Mostly… fixed income and cross product eTrading

August 1, 2008

What do I do with this?

Filed under: OMS / EMS, Uncategorized — Tags: , , , — John Greenan @ 6:44 pm
Picture the scene…
You are a high level exec at Sungard.  The GLTrade boys have agreed to sell up and you soon get control.
What do you do with it?

July 17, 2008

The Future of OMS

Filed under: etrading, FIX, OMS / EMS — holky @ 8:35 am

TowerGroup says Spending on OMS will grow in dollar terms and compare favourably with other buyside spending in terms of (apparent) priority. In terms of product, the research indicates that growth in the OMS sector is being driven by three key areas, and in addition to Weallth Management functionality there is;

— Emerging Markets – With both the US and UK OMS markets saturated, international markets – specifically continental Europe, the Middle East, Asia including China and India, and South America – represent the strongest growth opportunities for OMS providers.

With FPL also putting a flashlight onto Emerging Markets too (here) – I’d hope that any drive made by the OMS/EMS vendors will include electronic trading from the off, building the e-trading workflows for the local markets at the same time as the functions to cope with the internal order management and regulatory nuances for the region/market in question. We shall see.

— Derivatives – Supporting derivatives is a critical requirement for an OMS. Derivatives represent a unique opportunity for OMS vendors to extend their franchise beyond traditional OMS functions and into new territory, including valuation, pricing, and risk management.

Here Charles River and Tradeweb are in the news announcing the launch of a fully-integrated, end-to-end solution for post-trade processing of OTC Derivatives; IRS (U.S. Dollar, Euro, and Sterling), CDS (CDX, iTraxx, single names, and tranches), which is clearly really well timed and with definite potential as a workflow enhancer (and while the press release understandably does not mention trades executed in non-Tradeweb electronic venues – I presume these would be fed in the same way as voice trades so this proposition could cope with all of the client’s trades in these products?)

One thing that the TW/CRD press release did also mention, is about point-to-point broker connections…

In addition, a new Direct Dealer Inventory feed in Version 8.2 enables buy-side traders to establish electronic point-to-point broker connections and receive available fixed income inventory directly into Charles River IMS – electronically matching orders and helping traders successfully execute on inventory opportunities.

…which doesn’t specifically mention electronic execution via these connections, but does put another foundation in place for a single platform.

July 2, 2008

Fidessa on sellside, Charles River buyside

Filed under: etrading, OMS / EMS — holky @ 2:54 pm

For those of you going shopping…. Bobsguide tells us that Fidessa is voted the best sellside OMS for 2008 (overtaking Sungard BRASS). We already knew that Charles River was voted best buyside OMS.

June 24, 2008

Liquidnet for Fixed Income

Filed under: etrading — Tags: , , — John Greenan @ 11:57 am

Another one from John Greenan

While talking to a few senior folks in the buy-side about Fixed Income dealing they raised an interesting point. Why is there no such thing as Liquidnet for the corporate bond market?


June 20, 2008

Human sales/trading in an increasingly electronic world

Filed under: 2015, etrading, Nuts and Bolts — holky @ 8:19 am

EFN tells us that TABB reckon e-trading use will grow rapidly in European fund managers and investment banks over the next two years – causing the number of sales traders to drop by 9% a year for the next two years, with human traders executing 50% of flow in 2010 (down from 82% in 2005).

The point that new opportunities for the sellside trader are arising thanks to increasing fragmentation – in providing clarity to the buyside on where to execute (“navigating the markets”) – appears underlined by Traders Magazine suggesting that buyside traders do not have a coherent and considered strategy regarding the use of dark pools (for example 18% of the buyside traders unsure what they think their potential usage would be of a dark pool that was able to send out indications based on order flow that resides in that pool).

Isnt the uncertainty just because the landscape is not particularly well charted because it is still changing (and perhaps dramatically so) – eg more execution venue launches later this year. So while sellside need to help buyside clients understand whats out there, surely once the dust settles and the landscape is charted, more buyside will want to execute based on the proprietary rules that they have, in their systems/processes, with regard to when where and why.

June 17, 2008

French Govvies on MTS

Filed under: etrading, Nuts and Bolts — holky @ 10:26 am

I see French govvy traders’ electronic market making obligations can now be fulfilled away from MTS – here – joining Holland and Belgium in doing this, we must be approaching the tipping point for the rest of the Eurozone Debt Management Offices to similarly open up obligations in terms of venue?? … and this is all happeing at the time the covered bonds guys are seeking their own platform?

Previous post with ICAPs article about the Eurozone restrictions is here

June 11, 2008

Tradeweb RFS

Filed under: etrading, Nuts and Bolts — holky @ 6:27 pm

I see Tradeweb is in the news – with 4 new dealers (Citi, Deutsche, Goldmans, UBS) on Euro IRS, and also introducing a Request for Stream (RFS) trading model for Euro and Sterling IRS.

May 16, 2008

Covered Bond Platform

Filed under: etrading — holky @ 10:51 am

Finextra tells us that Six companies – Icap, TradeWeb, Eurex, MTS, BGC Partners and Bloomberg – are bidding to provide a new electronic trading platform for European covered bonds. Of course the devils in the detail with regard to the winners mandate, but if the punchline is a single platform, with no bridging connectivity to/from other execution venues/platforms, then aren’t the losing bidders going to argue same argument as was put against MTS being the single EGB venue?

April 28, 2008

Charles River rules … ok?

Filed under: etrading, OMS / EMS — holky @ 2:50 pm

Bobsguide says that TradeTech 2008 Names Charles River IMS Best Buy-Side OMS for Second Consecutive Year … Of course thats equity tradetech .. or at the very least now there isnt a FI one, “primarily-equity” TradeTech, though surely nowadays that’s academic; there is a single cross-asset-class buyside opinion on what the best OMS is?

April 21, 2008

Time for CCP in FI Markets?

Filed under: 2015, etrading, Nuts and Bolts — holky @ 12:21 pm

At the same time the exchange markets are moving into a much more OTC shaped model with fragmentation and dark liquidity .. Tabb is suggesting that the Fixed Income industry may need to migrate from a traditional OTC market without a central venue to a more traditional exchange model in which there are not only liquidity providers making two-sided markets but a vibrant agency model as well.   Full article here

With development resource more scarce given current market conditions I think all roads lead to Rome – with Rome being whatever the target client wants it to be. This definitely isnt a one-size-fits-all sort of Rome though. Instead we’ll see continued fragmentation of the existing etrading landscape leading to multiple venues happily co-existing, but each operating with a model specifically aiming at the type of customer they are targeting.  As each trading model brings a different proposition value for each different tiers on client and also on dealer side, it will be interesting to see how many of the existing venues have appetite for revolution to extend their footprint into dramatically new and unproven models (and new target clients), rather than reinforcing what they do by continuing on an enhancement-based evolutionary path – allowing new venues to enter the picture.

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?

March 28, 2008

Liquidity Hub Shuts Down

Filed under: 2015, etrading — holky @ 5:54 pm

Headline in Finextra.

March 19, 2008

The MarketAxess CDS long-game

Filed under: etrading, Nuts and Bolts — holky @ 10:55 am

OTC derivatives spending to soar …says TABB, via Finextra, in which case is the MarketAxess long game actually a good bet?

Quote  Investment banks may be firmly focused on the reform of equity trading in Europe and the US but the fixed-income market is facing different issues, according to a bond trading specialist who argues the credit crisis six months ago may have set back the modernisation of credit default swap trading by a year or more.    

Are any eyes on e- CDS at this point or is everyone looking at rates?  … I wonder just how long that long game is

March 18, 2008

Bondvision and LatentZero

Filed under: etrading, FIX, Nuts and Bolts, OMS / EMS — holky @ 6:08 am

I see in Finextra that BondVision is partnering with Fidessa LatentZero (Minerva).   Clients will be able to ‘auction’ their business to the best bidder either outright, or by switching with up to five dealers online …. which i presume means singledealer orders and rfq?

I recall way back towards the tail end of 2005 (?) a Bondvision announcement about the FIX pipe being opened. 

LZ point to point etrading gets a step closer?

March 7, 2008

smart order routing?

Filed under: Algos, etrading — holky @ 11:18 am

Finextra quotes Tabb as saying there are 55+ venues competing for (US) equities e-trading business … which sounds like the ideal landscape in which to be selling smart order routing ..the tools to pick out the right venues for the order in question.  I wonder whether there is a market for buyside smart order routing in fixed income space too; and whether this technology has potential to change the general dealer reluctance to permission a client on more than one platform for a particular product class?

MarketAxess FIX future

Filed under: 2015, etrading, FIX — holky @ 7:26 am

Story in Finextra saying that MarketAxess has bought Greenline Financial Technologies .. and says the acquisition will expand its revenue base by adding equities and exchange-traded options, futures and commodities connectivity to its fixed income options.

“The acquisition of Greenline further broadens the range of technology services that we offer to institutional financial markets, provides a meaningful expansion of our client universe, including global exchanges and hedge funds, and further diversifies our business beyond our core electronic credit trading products,” says Richard McVey, chairman and CEO, MarketAxess.

March 6, 2008

Four Seasons

Filed under: 2015, etrading — holky @ 8:46 pm

EFN tells us that the Four Seasons dealer consortium looking to challenge the largest US derivatives exchanges (initiallly with US treasury futures), is reportedly about to hire Gerald Putnam (founder of Archipelago trading system bought by NYSE in 2006), as its CEO. 

What Do You Want From A Hub?

Filed under: etrading, Nuts and Bolts — holky @ 10:45 am

Another post from John Greenan …. anyone want to volunteer something that fits the bill?

What do you want from a hub? Let’s clarify what we mean here.  In a classic equities buy-side connectivity world the institutional asset manager would generally choose between point-to-point connections using BTRadianz/TNS/similar or a hub such as Thomson Order Routing, Reuters Order Routing, FidessaExpress, UL Net, NYFIX etc.In the past the measure of value of a hub was seen in pure techie network terms – that the value increases as the square of the number of nodes.  That worked fine in a world where buy-sides were busy trying to add as many brokers as possible in the initial stages of the move to FIX based rather than telephone based trading.  But what are the dynamics in motion now?

Unbundling means that you do not need to deal with a broker in order to pay for their research.  So why bother with multiple brokers?  If you look at the execution capabilities of a firm such as Goldman Sachs or Morgan Stanley then it’s hard to see what else you need.  For simple risk management reasons it makes no sense to put all your eggs in one basket but the optimal number of brokers is perhaps now a great deal smaller than the consensus opinion.

Let’s put forward a new model of broker relationships – core and satellite.  Have a small number of core brokers with whom the buy-side maintains deep and broad trading relationships, multi-asset class, algos, programs and so on.  Have a number of satellite brokers that provide specialist execution capability – illiquid German mid caps, access to smaller markets where the tier one firms may not have a seat.  In this core satellite world how many brokers do you need for a global institutional asset manager?  Deal out of the US, EU and Asia Pacific.  Have say 6 core brokers and say 8 satellite brokers per region.  A total of thirty connections.

In this case it’s never mind the width, feel the quality.  Rather than a massive number of connections, lets go for the smallest number but have in depth trading relationships.  What can the hubs offer in this quality, rather than quantity, driven world?

What about a hub that offers 24×5 uptime based upon the hub having two connections to a broker and the buy-side having one connection to the hub?

What about a hub that offers crossing capabilities by default based upon being able to see all flow routed down the pipe?

Another issue, end of days.  In a global trading environment it’s hard to fit in end-of-days for sequence number resets.  Either you have a five minutes slot where a broker is unavailable or else you build two or more connections such that there are regional connections so an end-of-day can run after the business day has finished.

Intelligent management capabilities.  Monitor DKs and rejections and try and add value – notify people and let an investigation begin.

Management statistics.  What percentages of orders go where, which algos are used.  Can any patterns be determined?

Real time and post trade TCA.  How well is the firm performing in executing client orders?

I don’t think that a single hub exists at the moment with all these capabilities but it’d be nice to see it soon…

February 27, 2008

OTC and Exchange-traded derivatives ..super

Filed under: etrading — holky @ 9:15 am

Finextra tells us Nyse Euronext partners with SuperDerivatives – to join the dots to offer direct access to the Liffe Connect electronic trading platform … speeding convergence between OTC and exchange-traded derivatives markets – with one target being to tighten the bid/offer spreads in the corresponding exchange products.

February 19, 2008

LinkedIn, Bloomberg, and your data

Filed under: Nuts and Bolts — holky @ 9:09 am

Data data data data data.

LinkedIn announcement are going to provide a new relationship mining tool through their network, therefore selling your relationship info as stored LinkedIn … the company is apparently going to be tapping into the “social graph” of its users, analyzing relationships between people, their companies and professions to figure out who knows a lot about what.

Is Bloomberg heading in the same direction?  I see they are now recording the number of hits each persons profile has… an indication of how ‘popular’ or ‘newsworthy’ someone is. Would that and the relationships as defined in that persons address book be worth $$$$$ to journo’s or headhunters?

February 18, 2008

A Single Platform

Filed under: 2015, etrading, Nuts and Bolts, OMS / EMS — holky @ 11:40 am

SIFMA Fixed Income eTrading Survey 2008 results show 85% of buy-side respondents expect to be using a single platform for all of their institution’s wholesale electronic trading activity within the next two years.

At SIFMA we heard that the future is not all multidealer venues. Indeed, singledealer platforms are still a serious consideration for the majority of attendees where there is a functional benefit.  We also heard that buyside do actively want competition in the ECN/vendor space – if only so the functional landscape does not stagnate.

So answering the question posed in Tales from a trading desk, buyside expectation and indeed their desire would appear that the single platform in question is not one of the vendor or dealer platforms, instead it is their own desktop (ie their single platform), and that this platform is able to aggregate their view of liquidity into a single view of the market, from where they trade. So OMS or EMS depending how you measure it.

My panel ( this one of the only snippets I heard 😦 ) concluded that 2008 is back to basics and so time for the foundational work to be done so we are ready to benefit from the new venues and landscape changes that the dealer consortia are driving.   In an environment where fixed income etrading budgets are broadly the same as last year (*), we need to be specific about where the right place to spend is. So in terms of back to basics, spend your 2008 money on the implementation of your OMS and then […through 2009] plugging it into the liquidity pools.  

Which pools do you connect to though? Well, once buyside have got the hang of plugging their OMS into fixed income liquidity pools, we’d be mad not to expect a much stronger drive from buyside and sellside to hook up direct in order to handle bespoke orderflow/information flow, or perhaps a move towards something more cross-product.  Sure, this is a relationship enhancer so perhaps only really relevant for top tier clients, but how long will critical mass of connections into say one of the fi venues want electronic order flow constrained in some way just to match what is possible via the venue’s GUI ?  Will those venues constrain the types or order that they can process, or will they move towards a more generic orderflow routing instead?  … though perhaps that’s a question for 2010 and beyond.

(*) assuming survey of SIFMA attendees is indicative of the market as a whole. The other options were that budget was materially less or materially more than 2007.

February 10, 2008

Banking crisis averted? Virtually.

Filed under: Nuts and Bolts — holky @ 8:18 pm

With this news that it is now prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter as per my original musing about Second Life, it seems that virtual regulation is absolutely on the cards… albeit not per-transaction rules at this point, although I wonder how long it will be until a regulator of the real-markets gets involved?

February 9, 2008

Bloomberg fixed income etrading

Filed under: etrading, Nuts and Bolts — holky @ 5:38 pm

So, what is the impact to the future of Bloomberg fixed income etrading now Russel Levi has moved to Superderivatives ?

February 7, 2008

Reuters RTFI gets IRS

Filed under: etrading, Nuts and Bolts — holky @ 1:16 pm

I was pondering what was going on with Reuters RTFI, in the light of Thomson/Reuters, and also Liquidity Hub, when I got an out of the blue notification saying they’d just introduced ‘click to trade’ capability (so not RFS?) on IRS via RTFI (with Deutsche Bank)  … though none of this appears to be mentioned on the RTFI information page at time of posting.

February 5, 2008

Everyone’s moving to equity anyway!

Filed under: 2015, etrading — holky @ 8:40 pm

EFN tells us  3 senior traders from Citigroup have left to set up a cash equities division at  London-based fixed income heavyweight Icap … in the latest evidence that specialists in other areas are moving into the equities business.

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