Mostly… fixed income and cross product eTrading

January 31, 2008

How much US FI is ‘e’ ?

Filed under: etrading — holky @ 8:57 pm

WSJ says that Celent have done a big count-up of etrading in the (US) fixed income markets and concluded that 88% treasury is executed electronically,  but still only 10% of corporate bonds are ‘e’.

electronic-trading-chart.gif

OMS order routing on the up

Filed under: etrading, Nuts and Bolts, OMS / EMS — holky @ 8:48 pm

WSJ says that leading asset managers — including AIG Global Investment Group, Deutsche Asset Management, Pioneer Investments, TIAA-CREF and State Street Global Advisors (SSgA) — have participated in an extensive trading survey to benchmark themselves against their peers;  and while the first survey conducted in 2006 examined risk, trade strategy, technology, organization, broker valuations, workflows, fixed income, speed and liquidity, for 2007 the hot topics were trading policy, trading strategy, broker valuation, technology and fixed income (“Everybody was pretty much in the same position with DMA [direct market access], speed to market and liquidity, so we minimized the effect of that and focused more on broker relations, where people wanted to spend their time”).

Results showed OMSs have improved is their ability to automatically route orders – with 80% of firms in 2007 saying they have the ability to automatically route orders from their OMSs to external counterparties, compared to less than 50% in 2006.

January 30, 2008

Turquoise Airlines

Filed under: 2015, etrading — holky @ 4:20 pm

At Finexpo earlier today Eli Lederman, CEO of Turquoise, drew a parallel between 80s deregulation in US airline markets and what is going on in capital markets now. So where airline customers (passengers) now benefit in terms of more readily available flights that are cheaper (relative to the bad old regulated days) .. capital markets customers (buyside, who will of course pass on these benefits to the ultimate investor), should expect the new competition to bring more readily available (/accessible) liquidity, with tighter spreads, and the resulting upsurge in volumes transacted because of this reinforcing (/deepening) that liquidity.

One additional airline point jarred me.  The point about multiple airlines sharing terminals being a benefit to the passenger; who can now easily change airline etc for a connecting flight as part of a single journey. Which of course they can. So multi-airline venues rule! … Though if so, why would Virgin get any value from now claiming their entirely-separate-from-other-airlines security facilities are a differentiating and major plus point?  and who cares if silverjet have an entirely separate terminal?   Perhaps ~ 20 years on some of the multi-airline-per-venue benefits have lost their sparkle?

Persisting with the parallel but looking at FI otc markets, if we step past the current rush for multi-dealer consortia and venues, is the shape of the more distant future that singledealer venues will actually end up ruling?  Then it’s the buyside desktop that keeps the single dealer “terminals” (in airline speak) in close proximity (for easy parking and some benefits of connecting flights during an overall transaction). So that’s still an api connection per dealer (or perhaps per-aggregator) into the buyside desktop then that we should all be seeking?

January 29, 2008

2007 – year of consortia

Filed under: 2015, etrading — holky @ 12:39 pm

A consortium is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal.

Well 2007 was certainly the year of the consortia. Everywhere you look, banks pooling their resources for participating in a common activity or to achieve a common goal. 

And with Project Rainbow now on the horizon .. we see that 2008 is continuing the theme …
consortia2.gif
But what are the common goals that are sought?

The short term appears a defensive move in a landscape changing dramatically because of regulatory change –  the banks individually backing many/all horses in order to remain agnostic over choice of venue that business gets executed (until you start declaring you actually do have a preference), forcing exchanges/venues into lowering their costs … all of which of course appears to be working, though what cost of those venues countering with diversification into markets they previously didnt touch?

For the longer term do you have to start joining the dots between the consortia?  As and when the products cross over into another asset class, something that is typically managed in a separate silo in the sellsides, then those sellside representatives around each board table need to be there to execute their firm-wide strategy for the venue in question, rather than a product-silo specific view.  So will Tradeweb/Fusion plans to venture into Equity drive us down the road of a Fusioned MarkIT Boat Tradeweb ?  Or will MarkIT or Liquidity Hub turn Turquoise at any point?

Or is the only genuine end game for all of this wise investment just the exit strategy to sell any shareholding at a higher price than you paid?

January 26, 2008

eTrading is dead?

Filed under: etrading, Nuts and Bolts — holky @ 3:45 pm

The Trade News underlines that banks are getting rid of some of their electronic trading talent, just at the point that there is an argument for even further commoditisation of their sales and trading efforts into scalable electronic channels to save a bob or two.  So do you see all of this as indicating that etrading (inc DMA and algo) is still very much seen as a supporting role that can be scaled back to maintenance mode – or is all of this just scaling back etrading alongside an even bigger scaling back of the traditional roles as the capital markets sink into 2008?  Either way, with the consortia in abundance taking a fair slice of the development pie that remains, does this mean we should all expect less innovation this year through the singledealer sites/presence?  

January 23, 2008

MarkIT Boat

Filed under: 2015, Mifid — holky @ 2:07 pm

Just to close the circle, MarkIT buys BOAT … which already claims 68% of the off-exchange trade reporting and roughly 25% of the equity trades in Europe.

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