Bloomberg: No charge for buy-side fixed income trading

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October 26, 2020

Bloomberg has quashed rumours that buy-side traders are to be charged for fixed income trading in 2021. Buy-side traders had reported to The DESK that Bloomberg was planning to charge them for fixed income trading, effective as of 1 January 2021, on its multilateral trading facility (MTF) in Europe. Sell-side traders have separately reported a significant increase in charges across Bloomberg – between five and ten times – as services which were previously to be charged for within the fixed cost of a Bloomberg Terminal are being charged for separately.

“We do not charge the buy side today and nothing is changing in that respect next year,” said a spokesperson. “The fees for trading fixed income over Bloomberg’s MTFs only apply to liquidity providers (sell side).”

Any charge for investment traders’ execution would have been a marked departure from Bloomberg’s existing business model which has focused on buy-side firms paying only for the Bloomberg terminal, with services included within the package fee. Historically Bloomberg has only charged the sell-side fees for transactions.

However, it has increasingly branched away from this model in recent years, offering access to messaging and other services for non-terminal users, with additional services paid for separately. Concern about charges had led to concerns regarding additional costs beyond existing terminal charges.

One senior buy-side trader said, “My guess is people will push back [if they have already agreed next year’s fees] and say that any agreement needs to be renegotiated or restructured. My understanding is that they are getting in touch with various clients at the moment just to explain the changes, so until I have had that conversation I don’t want to come down on them like a ton of bricks.”

The current fee schedule that Bloomberg has published for 1 January 2021 sets out costs for trading all instruments, including credit, rates, credit default swaps, interest rate swaps, FX and equities. It states that for fixed income, equity, and FX trades, “the per-trade fees will be charged to those BMTF participants that respond to RFQs and orders” – which typically only includes the sell-side, or electronic liquidity providers. This model is in line with that of other market operators including Tradeweb and MarketAxess.

Under this model a fee per million of notional traded applies to European, Asian and emerging markets rates and credit, plus US rates. US credit is traded on a basis point fee per trade. The model differs for CDS based on the underlying. FX swaps are charged based on a fee per notional traded, but with an additional fee per single-leg trade or, for multi-leg trades a fee per leg for each credit default swap based on a third-party index or indices

Separately, sell-side sources have said that Bloomberg intends to begin charging broker-dealers for non-MTF associated services which were previously offered for free as part of the terminal costs. They have reported that fees will by five to ten times as a result next year.

“They are increasing their rate card [to the sell-side] by five to ten times,” said one sell-side source. “There have been various lobbying efforts at AFME and ICMA as – although no dealer has confirmed it yet – in all likelihood these costs will have to be passed on to the buy side.”

A senior buy-side trader noted that the impact of increased costs, or directly charging for trading costs, could boost rival platforms’ use.

“People might speed up rolling out Symphony or combining Symphony with Reuters Eikon or something similar,” he said.

©The DESK 2020
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ICE Data Services – Surveillance is only as good as the data that fuels it

By

Ian Rycott

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October 26, 2020

Passing the test on market abuse regulatory obligations will increasingly mean being “data fit”

By Anthony Belcher, Head of EMEA, ICE Data Services

When market volatility spiked dramatically as the COVID-19 pandemic rippled through markets in March and April this year, two big things happened.

First, the amount of message traffic from global exchanges exploded to levels not seen by even the most seasoned trading professionals. Through the ICE Consolidated Feed we tracked a doubling in peak daily message traffic to 276 million, compared with the daily peak in 2019. The main difference from the 2008 financial crisis was the suddenness of the surge. On March 9, Brent crude plummeted 30% as Saudi Arabia announced shock production cuts and the S&P Index fell by 7.6%, triggering circuit breakers.

Second, concerns over the potential for market abuse intensified. A survey from Duff & Phelps found that 32% of industry professionals thought market abuse risk had increased significantly during the pandemic, according to a report in City A.M., a London-based daily financial publication.

Market regulators were quick to issue fresh warnings about the need for participants to tighten up market surveillance, concerned that the shift to working remotely meant keeping tabs on trading activity would be more challenging. The UK’s Financial Conduct Authority issued guidance in May, reminding market participants of their obligations under the European Union’s Market Abuse Regulation (MAR) enacted in 2016.

Now, months on from those tumultuous weeks, the verdict is in on how the MAR performed in the three years since enactment. A report just issued by the European Securities and Markets Authority (ESMA) gave it a clean bill of health, declaring it “fit for purpose”.

That’s good news. But given the wild ride that markets went through earlier this year, it’s worth asking, now that the dust has settled and lessons are being learned, are your surveillance tools also fit for purpose?

Surveillance systems are ultimately, only as good as the data being fed into them. That’s because the market turmoil exposed weaknesses and gaps that caught some market participants unprepared. Was there the data at the right time, in the right format – and crucially, of the level of granularity required – to help ensure participants could fully meet MAR regulatory obligations?

If firms are running surveillance software and there are gaps in the tick data being used – thanks to dropping packets, for instance – then true depth of book isn’t being reflected and users can’t match what’s presented for surveillance purposes with what actually happened. The implications for being able to detect or reveal instances of spoofing, or layering – two practices in regulators line of sight– are obvious.

Meeting surveillance obligations is also about avoiding breaching threshold limits. Given this, being able to capture data every millisecond or less is essential during huge spikes, in order to stay on top of what’s happening.

Capacity is also an issue. Being able to withstand the kind of large message volume levels seen during the pandemic and storing the data are key elements of building the resilience market participants need. Moreover, standards will likely rise around the need for data that is properly normalised and stored in the cloud so it can be easily accessed and re-used.

Being able to rely on these capabilities is at the heart of any effective surveillance system, particularly at a time of heightened regulatory scrutiny. Given what we saw during the pandemic, regulations may well evolve from requiring surveillance to be conducted on a T+1 basis to more real-time. Firms will have to be able to identify new threats and upgrade their systems accordingly.

We already see surveillance system technology evolving, with some firms using automated monitoring of signals and alerts, as well as AI and machine learning to analyze them. Market surveillance vendors rely on level 2 market data from ICE Data Vault to feed their surveillance programmes. A key differentiator here is that the data, taken from multiple sources and in multiple formats, is normalized by ICE to allow AI and machine learning to extract more intelligent insights.

Key takeaways:

Covid-19 market turmoil exposed gaps in the availability of granular data for helping meet market surveillance regulatory obligations
Having the right data, at the right time, and in the right format, is now increasingly essential to meeting the EU market abuse regulations

Learn more about ICE Data Services’ deep tick historical data accessible via the cloud here.

© 2020 Intercontinental Exchange, Inc. This article contains information that is confidential and proprietary property of Intercontinental Exchange, Inc. and/or its affiliates, and is not to be published, reproduced, copied, disclosed or used without the express written consent of Intercontinental Exchange, Inc. and/or its affiliates. This article is provided for informational purposes only. The information contained herein is subject to change and does not constitute any form of warranty, representation, or undertaking. Nothing herein is intended to constitute legal, tax, accounting, investment or other professional advice. Intercontinental Exchange, Inc. and its affiliates, makes no warranties whatsoever, either express or implied, as to merchantability, fitness for a particular purpose, or any other matter. Without limiting the foregoing, Intercontinental Exchange, Inc. and its affiliates makes no representation or warranty that any data or information (including but not limited to evaluations) supplied to or by it are complete or free from errors, omissions, or defects.

Covid-19 shocks will continue to shape FX markets

By

Lynn Strongin Dodds

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October 23, 2020

Ken Monahan-Greenwich Assocs — Ken Monahan, Greenwich Associates

The structure of foreign exchange markets may have been permanently altered by the global pandemic, according to a new study – Ad Hoc Responses to COVID Shock Will Continue to Shape FX Market Structure – from consultancy Greenwich Associates.

“Though the pricing and the flows are returning to normal, the way in which those prices are discovered and the flows are channelled have shifted significantly during the COVID-19 pandemic,” said Ken Monahan, author and senior analyst at consultancy Greenwich Associates.

He added that the pandemic rattled FX markets, interrupting market participants’ access not only to liquidity, but also to basic workflows that were upended by the sudden shift to working from home. “The good news is that the market structure was flexible enough to accommodate rapid changes in execution methodologies and other areas, allowing market participants to adapt on the fly,” he added.

Monahan notes that the pandemic triggered increased volumes through single-dealer platforms and voice trading as investors pointed to relationships with dealers and others in the forex market as increasingly important as perceived liquidity declined.

FX investors also increasingly broke up larger trades and delayed the execution of trades, behavioural shifts which many said will likely last once the global crisis passed..

Nearly 20% of the 147 forex investors polled globally said they increased their use of voice trading during the pandemic, which the study called “amazing in context,” because the FX markets are among the most electronic across the world.

Another significant finding was that 67% of respondents pointed to relationships within the FX market. “This is perhaps also a healthy reminder that even in a market as disaggregated and electronic as [forex], individual relationships between firms and between people are still the basis of all business,” Monahan said.

However, while many investors moved from the electronic to the phone, the use of algorithms was also on the rise during Covid-19. The study found that 38% will increase their use of algos as result of their Covid-19 experience while only 11% said the higher level of voice trading would continue, and 10% said delayed executions of trades would likely persist.

“Firms were very reliant on relationships, but they were also using every tool in the toolbox,” Monahan said.

©BestExecution 2020
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JP Morgan and Tradeweb execute first electronic swaps against gilt futures

By

Lynn Strongin Dodds

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October 22, 2020

Bhas Nalabothula, head of European Interest Rate Derivatives at Tradeweb.

Tradeweb Markets, an operator of electronic marketplaces for rates, credit, equities and money markets, has become the first trading venue to facilitate the electronic execution of Sterling Overnight Index Average (Sonia) swaps against gilt futures for institutional investors.

The transaction was between Capula Investment Management and JP Morgan which acted as a liquidity provider.

Gilt future are deliverable derivatives contracts based on baskets of UK government bonds which enable market participants to hedge or gain exposure to GBP interest rate risk. A swap versus. future transaction, also known as an invoice spread, is a simultaneous purchase/sale of a futures contract against a spot starting or forward starting interest rate swap.

Historically, invoice spreads would be traded using Libor as the pricing basis for the swaps leg of the transaction. However, with the clock ticking for the phasing out of Libor by the end of next year, UK regulators are pushing for UK debt and derivatives market to accelerate their transition to the Sonia risk risk-free rate (RFR) designated by the Bank of England.

“The launch of Sonia invoice spread trading on our platform adds transparency and efficiency to the execution of these packages,” says Bhas Nalabothula, “Together with JP Morgan, we continue to build on our track record of collaborating with clients to advance electronic trading of interest rate swaps.”

Kari Hallgrimsson, co-head of EMEA rates trading at JP Morgan, adds, “This is an important step in the development of the Sonia derivatives market, and demonstrates our ability to lead the benchmark transition for sterling interest rate swap contracts.”

©BestExecution 2020
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European Women in Finance : Alyona Bulda : Expecting the unexpected

By

Lynn Strongin Dodds

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October 22, 2020

Alyona Bulda, head of the Global Exchange Division at Exactpro talks about staying the distance, keeping calm and helping clients navigate.

What is your role at Exactpro and how has it evolved over the past ten years?
I am responsible for the Global Exchange Division at Exactpro. Exchanges, clearinghouses and other financial market institutions using our software testing services are located in more than 20 countries on all six continents. The geography of the division projects spans from London to Johannesburg, from Abu Dhabi to Sydney, from Osaka to Jersey City.

Right after graduating from university, I joined Exactpro at an entry-level position of a junior QA Analyst. Shortly after that, I was given the responsibility to lead a team, and later – a project. While successful projects have led to progression in the company, I’ve also experienced an evolution in terms of expertise. Exactpro is a software testing business targeted at technologically and functionally diverse market infrastructures. Today my team may work with low-latency trading platforms, and tomorrow we may deal with sophisticated post-trade systems. Along with the business areas, technology is yet another dimension, and over the years I have become an expert in more domains.

In general, what type of research have you undertaken?
My research interests lie within the software testing domain. We test complex technology platforms, and this task not only requires exhaustive technical knowledge, but also an outlook over the broader technology landscape. To keep our competitive edge, we support our software testing practice by research in the areas of low-latency and high-throughput fintech systems, artificial intelligence, and distributed ledger technologies. It is also extremely important for me as a leader to involve other people in the research. These efforts result in different forms: research papers, industry reports and use cases, as well as vision papers.

What has been the impact of Covid-19 on your company and what skillsets have you needed to navigate through the current environment?
The lockdown did not bring a dramatic change to our way of operation – our pre-pandemic model was to have 1-2 people on client premises organising the remote work of the offshore development and testing teams. The only change was that it is now performed from home rather than from offshore offices.

Navigating through the difficulties of the pandemic required the understanding that people are a crucial component of what we do, so I started to pay more attention to the overall well-being of the team, while making sure the client gets all the thoroughness they had before and even more – given the dramatic increase in market transaction flows. From the skillset perspective, it is just the ability to stay calm, be agile and tolerant as everyone is adapting to the new environment in their own way, and just being there to help whenever it is needed.

How has the pandemic impacted the industry and what trends do you think it has accelerated?
The pandemic brought a better understanding of the inevitability of disruptions in face of uncertainty. This accentuated the importance of what we do to help our clients prepare for the unexpected – simulating heavy transactional load and outages to identify points of failure in critical financial services infrastructures.

How did the firm cope with remote working or was that part of the culture already?
Agility is among the core principles that we follow at Exactpro. As the financial institutions incorporate the Agile approach, it is necessary to follow its essence rather than mimic the procedures. Strategically, we do not overestimate the benefits of co-location. Instead, we foster system analysis skills in our people and value software testing specialists with critical and independent thinking. This mindset helps us to stay operational and efficient throughout the times of the ‘new normal’.

Aside from Covid, what are some of the other key challenges that the industry faces and what do you think will be the solutions?
As the world becomes more complex and unpredictable, technology-dependent industries reflect this through a substantial increase in systems’ complexity, data volumes and automation. Enhancing the platforms with strong data analytics capabilities raises the question of finding a legitimate way to harness the data and streamline the innovation without overly relying on automation and delegating decision-making to algorithms.

To address this challenge, the industry needs to critically assess the implications of new technologies and set its mind to always prepare for the worst scenario, use and re-use data, and apply smart analytics to help humans make responsible decisions.

I see you grew up in Uzbekistan and then moved to Kostroma in Russia. What brought you to London?
The UK market is the biggest for Exactpro. To provide a better service for our clients, it’s crucial to know their business culture, their ways of operating and the overall industrial context of their work.
I moved to London in 2016; by then we were engaged in several trading and post-trade projects, so I felt the need to be present on-site, closer to our clients’ business. For me, it also became a perfect opportunity to get immersed in the British culture.

Was this the career you envisioned?
Never. I thought I would become an engineer in the local manufacturing industry, and I have never expected my career journey to bring me to Sri-Lanka, the US or Australia.

When I graduated with a MSc in CAD systems from Kostroma State Technological University, it was difficult to find a job – most companies required work experience. Luckily, I was invited for an interview at Exactpro where my path in the fintech world began. From my first days at the company I understood the value of responsibility, and it has governed my subsequent career path ever since.

What was the reason for staying with Exactpro after the buy-out from the LSEG?
The decision was driven by my aspiration to follow the principles that we’d developed at Exactpro in its early days – striving to build a software testing focused business, which was founded on the concept of independent testing. When in 2018 our management team agreed on the buy-out from LSEG, I moved from the Group to Exactpro with the rest of the team.

How does Exactpro support and foster success with respect to diversity and inclusion?
At Exactpro, we do our best to treat everyone fairly. We stay focused on providing the necessary growth opportunities for our staff. Our ideology is that the best software testing instrument is the human brain, and our business benefits from diversity of thought and opinion.

At Exactpro, women make up 43% of the company’s management, with women holding the roles of CCO, CEO of our entity in Georgia, marketing director, heads of the risk management practice, HR and accounting, and heads of three out of eight technology divisions. Women lead Exactpro’s two biggest development centres in Kostroma and Saratov. Women researchers contributed to over 80% of peer-reviewed research papers on AI, DLT and software testing authored by Exactpro, with 12% of papers authored by women only.

Are there differences between attitudes in the East and West?
From my perspective, yes, there are. I’m half Ukrainian and half Tatar, and from early childhood I was exposed to different nationalities, religions and mentalities, and I was lucky enough to see the beauty in these differences. Knowing, understanding, and respecting these differences has always provided me with a different perspective in difficult situations, enabling me to move forward and drive change.

Working at Exactpro, I was able to travel across multiple client locations globally: New York, Abu Dhabi, Milan, Colombo, Sydney. This experience helped me feel the differences between Eastern and Western cultures and use their beauty to navigate through business relations in multicultural teams.

How have things changed in terms of diversity and career progression since you started working? Did you face any challenges?
From the very inception, Exactpro was built to be a company where we would love to work. There were just around 15 of us, quite diverse in terms of nationality and professional background. As the company went through significant growth, we experienced challenges to scale up our original people-first attitude, but even now that we are over 600 people, the company retains its flat organization structure. Such hierarchy, associated with a culture of individual responsibility and ownership of the company, resonated well with me, so, gradually, I started to perceive responsibility as a value rather than a challenge.

The specifics of what we do as software testers suggest that we must challenge the established order and be assertive, which undoubtedly helps to build confidence and independence in our female employees, resulting in our management team being gender-diverse.

What further progress needs to be made?
Our diversity-related figures randomly move in different directions, reflecting individual choices and performance. We cannot predict what they will be for each quadrant in the next year – a good indicator that the company culture truly results in equality of opportunity and does not discriminate in favour of any group.

©BestExecution 2020
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TORA launches into fixed income

By

Ian Rycott

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October 22, 2020

Global consultancy & analyst firms have called for innovative approaches to trading desk technology in fixed income. Now, David Tattan, Managing Director & Head of European Sales says TORA’s Order / Execution Management System (OEMS) has the capability to revamp bond trading.

What does TORA’s move into fixed income mean for traders?

The TORA OEMS now allows investors to trade across global fixed income sectors from government bonds, to corporate bonds and emerging markets.

Our new bond trading capability sits alongside our long standing functionality to trade fixed income futures and options, including futures on interest rate swaps and fixed income ETFs. We support a range of trading protocols as you would expect from request-for-quote (RFQ) to all-to-all trading. We have broad connectivity across platforms.

How will the TORA trading system specifically appeal to the fixed income community?

The fixed income community has long been familiar with the concept of order management systems (OMSs) and in recent years they have seen the appearance of fixed income execution management systems (EMSs) as the bond market has become increasingly electronic. They are also familiar with onsite OMS implementations. At TORA we offer an all-in-one trading system with all execution management and order management functions in the same system. This means a significant increase in day-to-day efficiency as the traders, portfolio managers and operational teams are all working from one holistic system.

Our technology includes both advanced auto routing functionality and execution analysis, both of which are available in the OEMS for fixed income. As the market develops then this type of functionality will become essential for FI traders.

The public discussion of whether to choose EMSs or OMSs seems to be one that continues to circle the fixed income space. What are your views on this?

The split between fixed income EMS and OMS technology has not been demand-driven. It was legacy technology driven. The terms EMS or OMS is becoming less relevant and having a single system with both is increasingly an advantage.

How does TORA support data-driven trading?

Our OEMS allows traders to stream data into the system via API and build data-driven auto routing rules. These can allow the trader to direct orders to certain venues or counterparties based on historical execution outcomes.

What impact does a data-driven approach have?

It increases clarity. The fixed income market has changed considerably since the Lehman crisis. Many things have changed including how investment banks hold inventory and the channels in which bonds are trading. Determining smarter ways to interact with these venues forces the trader to be more data driven.

Using spreadsheets, conversation and messaging to transmit orders between trader and PM increases the chance of misinterpretation. This ultimately reduces efficiency from the start, whereas data-led communication increases efficiency.

Liquidity in fixed income can look very different based on an investment firm’s fund and investment profiles. Being able to represent your own activity with proprietary data is therefore important for portfolio managers and traders. A lot of firms pump their own analytics into their OMS to enhance the data within the system. They can do this via API, which many of our clients do, and that is key to the enrichment of the investment process.

In terms of market volatility, as the market becomes more quant-based, speed is also increasingly important. Your trading system must connect to third party signals via API. Having a system like TORA, which is well suited to active traders and has very good APIs, means clients can easily connect our system into the data and analytics tools that they use to support their trading today.

So you see analytics and automation as the natural outcomes?

Analytics puts increasing amounts of actionable information on the trader’s dashboard or blotter to give them an edge at the point of execution. Automation takes repetitive tasks away from the trader where possible to free him/her up for value-added items. This could be designing auto-routing rules to send low touch orders based on different criteria, removing workflows to avoid re-keying data and full straight through processing (STP) from portfolio decision making, to re-balancing, to execution and all post-trade processes.

There is space in the market for full automation for highly liquid bonds like Treasuries which have a deep market. However, you can increase automation for many other instruments, even the less liquid ones, by creating various ticket defaults and then having a trader make the call of how to execute the trade.

Which investment managers might be drawn to TORA?

TORA appeals to large and small asset managers with a varied asset class remit. Our cloud-based system gives clients a clear advantage in the work from home environment, instant login access prevents latency, operations run smoothly and in real time with all the features and functionalities a trader is accustomed to, whether they are working remotely or in the office.

Larger asset managers like our broad coverage of asset classes and having order and execution management in one single system. Smaller specialist asset managers also like the combined OEMS, but also see the fact our technology is cloud-based as an advantage because it is easier to implement and prevents having to implement multiple systems.

What opportunity do you see in the fixed income space for TORA?

We believe there is considerable demand for strong fixed income trading systems to improve trader efficiency and also take care of downstream operational requirements such as allocations, risk-controls and position keeping.

www.tora.com

TOP OF PAGE

MeTheMoneyShow – Episode 23 (M&A: Liquidnet & BIDS Trading)

By

Ian Rycott

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October 22, 2020

Dan Barnes and Terry Flanagan discuss the recent M&A activity over Liquidnet and BIDS Trading.

Me The Money Show Episode 23 from Markets Media on Vimeo.

©Best Execution & TheDESK 2020

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ISS LiquidMetrix rolls out new TCA product

By

Lynn Strongin Dodds

-

October 21, 2020

Mark Ford, General Manager, LiquidMetrix.

ISS LiquidMetrix, a division of Institutional Shareholder Services, a provider of transaction cost analysis, execution quality and market surveillance tools, launched a new TCA product, LiquidMetrix 2.0, that re-imagines best execution analysis for today’s market structure and regulatory reporting needs.

According to the company, increased regulation, and the speed of technological change in financial markets over the last few years have led to increased complexity in market structure and trading. This has placed more emphasis than ever before on managing execution quality and cost transparency for both assets managers and their brokers.

LiquidMetrix 2.0 incorporates the latest in visualisation, analytical and data mining techniques, providing a set of tools capable of managing the best execution needs of buy and sellside clients globally.

LiquidMetrix 2. includes a wide range of features including a new web-based framework for measuring and analysing the interaction of trading strategies with markets to identify the sources of trading costs.

It has also enhanced the user experience by replacing rows and columns of data with interactive charting. New charts and other visualisations allow clients to quickly understand their transaction costs and to assess why some trading strategies are more cost effective than others.

In addition, it offers new analytical measurements including peer group and pre-trade cost estimates using new machine learning methodologies.

Mark Ford, LiquidMetrix General Manager said, “TCA 2.0 represents another innovative milestone for LiquidMetrix as we again provide an industry leading service that gives real value to clients in assessing trading performance.”

Highlights from Asia Pacific Trading Summit

By

GlobalTrading

-

October 21, 2020

The Asia Pacific Trading Summit, the largest one-day electronic trading event in the region, was held on Tuesday, October 20, 2020. Delegates attended in person and via live streaming.

This one-day, electronic event convened more than 700 key personnel of the institutional trading industry to provide thought-provoking, forward focused insights through an interactive programme.

One featured panel was “Is COVID-19 Leading to a Paradigm Shift on the Trading Desk and Trading Operation?”

Panelists were Tristan Baldwin, Head of APAC Equities, Liquidnet; Stephane Loiseau, Managing Director, Head of Prime Sales & Execution – Asia Pacific, Equities, Derivatives & Prime Services, Societe Generale – Global Markets; Raj Mathur, Co-Head, Advanced Execution Services (AES), APAC, Credit Suisse; and Francis So, Co-Chair, Asia Pacific Steering Committee, FIX Trading Community, and Head of Trading Asia Pacific, BNP Paribas Asset Management. The moderator was Benny Yip, Co-Chair, Asia Pacific Exchanges and Regulatory Subcommittee, FIX Trading Community, and Vice President, Global Client Development, Hong Kong Exchanges and Clearing Ltd.

Panelists discussed aspects of the “new normal” under COVID, such as:

Changes brought by the new technology and flexible working conditions, which are here to stay.
A more flexible work environment is expected to result in both talent retention as well as increased diversity in the trading space.
Time savings brought by less travel open up opportunities to address other trading issues such as transaction cost analysis, which may not have been a primary focus.
Challenges that still to be addressed: Compliance and supervisory framework post-pandemic; adjustments made in policies and procedures; technology of split teams; adjustments to new regulatory requirements.

The question was raised of how to keep a team cohesive in BCP mode. Panelists raised the following points:

Focus on processes more tightly;
It’s easier for established teams to stay cohesive; newer teams were more difficult to keep on same page.
Rotation of groups is needed to achieve the necessary coverage and flexibility at the same time.
Strike a balance between work and family life.

Silver linings of COVID:

Renewed emphasis on technology.
Time savings from less travel, which can allow for more attention on the client. Seeing clients digitally can be just as personal as in-person and it’s easier to get people in the “room”.
Talent retention: flexible work-life balance should be helpful, especially in Asia where it is not typical to work from home.

BlackRock to Launch Aladdin Climate

By

Markets Media

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October 21, 2020

Larry Fink, chairman and chief executive of BlackRock, said sustainability will be a tectonic shift in the industry for years to come as the fund manager will be adding more environmental, social and governance data to Aladdin, its technology platform.

BlackRock reported in its third quarter results today that it had $129bn (€110bn) of quarterly total net inflows with positive flows across all regions, investment styles – both active and passive – and product types.

Larry Fink shares his insights on BlackRock’s Q3 earnings results https://t.co/k7QXvP8EnX pic.twitter.com/B2CQfcAwTO
— BlackRock_News (@BlackRock_News) October 13, 2020

Fink said on the results call today that the net inflows represent 7% annualized organic asset growth in the quarter and 9% organic base fee growth led by fixed income, sustainable investments and exchange-traded funds.

Sustainable investments

He continued that BlackRock manages more than $127bn in sustainable products and the firm stands by its ambition to reach $1 trillion by the end of the decade. BlackRock has about 125 sustainable iShares ETFs with more than an aggregate $50bn in assets, as well as 67 active sustainable products.

“The demand for sustainable products has accelerated and we had inflows of $8bn in the third quarter,” said Fink. “This brings the year-to-date total to $25bn which is more than double all of last year.

Fink said that as a result BlackRock is investing in technology in order to be able to quantify the impact of ESG investing.

He added that one of the structural trends in the the industry is the demand for a unified enterprise and risk management platform like Blackrock’s Aladdin. The platform already has 1,500 ESG metrics and the firm wants to expand this data.

“We are creating Aladdin Climate,” said Fink. “Our ambition is to have a sustainability overlay in everything we do.”

Fink continued that investors across the board believe in climate change. For example, products in Europe do not see real flows without a sustainable lens and clients in Asia are also discussion ESG strategies.

More than 50% of the firm’s total flows were driven by clients in Europe and Asia.

Active strategies

BlackRock had a record $10bn of net inflows into active equities in the third quarter, which was the sixth consecutive quarter of inflows.

Fink said: “This was the strongest performance we have seen in active with 80% of equities and 87% of fixed income outperforming benchmarks over three years.”

Assets under management of $7.8 trillion at September 30, 2020. Source: BlackRock

Fixed income

Fink continued there was strong demand for fixed income with $70bn of net inflows, including a record $20bn into fixed income ETFs in the third quarter.

“We captured 40% of industry flows into fixed income ETFs,” said Fink. “We believe it will be a multi-trillion dollar market in the years ahead.”

Consolidation

Last week Morgan Stanley announced the acquisition of Eaton Vance in the latest merger in asset management.

Gary Shedlin, chief financial officer of BlackRock, said on the call that it was not a surprise to see mergers accelerating due to the pressure on fees, the need to invest in technology and the requirement to provide global insights and products across asset classes.

“Other firms are hoping to create what we already have,” he said. “We can benefit from the disruption and provide a beacon of stability.”

Shedlin continued that BlackRock was focussed on maintaining its existing strategy and would only consider deals that are accretive to organic growth.

“We have also been using our balance sheet to take stakes,” he added.

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Passing the test on market abuse regulatory obligations will increasingly mean being “data fit”

By Anthony Belcher, Head of EMEA, ICE Data Services

Alyona Bulda, head of the Global Exchange Division at Exactpro talks about staying the distance, keeping calm and helping clients navigate.

Global consultancy & analyst firms have called for innovative approaches to trading desk technology in fixed income. Now, David Tattan, Managing Director & Head of European Sales says TORA’s Order / Execution Management System (OEMS) has the capability to revamp bond trading.

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