[ I N D E P T H | B U Y - S I D E P R I C E M A K I N G ]
information leakage . Unless one restricts a request , your cares are advertised , albeit anonymously , to all users of a platform and there is a fee associated with expanding that network . Revealing cares in the market without any footprint is central to much of what the fixed income buy-side is trying to achieve – opportunity cost is the biggest challenge they face day-to-day , particularly in fixed income where instruments trade far less frequently .
“ One way of getting around that [ uploading cares without information leakage ] - and it ' s something that ' s been attempted a number of times in the market - is auctions or certain times of the day where there might be a liquidity aggregation ,” says Poole . “ You put orders into a platform at certain time and maybe there ' s an attempt to execute it at midprice that could help you reduce opportunity cost .”
“ On some of the platforms you can search by ticker and see what did not trade , which gives valuable colour . You can see that people have been looking for the offer in a certain credit and it hasn ’ t traded anything north of a million all day but people who have been looking for the bid have been able to sell in larger size . That suggests the bid is a bit deeper and if you ’ re trying to buy then perhaps what you need to do is try in smaller size . You can formulate a strategy without really leaking too much information .”
Aware of the desire for a more tailored approach to uploading cares , Bloomberg is set to introduce a new functionality to its all-to-all platform , Bloomberg Bridge , in the fourth quarter – allowing buy-side firms to post their indication of interest via axes anonymously . “ Bridge Axe will offer buy-side the opportunity to post axes anonymously to Bloomberg ,” says Paul Kaplan , global head of credit , equities and TRS at Bloomberg . “ If someone wants to engage on those axes , they will be able to go directly to that counterparty or they can choose to expand their inquiry to the full Bloomberg Bridge network .”
Data is king Central to the success of all-to-all and similar anonymous platforms , is data . Data is essential to buy-side confidence in price making , allowing firms to build a clear picture as to how and why an instrument will price to give them best execution – something they are expected to be able to prove thanks to Mifid II requirements .
“ If I go out and advertise that I ’ m the seller of a bond at 90 or 90.5 , I need to be able to capture alternative data to prove that that was in fact the correct level for the bond ,” explains Ninety One ’ s head of trading , Cathy Gibson .
Alongside the growing realm of all-to-all , new artificial intelligence-based tools have continued to launch aimed at giving traders a clearer picture of the market – ultimately giving them more confidence and autonomy over where things are pricing ( see pg . 32 for an in depth analysis of AI in fixed income ). Liquidity analysis tools such as Ediphy ’ s new Liquidity Checker that offers users real time notifications of shifting liquidity and solutions such as Wavelabs ’ eLiSA credit trading system that includes predictive pricing solutions for bonds based off of TRACE data in the US , have come to market as of late . Data remains paramount for equipping the buy-side with the information they need to correctly and confidently price .
“ What ’ s difficult for us as an active manager is knowing where larger size clears and that ' s the lack of data that ’ s always been the issue in fixed
“ There ’ s been an increase in the willingness and ability to leave latent liquidity in the marketplace to try to get things done in a slightly different way .”
MIKE POOLE , HEAD OF TRADING , JUPITER ASSET MANAGEMENT
14 // TheTRADE // Q3 2023