Fixed-Income Trading Tech Panel Discusses Bond Data, Liquidity and Protocols

Platforms emphasize shift to workflow efficiency in credit and municipal bond trading.

Front-office trading technology is vital to fixed-income trading desks, where sourcing liquidity, analyzing intraday pricing feeds, and vetting different protocols can be overwhelming to bond traders. 

At the ICE Strategic Partners Alliances Forum held at the New York Stock Exchange in December, panelists discussed ways to bring greater efficiency to bond trading in the credit and municipal bond markets – themes that will reverberate throughout 2025. Panelists from FlexTrade Systems, a provider of order-and execution-management systems for buy-and sell-side firms, Investortools, a fixed-income software provider for investment managers, and Trumid,  an electronic corporate bond trading platform, discussed a broad range of topics moderated by Pierce Lord, Senior Director, Pricing, ICE.   

While the catalyst in the front-office technology has been electronification of the credit space, the focus of venues and order and execution management systems (OEMSs) has shifted to how to increase workflow efficiency. 

The Evolving Role of Front-Office Trading Technology

Venky Vemparala, SVP and Global Product Manager – Fixed Income, FlexTrade  Systems, said fixed income as an asset class has been a focus of the firm’s execution management system, FlexFI. While a fixed-income EMS should provide connectivity to all destinations, all liquidity sources and algorithms,  Vemparala said this has become table stakes. “Our differentiation is really on how we improve workflow efficiency in the context of an EMS using connectivity and data as a building block.”  

As for what makes their platforms unique, Jason Quinn, Chief Product Officer and Global Head of Sales at Trumid, said: “It’s liquidity, it’s access to workflows and trading protocols that help them [traders] do their jobs better, and a connected and engaged client network.”  

When Trumid first jumped into the credit market a decade ago, it was difficult for a new electronic trading platform to break into corporate credit, said Quinn. The platform had a unique protocol known as “Swarms,” to concentrate liquidity in a specific security or list of securities, bringing users together at a particular point in time to trade anonymously and electronically. Since then, it has built out a full ecosystem of trading protocols in one place, including: Trumid Request-For-Quote or RFQ, Trumid Auto-Pilot for RFQ, Attributed Trading, Portfolio Trading (PT) and Swarms. 

Data Consumption: Extracting Value While Reducing the Noise

One of the challenges of front-office trading platforms is consuming and filtering all the data that’s required to price bonds. Each platform consumes data from third parties and creates their own analytics from that data, which can influence workflows.  

“Consumption and use of data is a big topic this year,” said Vemparala. Within the EMS, the blotter consumes indications-of-interest (IOIs), axes, broker runs, streams, and some historical data. “We back up the data through our own data lake.  We consume the estimated pricing feeds like ICE’s CEP, MarketAxess CP+, as well as AI-based estimated pricing and we have heuristics to remove duplicate data,” he explained.

“If you look at fixed income or axe data or broker runs data, there is too much data,” added Vemparala. On the panel, he gave the example of what looks like a $50 million offer but is really $10 million duplicated across five channels. To detect the true liquidity, FlexTrade’s EMS has heuristics which are analytical tools for removing duplication and finding the true liquidity. “We are conscious not to add noise to that data, but to add tools to connect the dots,” said Vemparala. 

Tackling the Reference Data Challenge

Meanwhile, in the muni asset class, James Morris, Senior Vice President at Investortools, said the Investortools platform, which has evolved into a portfolio and order execution management system (POEMS) specializing in separately managed accounts (SMAs), consumes a lot of reference data such as terms and conditions. 

In fixed income, reference data can include issuer details (name, country, sector), security identifiers (ISIN, CUSIP, ticker symbol), coupon rates, and maturity dates, callability features, credit ratings, bond types (i.e., government, corporate, municipal) and payment frequencies. 

Investortools recalculates analytics for municipal securities based on that reference data and receives midpoint pricing from ICE, which has intraday pricing and the Continuous Evaluative Pricing (CEP) offering. “We also have connectivity with the various trading venues and the direct dealers so we’re receiving live market data and FIX connectivity and putting all that together alongside our clients’ bespoke data,” said Morris. 

As a venue that executes thousands of trades per day, reference data is important to Trumid as well, said Quinn. Whereas munis have over a million CUSIPS, there are about 25,000 CUSIPs that are TRACE-eligible just in the U.S., said Quinn referring to FINRA’s Trade Reporting and Compliance Engine. “It’s a relatively disparate market, and it’s not continuous,” noted Quinn. Dealers that are connected directly to Trumid will stream their active inventory, and the firm has partnerships with firms like ICE, so that clients of ICE CEP can access the data via the platform’s user interface. On top of this, the trading venue has several data-led workflow solutions for clients, including its flagship product, Trumid FVMP (Fair Value Model Price) – a proprietary and predictive bond pricing model designed to serve as a reliable and objective measure of corporate bond value. The tool covers approximately 22,000 USD-denominated corporate bonds, “so that a trader can see every 30 seconds where a bond is expected to trade,” said Quinn.  

The Impact of Workflows on Changing Behavior

Panelists highlighted specific innovations that have driven changes in customer behavior.  

Among the biggest changes in corporate bond trading has been the concept of a list trade, said Quinn. “What was traditionally executed via a multi-dealer request-for-quote (RFQ), has become more of a program or portfolio trade,” he said. Trumid built a tool, Trumid PT Pricer, to analyze the ways to execute portfolio trades. “Some of these portfolio trades could have 3,000 CUSIPs, but they are thought of as a single unit,” said Quinn. Trumid PT Pricer estimates where a list of names should transact as a PT and compares it versus a single name execution, helping clients to decide whether to send single-name Trumid RFQs or PTs.  

From an EMS standpoint, efficient workflows can impact the ability of traders to capture liquidity when conditions change. “If you have an opportunity in munis, or credit or other market areas, and you have a few CUSIPs staged at 9 a.m., often by noon, the liquidity has moved to other CUSIPs and other ISINs, and it’s too late in the workflow process,” explained Vemparala. 

FlexTrade is building an automated workflow tool for a credit trader to identify liquid bonds with similar characteristics and then load and replace them into the EMS. The new feature, known as “liquid lookalikes,” enables the trader to filter liquidity based on criteria such as ticker, bond maturity or other factors, to find similar candidates. The tool will then alert the trader, who can remove the old CUSIPs and ISINs and then substitute back in the lookalikes – pending approval via compliance.  

Though electronic trading in the municipal bonds market has lagged corporate bonds, Investortools is building out automation so that SMA managers and fund managers can restructure their portfolio based on structural attributes and available liquidity. 

“In muni bonds, you’re not often building a portfolio based on specific CUSIPs; you’re building it based on structural elements,” explained Morris. He noted that Investortools can automate the identification of the right subset of securities that are available in the market. 

“We’re doing auto portfolio refinement, and the latest version of it is automated portfolio building and automated restructuring, which involves sending out an RFQ at the other end of it,” said Morris. 

What’s Ahead for 2025: Advanced Automation Takes Center Stage

In 2025, panelists expect to push automation beyond current levels. The overarching theme is still electronification. While around 50% of corporate bond trading is traded electronically, Quinn said that means the other 50% is still happening over the telephone or instant message. 

He noted that current automation is geared to hitting or lifting an RFQ. Trumid sees a world where the order can be left to the platform, which looks for an execution that is optimal relative to a client’s limit or threshold or where they’d like to see it done, he said. “We’ve assembled the most diverse set of protocols within one application which to trade. When combined with an agile tech stack and advanced machine learning and data processing techniques, there are vast opportunities to develop data solutions that can seamlessly integrate analytics with electronic and automated execution,” he said.  

According to Vemparala, FlexTrade is advancing automation through building blocks and integrations with e-bond trading platforms. For example,  FlexFI has an integration with Trumid, so the EMS can support Trumid’s automation, while facilitating access to liquidity across the ecosystem.  “Since our fixed-income smart order router is sitting on top of all the data points and protocols available in the market, we can be an aggregator of automation on the street.” 

In 2025, it plans to partner with each client on customized automation, he said. If a buy-side trader is working a line-item, it can rest the order in a dark pool for a certain amount of time, while responding to an RFQ or lifting an offer on a stream. “The goal is to help the buy side navigate all of those protocols, scripting together that in an idiosyncratic workflow,” said Vemparala. 

Morris said Investortools is focused on more automated portfolio restructuring based on data and analysis informed by the live secondary market. “As desks adapt and automate mundane tasks, this will free people up to spend time using the human capital elsewhere on the higher-ticket orders.”