[ T H O U G H T
bringing back dealers that are per-
forming in that particular bond.
We believe this to be unique; in
other systems, the reliance tends
to be simply on the historical data
between the particular client and
their top dealers, which means a
high level of bias and a much nar-
rower potential liquidity pool.
This really is a key differentiator.
It means that client and dealer
can both be assured of unbiased,
data-driven matching with a high
degree of accuracy.
What’s the benefit to the sell-side?
AS: If we think about the fixed
income trading landscape and
where we’ve come from, it’s clear
that both the buy- and sell-side
are looking to utilise data sources
more constructively. In some
ways, the market is also separating
itself on both sides towards high-
and low-touch trading.
For low-touch, a wider liquid-
ity pool with greater overall
competition drives better trade
completion. However, with high-
touch enquiries both the buy- and
sell-side are in agreement about
the need to be more specific to
ensure that the selection process
encompasses dealers that truly
want to act and want to respond.
This whole process is about creat-
ing the right liquidity off the back
of that need, to the benefit of all
participants.
How is it improving traders’
performance?
AS: There are two key ways to
improve overall performance
– increase the likelihood of exe-
cution completion and enhance
the workflow efficiency. Looking
specifically at execution, getting
a dealer whose profile means
they’re likely to want to respond,
because they are axed in it, care in
it, or have historically performed
L E A D E R S H I P
well in it, leads to more liquidity,
thus improving the likelihood of
execution. The efficiency angle
is around the system actively
suggesting dealers for you, thus
saving time and resource for
traders who previously may have
had to carry out vast amounts
of research before making those
kinds of decisions.
How has the new fixed income
liquidity and data landscape
influenced its development?
AS: It’s often said, but no less true,
that MifiD II was a watershed
moment for the industry. We’re
now in a much more data-driv-
en and technology-savvy world.
Yet MiFID II mandates, such as
approved reporting arrangements
(APAs), didn’t deliver the “big”
data that the industry expected.
So, clients looked increasingly to
us to source, aggregate, curate and
deliver the data they need.
Technology is advancing quickly
on both sides. The sell-side is
increasingly starting to realise the
importance of analysing multi-
ple data sources simultaneously,
through the use of more algo-
rithms, and new technologies such
as artificial intelligence, in order
to create a price more efficiently.
While the buy-side is using new
tech-driven strategies, like low-
touch trading, to increase efficien-
cy and improve alpha generation.
And of course, to make these
strategies work, what they need
is liquidity – access to counter-
parties with the right bond or the
right price, at the right time. That
is core to the MarketAxess value
proposition, and why Smart Select
exists.
How has it been received by
clients?
AS: Smart Select is currently in
the pilot phase and has been rolled
|
M A R K E TA X E S S ]
out to around 20 clients so far, and
I’m pleased to say it has been very
positively received. I have found
that users are very intrigued in the
fact that by pressing the button
the system is highlighting the
appropriate dealers, and by hov-
ering over the selected names, the
system gives a reason as to why
they have been selected.
It has also been interesting to
see that users have found the
dealers are not necessarily the
ones they would have picked, for
various reasons, but Smart Select
is bringing those dealers to light
due to the data around historical
performance in specific bonds.
How does Smart Select fit in with
MarketAxess’ overall evolution?
AS: The evolution of MarketAxess
is very much about producing
innovative solutions to create
more liquidity for both buy- and
sell-sides, and that’s ultimately
what Smart Select is. We have
worked closely with the buy- and
sell-side to create more liquidity,
by matching inquiries to a dealer
who wants to price it, in a more
efficient manner, particularly
in light of the more challenging
trading environment that fixed in-
come participants find themselves
working in today.
Smart Select is a milestone in
the journey for electronic trading
in fixed income. It reflects our
ongoing efforts to harness more
machine learning, more artificial
intelligence, and more diverse
data sources to help build the
optimum trading environment for
all participants. And there is so
much we can still do – global fixed
income markets are unique, and
we’re still only in the early stages
of applying technology innovation
to how they work. It’s no exagger-
ation to say we’re excited about
what comes next.
Issue 61 // TheTradeNews.com // 23