[ ADVERTORIAL ] plug-and-play of an existing OMS connection to identify which orders should be executed via AiEX .
How long does it take to implement AiEX and how do you work with clients to get the rules just right ? CCJ : Technically , it can take just a day to implement AiEX when connectivity already exists with a client .
However , we do spend time working with firms to evaluate and refine the execution rules . It ’ s important to understand client motivation , for example , how they trade and how they want to segregate their trading activity . We use management information systems to understand aspects such as execution timing , typically in conjunction with our transaction cost analysis tool to figure out which trades can benefit most from AiEX . Technical set-up will be very quick , but we spend time ensuring the rules fit the client ’ s needs and the traders are comfortable with the protocol . Post-implementation , we provide comparable metrics to demonstrate the benefits of automated execution and suggestions on how to optimise these .
Each client has their own specific requirements as they onboard . Responsiveness to requests has been critical , and we can now offer a wide range of rule setups .
How receptive have market participants been to the adoption of automated workflows ? What benefits have they seen ? CCJ : As with any advance in electronic trading , some institutions are naturally more receptive to innovation . But we have seen exponential growth in the adoption of AiEX over the past year . Many clients gain a significant capacity increase almost immediately . As more trading becomes electronic and more asset classes are trading on venue , clients are increasingly motivated to identify cost savings .
Furthermore , the low cost and light technical build nature of AiEX provides a compelling tool for buy-side firms to ensure compliance with MiFID II ’ s best execution rules . We ’ ve seen many clients using AiEX to codify these rules and demonstrate the effectiveness of their best execution process . The integration with our post-trade TCA tool is a very effective complement to this process .
What are the different use cases for AiEX across asset classes ? CCJ : The classic case is the large real money manager with a significant amount of low-touch orders , particularly at points of month end with index extensions , which have the potential to stretch the capacity of the trading desk . But expansion into other asset classes has presented us with interesting alternate use cases . In ETFs , for example , through live comparisons to the exchange touch , AiEX can guarantee better execution than some of the more traditional transaction methods . This has allowed ETF desks to trade a range of sizes and orders on a single venue in accordance with defined execution policies .
We have mostly discussed AiEX in terms of cash bonds and ETFs . As we brought the concept to more clients , we found a lot of interest in automating derivatives flow . In short , the speed at which clients execute can lend itself to wanting to trade in a faster market , especially where there is a trading obligation to execute on venue . As such , we ’ ve had a lot of success in the derivatives space where clients can trade in a regulatory compliant manner , whilst gaining access to pools of liquidity quickly and effectively .
Another use case is retail aggregation firms handling multiple orders throughout the day . For those clients , it ’ s not feasible to have numerous traders assessing liquidity and manually trading , but AiEX provides a cost-effective means of aggregating such orders and executing them efficiently on venue through accessing the widest pool of liquidity available . Through integration with our All-to-All liquidity pool , clients are able to reach non-traditional counterparties where bilateral relationships do not currently exist .
But AiEX is not just applicable to smaller-sized orders . The ability to compute rules around dealer selection , size and risk , opens up the capacity to formulate a process to find the right liquidity , at the right time , with the right counterparty . The results can be quantified and the rules refined over time .
What is on the horizon for AiEX ? How do you expect it to evolve over time ? CCJ : As Tradeweb expands to include new asset classes and trading protocols , it is a relatively light lift to offer those capabilities via AiEX , because it uses the same core architecture . And because AiEX replaces a mechanical process with pre-defined rules , it opens up opportunities to optimise aspects of the execution process , including timing .
Partly driven by MiFID II , trading is increasingly dependent on the efficient consumption of data and the ability to make intelligent trading decisions . Similarly , for us at Tradeweb , use of data will be critical to how we align AiEX ’ s rules with the execution objectives of client trading desks .
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