[ B U Y- S I D E
I N T E R V I E W
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J I M
the financial crisis as dealers with-
drew from risk-taking have made
it more important to embrace new
methods of liquidity discovery. To that
end, AllianceBernstein has created
Automated Liquidity Filtering & An-
alytics (ALFA), a programme so wide
reaching and useful that it could soon
become a standard technology in the
investment management business.
The genesis of ALFA began in early
2015 with discussions between Swit-
zer and Ashish Shah, AllianceBern-
stein’s head of fixed income and chief
investment officer of credit. Initially
ALFA was devised as a way to organ-
ise information.
“Everyone was looking to source
liquidity and with so many new plat-
forms out there we thought there was
so much information coming towards
“If the buy-side helps liquidity
it is good but won’t replace the
role of the dealers.”
us and we didn’t have a way to process
it in an orderly fashion,” says Switzer.
“We discussed that I either needed
to hire more traders because infor-
mation is so bifurcated or we needed
technology.”
The company chose the latter. Tim
Morbelli, vice president of credit
trading, came up with the idea and
then spent six months with the Alli-
anceBernstein technology team—AB
Labs—to create the first version of
ALFA.
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TheTrade
Summer 2017
S W I T Z E R ]
It pays to be a provider
It began as a way to collate informa-
tion more efficiently from all different
platforms and venues in the market
but over time this has developed.
ALFA has proven a goldmine for
organising information and getting
clarity on where liquidity lies. The
technology sits on top of the compa-
ny’s Fidessa Minerva order man-
agement system and will scour the
market aggregating multiple liquidity
pools from various external bond
pricing sources and trading platforms
together into one interface. At the
same time, portfolio managers can
create an algorithm through which
they can find the securities they need
themselves and not have to go through
a trader. It has taken the pressure off
the trading desk.
“ALFA provides us an unprecedent-
ed level of pre-trade transparency,”
says Switzer. “By aggregating formerly
separate pockets of market data into
one single interface ALFA enables
the trader to instantly see the price of
a security before engaging in a trade
allowing us to be price makers rather
than price takers. We are also mining
data from this and sending it to quants
who can look at a huge range of find-
ings on cost and spread analyses, such
as future new issue concessions and
liquidity cost scores.”
The improvements in efficiency are
telling. As an example, in the past, for
a specific buy-and-maintain client
portfolio the asset manager would
have bought 100 bonds out of which
it would send back 60 to 70 because
they were not liquid enough.
The programme also helps to look
for opportunities where the asset