A hopeful
evolutionary
mindset
Key findings from: the 9 th Alpha Trader Forum Fixed Income London June 2017
Comparing the buy-side discussions at the 9th London
Fixed Income Alpha Trader Forum (ATF) in June 2017 to the
inaugural Alpha Trader Forum debates in June 2013, the
current tone is progressive. Electronification of the buy-side
trading desk has become a standing topic on the agenda
and the debate is now about to what extent the buy side find
matches in the new initiatives and further use cases utilising
technology. Technology is already proven successful for
internal matching and the buy side are hopeful to be able to
streamline primary issuance with the help of technology in
the future.
Furthermore, the buy side are now debating what other
interesting trading protocols would be useful, how they can
minimise getting ripped off by incremental technology fees
and hopefully aggregate liquidity information to a single
screen in the future as there is not a single liquidity initiative
that meets all trading requirements.
The aggregation subject is a major area of frustration for the
buy side and better EMS and OMS solutions are also needed
to automate the upcoming MiFID II reporting.
Autumn 2017
Evidently there are growing possibilities to evolve the fixed
income trading desk towards more automation and higher
levels of predictive machine learning at least for investment
grade government bonds. We are already in an era of
transformation where best of breed buy-side traders must stay
well-informed and avoid complacency to remain competitive
in the job market.
Most of the buy side are looking at arranging direct ARM
and APA relationships to satisfy all of their MiFID II reporting
requirements.
A major concern for the buy side is currently how to automate
the reference prices into their trading rationale as in most
cases this is an extremely manual and time-consuming
process. The buy side debated the capabilities within various
technologies to automate this process. With incremental data
as of January 2018 the buy side hope there will be better basis
to leverage technology for this process.
K&KGC presented previous research findings of suggestions
made by 32 senior buy-side heads of trading on how to
prepare for a prospective client requesting evidence of how
the buy-side firm traded according to their execution policy.
Unbundling of fixed income cash trading is a frustrating
exercise to satisfy theoretical regulatory requirements where
there are no foreseen benefits for the end client and will add
administrative burden for the buy side and sell side. One
valuable proposal is that the sell side should publish their
“no value” research for unrestricted public consumption to
prevent unnecessary fees and administration. Most buy side
are planning to pay for fixed income research from their P&L.
With the emerging development of bond trading
technologies and soon more access to data, we are all
attentively following the development and adoption of useful
fixed income Transaction Cost Analysis (“TCA”). As mentioned
a number of times before, useful fixed income TCA is today
classed as a luxury mainly afforded by well-resourced trading
desks.
www.buysideintel.com
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