop a broader understanding of market infrastructure beyond exchange operations. My background was primarily in exchange operations, but market infrastructure encompasses a much wider ecosystem of institutions and services. The search for this comprehensive knowledge proved challenging. Traditional graduate programmes and professional education, while valuable, rarely delve into the specialised world of market infrastructure. Even within exchanges like KRX, training tends to focus narrowly on specific operational aspects rather than providing a complete view of how different market infrastructure providers interact and compete.

The WFE's Market Infrastructure Certificate (MIC) programme caught my attention precisely because it addressed these needs. It offered something unique: a structured approach to understanding the entire ecosystem of market infrastructure, taught by industry experts with deep knowledge in the field.

A Journey Through Market Infrastructure 

The WFE MIC programme's comprehensive structure, comprising four distinct modules and two residential weeks, provided a perfect blend of theoretical knowledge and practical insights. Each module contributed uniquely to my understanding of market infrastructure.

The Payments and Financial Market Infrastructures module filled crucial gaps in my knowledge. Despite my years of experience in exchange systems, my exposure to payment systems, CCPs and CSDs had been limited. This module provided a comprehensive view of these essential components, helping me understand how they interconnect to form the backbone of financial markets. These areas are also at the center of today's financial innovation, with fintech and digital assets reshaping traditional market infrastructure. Understanding these components and their interconnections is crucial for anyone involved in designing new financial products or services.

In the Exchanges, Asset Classes and Market Micro-structure module, I discovered new perspectives even on familiar topics. The theoretical framework of market microstructure offered fresh insights into product design from an exchange's viewpoint. For example, I found the concept of balancing informed and uninformed traders through adverse selection control particularly enlightening - it provided a theoretical foundation for product design decisions. The lectures on market fragmentation were particularly relevant, given KRX's evolving competitive landscape, providing valuable insights for addressing future challenges.

The Regulation, ESG and Ethics module opened entirely new horizons. While ESG was relatively unfamiliar territory for me, this module went beyond merely introducing new concepts. It prompted deep reflection on organisational decision-making, particularly how market infrastructure providers can build governance structures that effectively balance commercial interests with their responsibility to maintain market integrity.

The Industry Project module stood out as a unique opportunity to apply the programme's teachings to areas outside my current responsibilities. This academic-focused component not only allowed me to conduct in-depth analysis on topics of personal interest but also introduced me to the vast research available in the market infrastructure field, teaching me how to leverage academic insights for practical applications.

The residential weeks in London and Chicago proved invaluable for their networking opportunities. Our cohort included accomplished professionals from exchanges, clearing houses, CSDs, regulatory bodies and financial institutions worldwide. Through group projects, I collaborated with colleagues whose paths I wouldn't normally cross in my day-to-day work. The informal gatherings, including evening social events, fostered genuine connections and candid exchanges of experiences.

These weeks were also enriched by intensive lectures, discussions and networking events with industry experts from leading financial institutions. Their practical insights complemented the academic modules perfectly, offering real-world perspectives on theoretical concepts. The discussions about competition among exchanges were particularly enlightening, providing concrete strategies and insights from those who have navigated similar challenges.

Discovering New Perspectives 

The programme has fundamentally transformed my understanding of market competition. Before joining the MIC programme, I viewed market fragmentation primarily as a threat to an exchange's revenue stream, anticipating that competition would inevitably lead to a price war over trading fees. However, the programme helped me discover unexpected opportunities within this challenge. I learned how market fragmentation can create new value through inter-market arbitrage trading, enabling exchanges to generate revenue by providing low-latency market access. The analysis of tick-size wars provided additional insights into exchange competition.

The programme also introduced me to a wealth of academic research in market infrastructure, a valuable resource I hadn't fully utilised before. I discovered numerous studies examining various aspects of market structure and their impacts on trading behavior. This exposure to academic research has opened new perspectives on approaching market challenges, complementing practical industry experience with evidence-based insights.

The diverse composition of our cohort created unique learning opportunities through both formal and informal interactions. Working alongside professionals from exchanges, clearing houses, CSDs, regulatory bodies and financial institutions provided insights that would be difficult to gain in our day-to-day operations. The interactions with regulators were particularly valuable, as these conversations rarely happen in my regular job scope. Understanding their perspectives on market stability has equipped me to better contribute to KRX's innovation initiatives, especially when navigating regulatory considerations for new services. Through group projects and informal gatherings, we shared experiences and insights that went beyond formal sessions, and some of us continue to exchange ideas about market developments.

Perhaps most surprisingly, the programme has changed my attitude toward knowledge sharing within our organisation. What began as a personal journey to enhance my understanding of market infrastructure has evolved into an eagerness to share these insights with colleagues. I now see the value in creating a broader dialogue about market infrastructure within KRX, particularly as we prepare for market fragmentation. To start this initiative, I am planning to organise training sessions for junior staff in the coming months, focusing on how different market infrastructure components work together in our evolving industry.

Preparing for the Future 

The WFE MIC programme has broadened my perspective on the evolving landscape of market infrastructure. As KRX prepares for market fragmentation with the upcoming launch of a new ATS, the insights gained from the programme have proven particularly valuable. The combination of market microstructure concepts, experiences from other markets and regulatory considerations provides a comprehensive framework for understanding both the challenges and opportunities in this new competitive environment.

My final project on market fragmentation examined how exchanges in the US and European markets have adapted to competition. Drawing from decades of academic research, the study explored various competitive strategies including market structure optimisation, service differentiation and technology infrastructure enhancement. These insights from mature fragmented markets offer valuable lessons as KRX prepares for similar changes.

Looking ahead, I am eager to contribute to KRX's preparation for this market transformation. The programme has equipped me with practical insights about market fragmentation, perspectives on organisational decision-making and methods to leverage academic research for strategic planning. I also plan to share these insights with colleagues through training sessions, hoping to foster broader discussions about market infrastructure within our organisation.

For those considering the WFE MIC programme, its value lies in its comprehensive approach to market infrastructure. The programme goes beyond operational knowledge, offering insights into market structure, regulation and strategic considerations that are difficult to gain through regular work experience. The combination of structured learning and interactions with industry professionals creates an enriching experience that bridges theoretical understanding with practical application.

For more information on the WFE Market Infrastructure Certificate, and to apply, please click here: https://www.world-exchanges.org/education/mic.