The move to electronify and automate low-touch trading in fixed income is gathering pace. A recent survey from WBR found that 60% of respondents said they use auto-execution protocols offered on trading platforms, up from 47% the previous year. Firms understand the benefits automation can bring to the credit and bond desks and are now looking to extend these capabilities further to other areas of the fixed-income trading value chain.
EMS solutions are at the centre of the next evolution of these initiatives, expanding on the automation capabilities available via venues and unlocking further efficiencies by catering to complex workflows across multiple platforms, protocols and products within fixed income.
The following is a selection of some eye-catching themes and discussions relating to fixed-income EMS at the Fixed Income Leader Summit (FILS) in Nice.
Trading Efficiency and Effectiveness with a Fixed Income EMS
The benefits of automation to a trader’s immediate and future workflow were a common theme at FILS this year. The EMS should be the ‘cockpit’ of the trader and be central to fixed-income trading operations.
During the panel, “Leveraging next-generation EMS,” and thinking specifically about the immediate, the bond widget was discussed as an area which could be developed and leveraged to make the trader more effective in their job – particularly around accessing liquidity, direct dealer connectivity & regulation.
Looking further ahead, using the concept of the EMS as a cockpit could reduce the operational friction between the portfolio manager and the trader. An EMS can bridge the gap between PM and trader and make their interaction a 2-way relationship, especially in less liquid FI products. For example, a trader could offer an alternative bond/issuer to a portfolio manager when there isn’t liquidity in the order sent from the PM.
Currently, disparate systems (OMS/EMS/PM) are required to communicate or send information between functions, which can delay response time and require manual re-keying of data between systems. However, by centring around the EMS, combined with technological advances, such as the recently released FDC3 2.0 intents, true interoperability between systems and seamless communication within a single view for the trader is now becoming a reality.
Aggregating Data to Achieve a Holistic Market View
Recent research from FILS media partner, The Desk, found that improved data aggregation and pre-trade analytics are still the two most essential improvements demanded in O/EMS technology.
The research results were mirrored in the data management panel, “Getting your data in check”. The session discussed the issue of fragmented data in Europe – with one panellist noting that it was more of a problem in Europe than in the US market. Sources of information in fixed income, which need to be incorporated into traders’ workflow to improve decision-making, are increasing in variety and format – and, given their value, are only set to grow. Consequently, aggregating the data to achieve a single view of the market is challenging and comes with an associated cost.
A panellist mentioned that they had built many of their systems to assist with the vast amounts of data which require aggregating and normalising. While this approach can be attractive, it presents issues with internal maintenance costs and challenges with keeping up with market requirements.
The Cost of Data and Incoming Sources
The cost of fixed income data, and perhaps of equal importance, who pays for the data, was also a theme during the panel “Getting your data in check”.
New data initiatives are entering the market, such as Glimpse Markets, a buy-side driven data sharing network that provides contributors access to unfiltered post-trade bond execution data. Offerings such as this are upsetting the traditional status quo. They are allowing the buy-side to potentially shift data away from its standard position as a cost centre while benefiting the broader industry.
Further, panel participants agreed that a Consolidated Tape for fixed income was good for EU bond markets to improve liquidity. It’s an eagerly awaited initiative. While it will likely be expensive, it was agreed that the cost for data initiatives such as this isn’t necessarily an issue as long as the outcome is the desired result. Input suggested early 2024 by panellists as a best-guess estimate.
Taking the next steps in Fixed Income EMS
Whether fixed-income traders are looking to incorporate existing data sources or new offerings such as Glimpse and a consolidated tape into their workflow, it’s becoming apparent that a fixed-income EMS is necessary for today’s market environment. From an EMS perspective, a highly customisable solution, such as our own, FlexFI, can efficiently integrate all feeds into a single, holistic view alongside other market and trade data.
If you are interested in learning more about how FlexFI can optimise fixed-income operations, we would be delighted to have the discussion, please get in touch.
For further discussions, please contact:
Dan Enstedt – VP Business Development and Sales EMEA – EMEA – Dan.Enstedt@FlexTrade.com
Manuela Bauer – Sales Director – France and Central Europe – Manuela.Bauer@FlexTrade.com
Anita Karppi – SVP – Business Development and Sales – EMEA – Anita.Karppi@flextrade.com