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A Year of Extremes

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3 December 2020
Brad Bailey

A Year of Extremes…

It certainly has been a year of extremes with many superlatives required to describe the situation; but also, a year with plenty of challenges. I am not talking about Covid-19, but fixed income!

Celent just released part one of a series where we explore the future of fixed income technology.Part I looks at a high level view of changes in fixed income technology, the waves of venues, the leverage of data, channel management, and the emerging technology ecosystem. We introduce the FicTech space and how new models, markets, participants, regulations, and investor demand are changing fixed income trading. The series will continue with a look at the venues and data models in rates and credit as well as a look at innovation occurring in loan trading, and the primary issuance markets.We explore how technology and data shifts are driving new ways of trading and rethinking their fixed income desks in a time of great extremes and divergences.

FicTech

Source: Celent

Superlatives:

Record issuance, trading volume , volatility, volume trading on platforms. The next wave of new venues. The newest models for accessing fixed income data, fixed income analytics, and paths to advanced predictive analytics and machine learning. The best year in a decade for fixed income trading and DCM revenues. The most choices for executing trades across new models, and the most portfolio trading ever in fixed income. The most interesting technology ecosystem in fixed income.

Technology Landscape in Fixed Income

Source: Celent

Challenges:

The challenge of trading a complicated product like fixed income during a pandemic with teams distributed across homes, BCP sites, satellite offices, and trading floors. The largest peace-time movement of Materiel --computers, workstations, routers--shipped from offices and DR sites to homes, has led to real rethinking of channel management across voice and electronic trading in fixed income. Additionally, the struggle to define electronic trading properly which could potentially create a situation where non venue technology providers and networks fall under regulatory mandates. The rethinking and digesting of changes as venues change hands. Trying to make sense of the inability to get to an equivalence deal post-Brexit- potentially forcing a trading diaspora from London to Frankfurt, Dublin, Amsterdam and other cities (but more likely creating the need for desks in both locations). Making sense of the data collected from MiFID II in order to create more market transparency.

From my room to my Zoom

And, the timing is perfect because I am packing my bags to head the 27 steps from my room to my Zoom for this year’s virtual, Fixed Income Leaders Summit where I will be discussing many of these topics with leading asset managers, venues, dealers, and FicTech players.

On day 1 December 8, I will be discussing credit liquidity sourcing, aggregation, data, best execution, and portfolio trading with heads of trading at top US asset managers as well as FicTech providers in two sessions in the afternoon.

On day 2 December 9, I will participate in a fireside chat that explores new frontiers in rates execution with CME Group/BrokerTec, Eaton Vance, OpenDoor Trading, and Tradeweb.

I look forward to your questions and engagement for the remainder of this year and next.

What a year it has been!