Mostly… fixed income and cross product eTrading

April 21, 2008

Institutional Buyside FI etrading

Filed under: 2015, etrading, FIX, Nuts and Bolts, OMS / EMS — holky @ 12:03 pm

Another post from John Greenan…

What’s the future for Institutional buy-side Fixed Income trading?

Within the e-trading world a lot of the emphasis has been on the sell side with different firms and strategies (Liquidity Hub, project fusion and so on).  One aspect that does not seem to get as much attention is the buy-side.  Typically a big institutional buy-side will have an OMS like Charles River, LatentZero, MacGregor etc.  On top of that will sit one or more of MarketAxess, Tradeweb, BondVision and so on.  The model that these firms impose is one of FIX connectivity into the EMS but no option of end-to-end FIX connectivity from OMS to brokers.

As this market place matures it’s difficult to see what the future direction will be.

I’d like to propose one model.

Buy-side EMS connects via pure FIX 4.4 to a limited number of brokers.  A RFS process starts to request two way quotes in size for a list of instruments that the firm is interested in.  These quotes are combined into a synthetic order book – such that the buy-side can see ‘market-depth’ for instruments of interest.

The strength of this solution is that there is no longer a need to look at proprietary systems, the streamed quotes can be used for monitoring, it’s pure FIX, brokers can be plugged in or dropped without much fanfare.

The weakness is that the first buy-side to implement this may have to build the system.  Potentially it’s a very resource intensive system, depending on the number of quotes, brokers and instruments.

What are buy-sides doing in this space?



  1. If buyside FI dealers already use the FI platforms mentioned above as standalone systems, its a little harsh to say the OMS vendors are imposing those platforms as the only FIX FI solution.

    There’s not been much noise from the sell side on this one, compared to the racket their equity businesses make on self directed flow (algos, DMA, SOR and the suchlike. The impression that I get is that currently, the brokers are happy to lie within these ECNs.

    As I’ve mentioned previously on this blog the quickest way to kick this of would be for those platforms mentioned to be available over an API rather than a staged blotter, however I guess turkeys don’t vote for christmas and while I think BV and MA offer an API, TW steadfastly don’t.

    That infrastructure could then be leveraged for point to point connections.

    Comment by oxymoron — April 29, 2008 @ 7:57 am

  2. Ah, there’s an ambiguity in my original post. Let me clarify

    “The model that these firms – Tradeweb, MarketAxess etc – impose is one of FIX connectivity into the EMS but no option of end-to-end FIX connectivity from OMS to brokers.”

    Comment by John Greenan — April 29, 2008 @ 4:19 pm

  3. One other comment – do I know you oxymoron?

    Comment by John Greenan — April 29, 2008 @ 4:20 pm

  4. “The model that these firms – Tradeweb, MarketAxess etc – impose is one of FIX connectivity into the EMS but no option of end-to-end FIX connectivity from OMS to brokers.”

    I’d concur with that. In fairness, I’m not sure how they would feel that this fitted in with their business models.

    Comment by oxymoron — April 30, 2008 @ 11:52 am

  5. Clients want more and now. They are using single dealer platforms, screen based and api’s, in greater numbers and in total more volume. We all know the sell-side banks that have invested in this avenue.

    The API is still what the hedgefunds want. They are finally even asking for it more and more.

    The TABB notes simply reflect a call for more transparency. A more even playing field. Moving to exchanges clients get that, and yes they all want to spend part of 2008 and 2009 experimenting with how to force dealers into STP solutions and exchanges into OTC products.

    History repeats itself.

    Comment by Lacidar — May 5, 2008 @ 1:02 am

  6. Move the liquidity hub style RFS model to the buy-side and allow data mining based on spreads – give the buy-side the tools to beat up the sell side.

    No proprietary APIs – just FIX all the way.

    Build it and they will come….

    Comment by John Greenan — May 6, 2008 @ 3:02 pm

  7. My apologies to all. When I write API I mean both/either proprietary protocol (low level-ITCH like, UNICODE) OR FIX protocol (any version 4.2 and up).

    Given the current credit crisis and crippled institutions who “once up a time” claimed to be centers of liquidity watch closely for more client to client trading in Fixed income via ECN/ATS, Exchange, Dark pool, or even a ring of clients connected by, yes Mr Greenan, FIX all the way.

    This may take years but it is coming.

    Oh ya, has anyone else had a big laugh at how the dinosaur voice traders are howling and crying about their Interdealer voice brokers making millions more than these whinning traders themselves? Had they not any notion of how much brokerage traders pay voice brokers?

    And those “Sponsored” trips seems fab as well…

    Comment by Lacidar — May 8, 2008 @ 1:37 am

  8. check out
    they already provide this to Buysides with several bond market makers.

    Comment by joe — May 28, 2008 @ 5:52 pm

  9. Hey Joe,

    (good name for a song…)

    Does anyone use TradingScreen in a buy-side to stream in quotes from multiple sell sides in real time?

    Comment by John Greenan — May 29, 2008 @ 10:14 am

  10. My understanding was that tradingscreen was more of a hedge fund/AI product, but I could be wrong

    Comment by oxymoron — May 29, 2008 @ 10:38 pm

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