The Fixed Income London Meeting Takeaways…

How can you increase transparency, execution efficiency and access to more information to achieve better pricing, and improved intelligence?

  • There is buy side demand for better, more accurate pricing with fairer platforms for participants. Currently, the buy side feel that there is no real fee and pricing transparency in the market.
  • During illiquid periods, relationships are still key. Maintaining and developing relationships with the brokers you know will ensure you are still able to access liquidity even in high stress periods for the market.
  • It is hard to use pre-trade data to push toward firm pricing, not clear for many what is real and what is not, especially in larger blocks.
  • It’s currently still an OTC market, but open trading is changing this in some places.

How can you adapt cumbersome, legacy systems with an agile framework to allow for faster scale and innovation?

  • All buy side are facing the same issues, primarily that there is a lack of resources to invest in fully modernising systems. There needs to be a shift in the perception of the desk, away from being seen as a cost centre, to a generator of alpha to support investment from the wider business.
  • Backlog of workload also works to prevent innovation, and often leads to over use of off the shelf solutions which are not truly fit for purpose, and require further time to tailor and adapt to custom workflow and execution demands.
  • Traders should also look to involve IT teams in discussions about what is and isn’t possible within the confines of existing systems. there may be underutilised capacity that you are unaware of. Often making small, simple changes can lead to greater efficiencies, and help to drive internal acceptance of greater changes down the line.

Next Gen RFQ- What is required to move towards smart credit automation and a truly zero-touch approach?

  • Automation is here to stay – buy side need to ensure they have a clear understanding of the main challenges and workflow inefficiencies they face in their role, and look to build automation into these areas.
  • Don’t rush into automation – zero touch shouldn’t be your objective. Bergin by automating small,  manageable chunks of menial workflow using simple rules based automation and build to a point where you can introduce one, or low touch trading models first.
  • Automation should be seen as a complement to, rather than a replacement of the trader. Automation should allow traders to focus on higher touch, alpha generating trades.
  • Main challenges that prevent betternautomation are platform fragmentation, connectivity issues and setting up security.

How can you overcome fragmented trading systems and apps to create a simplified and efficient trading hub?

  • Buy side aren’t aware that interoperability is common amongst O/EMS platforms – buy side need to engage with and open a dialogue with their provider to open up capability to allow cross functionality between platforms and applications.
  • Buy side should be able to take all the applications they use now and make them able to talk to one another. Time, and energy spent on entering repetitive data into multiple platforms should be saved and used by traders to generate alpha.
  • An industry standard for interoperability does exist – FDC£. Once platform providers sign up, they are a part of the network. Similar to other applications, this universal language will become the industry standard, and all providers will need to be a part of it.
  • All applications as part of a containerised, interoperable platform will run at the same speed as they would independently. Traders don’t need to worry about the capability of desktop to handle multiple interoperable platforms if they are able to run them individually. Containerised sol;utions will be more efficient than having multiple tabs open on a browser.

How can the buyside accelerate progress towards achieving efficiencies in primary?

  • Innovation for primary markets is incredibly slow, there is a genuine buy side appetite for change.
  • To speed up the innovation process, development can come from a tighter integration and sharing of resources between primary and secondary markets – why reinvent the wheel when you can use the same plumbing?
  • Main pain points are focussed around the shell security setup process, information fragmentation across multiple electronic channels, and multiple deals at a time, lack of system connectivity and platforms being slow to get systems set up.
  • For primary innovation to happen, the buy side need to come together as a collective voice and push for change across EMS platforms.

What should the end-result be for a fixed income consolidated tape?

  • There is a demand from the buy side for a consolidated tape – however, this is hamstrung by the need for all data from the market to be captured, it’s all correct and cleaned, and there is minimal/no cost.
  • Fragmentation of systems and data sets is a huge problem for consolidated tape implementation. The interface will need to communicate and integrate effectively with all O/EMS platforms.
  • There is a demand for an industry regulator/enforcer to help drive change in the space.