The TRADE 60 | Page 70

[ M A R K E T R E V I E W order management system (OMS) to the execution engines of major fixed income trading platforms and ECNs, using appropriate param- eters. An important element is ensuring our fund managers are comfortable with the criteria we’re using to direct trades to different execution channels. There are scale benefits to trade automation. Intermediation with banks via ECNs can allow our traders to put on more trades more quickly, but a more import- ant driver for us is securing access to sell-side balance sheets when executing bigger trades. In parallel, one of our biggest priorities is making more efficient use of data to determine the likely cost/benefit profile of a trade. We’ve been working with banks, ECNs, and other data providers to pull in more data, both to support our ability to assess the potential cost of a trade, and for use in our post-trade transaction cost analysis (TCA). These metrics are used in RFPs to demonstrate to clients our ability to deliver a good outcome when implementing investment ideas. On a practical level, we feed these external data inputs into our proprietary pricing system, which generates an estimated aggregate cost for a portfolio which then determines whether we go into a single-name trading mode or start looking at a portfolio trade. We still rely heavily on the skills of the trader to get inside the bid-offer 70 // TheTrade // Summer 2019 | F I X E D I N C O M E ] spread on single trades, or to negotiate with a bank to achieve the aggregate cost we’re looking for on a portfolio trade. Jim Switzer, SVP and global head of fixed income trading at Alliance Bernstein: Data aggregation is probably our number one priority right now. We’ve been amassing historical and point-in-time data “We still rely heavily on the through our ALFA skills of the trader to get market liquidity sur- veillance tool over inside the bid-offer spread the last five years. on single trades.” This has given us LEE SANDERS, AXA a fairly robust picture of the INVESTMENT MANAGERS market, which is now informing our approach to direct connectivity, both to ATSs and the sell-side. Internally, our focus is on systemi- sation of our investment process. In today’s challenging liquidity condi- tions, systemisation allows us to use different liquidity strategies. One example is the concept of portfolio trading. The aim is to look at baskets of risk in a similar way and be able to trade multiple portfolios at the same time. This requires not only electronic process change but also behavioural process change from traders and the investment team in how they approach risk management and portfolio optimisation. It also requires support from the top: senior management has made it very clear we should strive for innovation and efficiency. What are the main ways in which you have evolved your relationships with sell-side firms and technology vendors to secure access to liquidity across the fixed income markets? Mike O’Brien, director of global trading at Eaton Vance: In general, the buy-side needs to evolve and think about their trading strategies in different ways. With some of the new entrants into the fixed income markets, there are new ways to trade beyond request- for-quote (RFQ). The buy-side needs to get more comfortable with those, understand how they work and how they can be used across the portfolio so that fixed income traders have multiple tools at their disposal to access liquidity. Buy-side traders need to understand how the market operates and how to value a bond sufficiently well to be a price maker than just