Conference Dailys FILS in Philly Today 2019 - Wrap-up | Page 6

FILS IN PHILLY
in-depth
THE OFFICIAL NEWSPAPER OF
FIXED INCOME LEADERS SUMMIT 2019
Automation an increasingly dominant theme
for sell-side fixed income participants
SPEAKERS FROM GOLDMAN SACHS, TRADEWEB AND MARKETAXESS DETAILED HOW THEIR ORGANISATIONS ARE USING
AUTOMATION TO ENHANCE EFFICIENCIES AND OUTCOMES FOR THE FIXED INCOME MARKETS.
Continued from front page:
“Right now, we are running about 10% of the
trades that go through our platform in an auto-
mated fashion; we believe that within four years
we will see 90% of trades under five million in
size happening in a fully automated way,” said
Schiffman.
“It’s basically like a Tesla autopilot-type func-
tion. There is no reason to pay attention to the
small, routine trades that can easily be accom-
plished by defining parameters of the system
and letting it execute those trades according to
the rules.”
Reducing manual operations for lower-value
trades is one of the key, and most well-rec-
ognised, value adds that automation can provide.
However, Elisabeth Kirby, managing director,
US rates strategy and product management at
Tradeweb, highlighted that automation on its
own will only go so far and that the trading plat-
form provider is looking at a “holistic evolution”
where “optionality is the key word.”
“We don’t necessarily see a linear evolution, for
example, of people who used to trade RFQ and
now they want to trade in a different way; the
evolution is much more additive. We have built
offerings to address all of the different ways
that the fixed income markets might be evolving,
specifically things like anonymous central mid
order books, point-to-point streaming liquidity,
the automated RFQ,” Kirby explained.
“These are all things that supplement the
existing RFQ, so for clients who trade RFQ and
more traditional liquidity providers, that is
something we want to continue to support, but
there may be something of a misconception that
that is all Tradeweb does or that is all that the
buy-side wants to do.”
Kirby also detailed that Tradeweb’s RFQ
platform has evolved into a lower-touch, or even
no-touch, system whereby around one-quarter
of the tickets for US Treasuries that go over the
platform are now automated.
Broker-dealers are also pushing automation at
the core of their offering and Amy Hong, global
head of market structure at Goldman Sachs, said
that the institution has focused on improving
workflow efficiencies, starting with straight-
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FILS IN PHILLY DAILY
“It’s basically like a Tesla autopilot-type function. There is no
reason to pay attention to the small, routine trades that can
easily be accomplished by defining parameters of the system
and letting it execute those trades according to the rules.”
AMY HONG, GOLDMAN SACHS
through processing (STP) to reduce the amount
of the time its teams and clients spent booking
trades manually.
“That has evolved into really interesting things,
like auto-response, systematic price formation,
systematic market-making, systematic risk
management. Automation is something we are
seeing across the entirety of the product spec-
trum,” Hong said.
Hong said that Goldman Sachs has adopted
a particular focus on the price formation and
market-making functions and described how
the firm’s systematic market-making algorithm
was able to perform in ways a human could not,
although she clarify that there was room for both
high- and low-touch means of market-making.
“As we continue to further mature and develop
our market-making model, the combination of
systematically synthesising market data along
with the great human trader talent that have
focused on managing risk and client service,
is actually going to make for a much healthier
marketplace from a liquidity, as well as a user
experience, standpoint.”