Mostly… fixed income and cross product eTrading

June 29, 2007


Filed under: etrading, OMS / EMS — holky @ 6:44 am

As electronic trading causes a surge in market data volumes, and buy-side traders seek connectivity to liquidity pools, algorithms and exchange venues that are moving into multiple asset classes, there’s a rising demand on the buy side for execution management systems (EMSs) – says WSJ in an article about this years SIFMA conference

Many order management systems (OMSs) provide access to broker algorithms and operate order routing networks, but they are not as fast as the EMSs, industry sources say. While hedge funds that focus on fast executions across multiple destinations can make do with just an EMS, traditional asset managers still need the OMS, which they use to document trades, rebalance portfolios and handle everything from pre-trade compliance to post-trade allocations.

So the technology providers are pitching integrated global OMS/EMS solutions, taking various approaches to achieving OMS and EMS functionality in a single platform, including acquiring an EMS and merging the two systems, building an EMS on top of an OMS, or building an interface that can connect with third-party OMSs.

And the vendors are placing their bets what the buy side really want; a single OMS/EMS (Eze Castle-ConvergEx, Fidessa LatentZero, ITG Macgregor) or the flexibility to integrate with their favorite EMS (Linedata)

While equity/exchange trading getting its act together in terms of a single buyside entry point to ‘the market’ (regardless of how achieved – above), the status-quo for fixed income remains to use separate application per venue (tradeweb, marketaxess, rtfi, bloomberg, and so on)????

Furse warns over Project Turquoise

Filed under: etrading, Mifid — holky @ 6:39 am

EFN says that Clara Furse, chief executive of the London Stock Exchange, has publicly warned that Project Turquoise and MiFID could reduce liquidity and raise costs for investors. 

She also dismissed the claims by Project Turquoise that stock exchange fees were a significant part of the overall cost of trading, and their claims that their mutually-owned structure was superior to that of the LSE;  claiming exchange fees account for just 4p out of the average £6.50 average cost of trading £1,000 worth of shares on the LSE – or about 60 basis points – compared with 85p in commissions charged by brokers and 60p in market impact, adding “Even if we offered our services for free, we would only reduce the overall cost of trading on the LSE by 4p. That is a small price to pay for the efficiency and liquidity that we provide.”

June 28, 2007

MTS board is reshuffled

Filed under: etrading — holky @ 7:41 pm

MTS S.p.A. is pleased to announce that the Company’s Supervisory Board has appointed a new Management Board with immediate effect.The Management Board, which is responsible for the day-to-day running of the Company, will comprise the following Directors who have been elected for a one year term: Ciro Pietroluongo, Chairman (MTS), Luca Bagato, Deputy Chairman (Consultant to Borsa Italiana), Gianpaolo Alessandro (MTS), Pietro Poletto (Borsa Italiana), Alessandro Ravogli (Banca IMI), Carlos San Basilio (MTS), Stephen Wolff (Deutsche Bank).

best-execution policy concerns

Filed under: Mifid — holky @ 11:32 am

Complinet survey reveals industry-wide concerns about MiFID best execution policy …. “Our customers are telling us that the guidance provided by the EU and by the UK Financial Services Authority is not yet clear enough for them to be sure what their obligations are. With less than five months to go, they are still having to compare different interpretations and take a view on what best execution means in practice for their firm. This level of uncertainty is clearly causing concern”

Thus each firm must wait for first test case through the courts to benchmark how good or not their MiFID-compliant best execution policy is?

June 27, 2007

Gazelles and Lions, part 2

Filed under: etrading, FIX, Nuts and Bolts — holky @ 7:53 pm

The nomination period for the FPL Global Fixed Income Committee closed in May.  We are pleased to announce that George Macdonald (Macdonald Associates) will be the new Co-Chair of the Global Fixed Income Committee.  

Congratulations to George.   While George is very pro-FIX,  IMO if he can help break the (at least perceived) FIX-ness and techy-ness of the Global Fixed Income Committee, so instead it is seen as a [gazelles and lions] high-level and no-holds-barred open discussion group for fixed income etrading/e-distribution, then leverage each firm’s equity business buy-in and awareness of what FPL do, and do well, in order to get far more buyside involved for this generic fixed income etrading dialogue, with FIX only being wheeled out (and then only by the tech committee) when it’s nuts-and-bolts time, he’ll have made a big difference in the fixed income etrading space.

Algos and FIX in Europe

Filed under: Algos, etrading — holky @ 7:44 am

EFN says fund managers in Europe have been slow to embrace algorithmic trading (12% of trading volume at asset managers, doubling since last year) compared with their US counterparts; blaming poor technology, and saying that while MiFID may eventually encourage algorithmic trading, fund managers’ time and resources are focused on other projects … one recurring theme with higher priority being to implement FIX.   

With the industry still being at the nuts-and-bolts connectivity stage and hence without experience to fully trust electronic trading, limited uptake of algorithms, and another EFN article saying that dark pools of liquidity are relatively untapped by European Fund Managers, I can’t help thinking we still have an enormously long way to go to reach a post-MiFID vision of buyside connecting to multiple liquidity pools electronically and using algorithms to compare all in search of  best execution. 

But what’s the alternative?  An ALLQ type view of the different pricing available for a particular stock line, and a myriad of venue-specific manual order entry forms as part of their desktop?  With FIX implementation being top priority that’s clearly not the desired route.  But for those of us with a fixed income background, does that kind of setup ring any bells?  

June 26, 2007

Algo + News Feeds, again

Filed under: Algos, Nuts and Bolts — holky @ 7:37 pm

I was thinking about the use of news feeds in algorithms again, and wondered why Reuters and Dow Jones and all the other vendors trying to flog these feeds aren’t out there letting people use the tagging / weighting / scoring just to filter what appears in different panes in their market data terminals.  Letting everybody via the market data gui see how they can filter the crap and only see important stuff, or filter all the bad news in order to see a rosy view of the world, or whatever, if only just to build faith in the provider’s story scoring. Let people begin to play with the scoring system (such as the ‘weakness’ comment in ukalgotrader’s News feeds into algorithms? Lets make algos work first!) via the market data gui and see where it goes?

June 25, 2007

Algos in Silicon

Filed under: 2015, Algos, etrading — holky @ 5:40 pm

A topic that came up at the Financialnews Sellside Technology seminar was the ever-increasing demand for proximity technology – where systems are being placed as close to the exchange as possible in order to avoid latency.    In the context of “what’s coming in the future”;  one question posed (by Dave Cliff the “ziptrader”) was how long before exchanges charge to host a firm’s algorithms coded on silicon?  So rather than connecting a machine with the shortest possible cable between itself and the exchange, a card containing the algos is instead plugged into the exchange machine itself?  An interesting future prospect of revenue stream for an exchange? 

A question raised was whether that materially impacts the ability for providers to deploy algos to customers immediately; and on that I thought “immediately” was interesting terminology.. (same thought applies to ullink framework that avoids the need for ullink software release just to get new algos out of the door).  Are customers willing and able to utilise new algo’s immediately?  Surely there is is a time lag before a new algo is used materially at most customer-side.  Time for the customer to understand what the algo is trying to achieve and how, then for this to be cleared by the “fat controller” and worked into the [new] trading strategy.  

How long is the time lag?  Depends how much trust the customer has in the algo provider (eg sellside) actually getting this sort of stuff right each time.  Also trust that the software provider (OMS/EMS/intermediary who exposes the route into the algo to customer) isnt going to muck it up along the way, and trust that it is possible to get a comprehensive audit of what where and when to show that an algo acted in accordance with it’s claimed design – whether for best execution certification or when there are occasions that the results are vastly different than expected.

Much of this comes down to trust that the testing has been done and the tests covered everything they should.  Surely this isnt materially different if the algos are on silicon plugged into the exchange rather than software somewhere in the pipe between customer and exchange?  And given the resource that could be given to this, if there is a need to establish a lifecycle which includes pressing algos onto a card which can then be plugged into the exchange machine, is this really going to slow algo deployment down to the extent that this impacts sellside ability to grab competetive advantage?

June 22, 2007

FPL “onboarding” !!

Filed under: Client Onboarding, Nuts and Bolts — holky @ 2:14 pm

An FPL Account Management Working Group is being established to examine where a messaging standard will assist in the setup and maintenance of front office and back office accounts and their interaction with clients, clearing firms, execution firms, the give up process and exchanges.
Initial objectives of the group include: 
– Programmatic Account Setup within one or more systems
– Programmatic Account Maintenance within one or more systems
– Programmatic Risk Controls at an Account Level
– Linking Front Office Systems Accounts with Back Office System Accounts
– Better Process Control Around Account Management
– Better Communication with Exchanges and Contra-Brokers

Hey!! Looks like my dream of a “sane” onboarding standard  just might come true….

LSE Could Add Fixed-Income Platform via Borsa Italiana

Filed under: 2015, etrading — holky @ 1:19 pm

Just as the London Stock Exchange (LSE) and Borsa Italiana disclosed that they are in merger discussions, the Milan market took steps to acquire the controlling interest held by NYSE Euronext in MBE Holding, which in turn owns the majority of the MTS group of fixed-income trading platforms.MTS had been touted as an attractive asset within Euronext in the run-up to that multinational exchange operator’s merger with the parent of the New York Stock Exchange, which was consummated in April. Euronext–and now NYSE Group–owns 51 percent of MBE Holding, Borsa Italiana 49 percent. But Borsa had an option to purchase the 51 percent in the event of a change in control at Euronext, and it served that notice Thursday, NYSE Euronext disclosed.

“The parties will have three months [from June 20] to agree on the fair market value of MBE Holding’s shares,” the exchange statement said.

(From Securities Industry News)

June 20, 2007

Price transparency in bond and other non-equity markets

Filed under: Mifid — holky @ 6:25 am

The CESR site now contains the answers received to its May 2007 consultation paper on price transparency in bond and other non-equity markets.

June 19, 2007

Gazelles and Lions

Filed under: 2015, etrading — holky @ 6:12 am

Why are buyside just accepting what’s on offer in the etrading space and building their workflows and trading behaviour around that?  Why aren’t the buyside collectively getting vendors and platforms to build the functionality they want? 

If the answer is that without the sellside bought-in the venue would hold no value, consider whether a bunch of gazelles always collecting in a certain place would attract lions. The analogy being if it’s the right buyside gazelles who are going to be gathering at a particular watering hole, then I know of no sellside lion who would resist getting involved with such a pool of customers .. whether that particular watering hole is the lions natural habitat or not.  

If the gazelles got clever then the analogy of buyside gazelles and sellside lions might not work.. so instead we have buyside lions waiting to ambush those poor sellside gazelles as they wander into unfamiliar territory. Or who knows, maybe even different types of animal that can happily co-exist without eating each other 🙂

So going back to the first question, why aren’t the buyside stepping up to drive this?   Sure, there are a few buyside firms with a voice on etrading topics, but the rest are just being gazelles, taking whats on offer and building their workflows and daily behaviour around that.  Is that really such a good strategy?

Swift admits regulators

Filed under: Nuts and Bolts — holky @ 5:58 am

From Securities Industry news

Swift financial messaging cooperative has created a new participant category for financial market regulators to make it easier for institutitions to meet transaction reporting obligations that will be significantly increased under MiFID. “The category allows regulators to receive [a bank] identification code [BIC] from Swift that can be used by financial intermediaries to send their post-trade transaction reports through the Swift network,” says Andrew Douglas, the La Hulpe, Belgium-based organization’s director of market infrastructure initiatives.

Lazaro Campos, Swift’s CEO, said in a prepared statement, “The addition of financial market regulators to Swift is a tangible example of how we are helping our customers meet their regulatory requirements.” He said it ultimately makes it “easier for customers to do business” and “helps our strategy in support of European integration.”

June 18, 2007

Electronic Repo Market Is Key?

Filed under: 2015, etrading — holky @ 7:31 am

EFN article outlining that majority (55%) of electronic repo flow is through Brokertec … €261bn last month … but that Basel II will be the catalyst to broaden the number of participants in these electronic markets. Then speculating on what the venue for business to customer electronic repos will be; Bloomberg expanding its existing Repo thing (taking the build it and they will come route), existing interdealer venues building a second tier to preserve existing participants privileges while giving the others second-level access, LiquidityHub ‘doing’ repos, or dealers buying back Tradeweb and offering it there..

Nyfix launches dark liquidity pool in Europe

Filed under: etrading — holky @ 7:18 am

Nyfix, a US electronic trading venue, is launching a dark liquidity pool in Europe, as rival Investment Technology Group reaches monthly volumes of £50bn with its venue.. says EFN

(ps. Nice diagram on their site showing where their ATS sits in terms of transaction flows)

June 12, 2007

On-Exchange Credit Derivatives

Filed under: etrading — holky @ 7:53 am

Same day we hear a summary that Traders shun new Eurex credit product … specifically that one of the three credit derivatives contracts launched five months ago by Eurex, the Swiss-German exchange, has failed to attract a single trade ….we also hear in EFN that three US derivatives markets are preparing to launch exchange-traded credit products, highlighting the increasing interest from exchanges in the fastest-growing segment of the over-the-counter market.

Personally I expect this market will take off… the work is getting the message that this is available, and why that’s good, to the right customers

MarketAxess vols for May

Filed under: etrading — holky @ 7:48 am

MarketAxess claim trading volume rose 15 percent from April levels, with May volume totalling $39.1 billion, up 40 percent from $27.9 billion a year ago; including $23.4 billion in U.S. high-grade volume, $9 billion in European high-grade volume and $6.8 billion in other volume.

But are they doing enough? .. yesterday says analysts at Credit Suisse downgrade MarketAxess (ticker: MKTX) from “neutral” to “underperform.” … though also mentioning that the company’s share price has appreciated by 33% so far this year.  The analysts say that although industry activity levels have been weak this year, MarketAxess has benefited from continued market share gains by its core US franchise, contributions from its newer inter-dealer business and accelerating growth in the European and emerging markets.

June 11, 2007

No More Innovation

Filed under: 2015, etrading, Nuts and Bolts — holky @ 10:48 am

Where etrading is just a ‘function’ to help sell a multi-function terminal such as Bloomberg or Reuters, I’d expect their development focus to be primarily on the functionality that can be used in sales pitch to get and keep terminals on desks NOW. 

As we’ve seen with Bloomberg, the easiest sales pitch will be electronic tools to replicate an existing manual process; yes some interesting tools such as Bid Lists, and new ‘markets’ such as Repo AutoEx, but if you dig into the headline these were initially just standardising the format of previously free-format MSGs used in everyone’s daily routine.   Sure, once everyone is using a standardised msg for their negotiation process, then plugging in the etrading piece behind the scenes to automate some of this is a damn sight easier than “selling” the soup-to-nuts solution from scratch.  But doesn’t running your development schedule on this bottom-up basis limit your ability to deliver true innovation in the etrading space?

I recall three years ago (?) Reuters presented their view of the fixed income etrading future; an offering where client had the ability to execute secondary FX (with same or another dealer) off the back of a FI ticket. Joining the dots between the different Reuters etrading offerings. But since the reality of RTFI came along they’ve been chasing Bloomberg on ‘retail’ autoex…  just trying to get into day to day FI trading workflows..  I recall no sight or official mention of that cross product portal or anything outside the scope of anything on offer anywhere else in the FI etrading space.

Do Reuters or Bloomberg have an etrading roadmap that goes further than next 12 months?  

Well even if they did then that’s all changed anyway, right?   If liquidity hub are now taking the focus and so driving or shaping the development of these offerings going forwards, then how different will the Bloomberg and Reuters offerings be in the fullness of time?  

Do we face a significant risk of stagnation in the fixed income etrading space?

June 7, 2007

liquidityhub offline?

Filed under: etrading — holky @ 9:33 am

Oh dear is it all over? –  is getting a page with

Coming Soon!
This site is under construction.


( i dont suppose this post will age well once the LH site IS back on line … )

June 4, 2007

Multi-broker FI EMS….

Filed under: etrading, OMS / EMS — holky @ 4:12 pm

So Goldman Sachs has extended the functionality of its REDIPlus multi-broker execution management system (EMS) in Europe, so users in the region can now route orders to other brokers’ algorithms via their platform.  Joining the dots between this and my previous post on EMS for fixed income , when should we expect to see an EMS standing up and being counted as a customer-side desktop for Fixed Income?  

Of course this isn’t just dealers who can do this. While it seems initially a less likely outcome, how about one of the FI ECNs having the courage to acknowledge the competition in particular product sets where they don’t excel, and do the plumbing to let their GUI offer their customers a route into another venues liquidity…

Multi-Asset Trading

Filed under: etrading — holky @ 11:21 am

A good article in WSJ “Is Multi-Asset Trading Dead on Arrival?” says It’s easy to blow off multi-asset trading as DOA. Trading across products violates almost everything I have learned, namely: Wall Street makes money through focus; systems developed for multiple purposes serve none; the industry’s technologies follow P&L codes, which are vertically (by product) not horizontally (by customer) aligned; and if you make it too complex, nothing gets deployed.   

The article does put forward the case ‘for’, and its conclusion is sound; while full integration of all of the silod front and back office systems is in the dim and distant future at best, that will not prevent customer side increasingly needing, and so increasingly getting, the ability to electronically trade multi-asset transactions.

Transaction Building Blocks

Filed under: Algos, etrading, Nuts and Bolts, OMS / EMS — holky @ 6:15 am

Again on the future of OMS/ECNs…  I saw a press release a while ago re ULLINK’s UL REACH thing that apparently lets sellside publish their algorithms to buy-side community so they are made available “instantly” (meaning without having to wait for a new ullink software release).

Why don’t the FI ECNs build their GUIs to support transactions being built from generic building blocks of functions and fields?  Build the equivalent of their existing etrading offering as the generic functionality using those building blocks, and then shift ‘development’ of anything over and above that to the sellside who wish to support a particular type of transaction. 

As long as dealers wish to support it (and so develop it), this removes the constraint that the ECNs place on what can be transacted on the platform. With the right building blocks could dealers support things such as customers electronically unwinding existing swaps once non-standard, or etrading butterflies and curves and so on ? .. the things some big buyside say they require before they will do any of their swaps business electronically.   In terms of value-add the ECN becomes “the library” of  core etrading functions as well as the connectivity between customer+liquidity provider – not a bad position to be in to ensure they remain in the future landscape.

As the OMS guys are already coding dealer-specific functions (algos) into their gui, if the ECNs continue to hard-code their gui-per and so constrain the product offering then where does that leave them in the future?

June 1, 2007

Your Second Life

Filed under: Nuts and Bolts — holky @ 7:49 pm

A report published last month by research group Gartner said 80% of internet users and Fortune 500 companies would have a “second life” by the end of 2011,   with Steve Prentice, head of research at Gartner, saying: “Virtual worlds will have a significant impact on your enterprise during the next five years.”

So in the news is another SL launch – Germany’s Wirecard Bank opens in Second Life

And the EFN article here mentions the World Stock Exchange (which is also here in WSJ) which caught my eye as being a single exchange for the whole world, something many in the real world expect at some point.  This SL one supposedly works the same way and uses same terminology as real life exchanges, so its Traders convert real currency into Linden dollars using credit cards or PayPal and “invest those linden dollars wisely” (my phrasing to avoid the words punt and gamble) in the exchange to trade shares in listed companies which will rise or fall according to demand.  I still think the regulators will be all over this once they realise just how much shirt you could lose with that “wise investing”, especially on technology that appears to have so many questions about how it is being operated.

But sod just getting the exchanges of this world sorted… let’s go for the entire universe. See the cross-platform financial exchange spanning multiple virtual worlds including Second Life and Entropia Universe for the ‘how-to’.

My original second life post here

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