New Era For Fixed Income Trading

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August 15, 2017

By Cathy Gibson, Director and UK Head of FI Trading, Deutsche Asset Management

MiFID II is reshaping the bond trading landscape, imposing more transparency and tighter monitoring of the order execution process, but it is also a catalyst for technological innovation that the buy-side is keen to apply.

New regulatory instructions and guidelines are having a major effect not just on operational models, but on the development and application of new technologies to fixed income trading. The industry probably under-estimated the catalytic impact of Markets in Financial Instruments Directive (MiFID) I to equities trading in 2007, but the technological response to MiFID II has been immediate and the potential for major changes recognised.

There is a subtle, but important shift in definition of “best execution” contained within the European Union’s MiFID II compared with MiFID I from a commitment to take all reasonable steps to obtain best execution to taking all sufficient steps to obtain to best execution.

However, in practical terms, it won’t affect the trading processes already being implemented at Deutsche Asset Management. The more significant effects will be on the monitoring, testing and verification of trades, which will create a considerable administrative burden on the buy-side by increasing the amount of documentation it needs to compile and record.

Many investment firms are applying the transaction cost analysis (TCA) methodology used for equity trades to their fixed income operations – including Deutsche Asset Management. TCA is not required as proof of best execution under MiFID II, but among other things it is good way of capturing live market data at the point of execution. Ultimately, TCA in fixed income is and will remain below the quality of the equity offering because there is no consolidated type in fixed income. This is a significant information gap for a large sector of the fixed income market.

The European Securities and Markets Authority (ESMA) paper, published in April 2017, emphasises that firms should aim to achieve best execution, although it recognises that the intention will not always be attained on every occasion. Instead, we must institute a process that that can reasonably achieve best execution on an on-going basis, rather than obtain the best possible results on every single occasion. The key will be the ability to demonstrate and document the best execution process and show it can be monitored, assessed and rectified should any weakness be identified.

In addition, TCA and its variations do not just apply to trade execution: they are applicable along the whole investment process, including pre-trade price discovery, communication with portfolio managers, inventory checks and post-trade settlement and confirmation.

However, sometimes the focus is too much on the challenges the legislation imposes rather than the benefits. There will be an increased level of transparency for those bonds deemed to be liquid and increased visibility to our clients on exactly how best execution is achieved and monitored. Also, the increased data the regulators will receive will allow them to more closely monitor for market abuse, which is a positive for all market participants.

Regulation spurs technological innovation
Necessity is a great innovator and the changes in liquidity and market structure that recent and upcoming regulation has created has led to an explosion of Fintech innovation and the provision of an abundance of sophisticated and valuable services and products offered by third-party vendors as well as within buy- and sell-side firms.

It is essential to keep abreast of Fintech initiatives and what they can offer to enhance the fixed income trading process. The order delivery process is changing across all stages, with real-time information updates and higher quality data. Clearly, there is a trend towards more efficiency and accuracy that will further enhance trade execution for fixed income securities.

Some firms, such as Deutsche Asset Management, have already adopted new technology after carefully assessing their potential value. For instance, we now have higher quality pre-trade price and inventory discovery. We utilize open-trading platforms that give us the capacity to act as a price-maker, where we post selective axes and positions, and all participants enjoy access to rich sources of data.

We also use matching pools that enable us to trade with other market participations, achieving execution prices inside the bid-offer spread and it allowing us to trade leaving a minimal foot print in the market.

Trading in this way has the advantage of directly tapping liquidity, but it means that we must be especially vigilant and transparent about ensuring best execution processes are followed.

Buy-side takes the initiative
Buy-side bond traders are becoming ever more proactive about what they actually need from vendors and sell-side technology.

They regularly advocate their interests and communicate their requirements at conferences and through formal channels, for example to ESMA via the International Capital Markets Association . At Deutsche Asset Management, we believe in taking the initiative and help drive innovations and creative solutions to the challenges we face every day. Given that the vast majority of bonds now reside on end clients’ balance sheets and not with market makers it is a necessity to invest our time and resources in this space.

We have a constant dialogue with sell-side counterparties and Fintech companies, sharing concerns but also expressing our different motivations and objectives. Most especially, the buy-side wants ample liquidity, competitive pricing and non-volatile markets.

Multi-Asset Platforms For Singular Needs

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GlobalTrading

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August 15, 2017

By Edward Sanderson, Vice President, Advanced Execution Services, Credit Suisse

Sophisticated trading strategies, a shifting regulatory landscape and rising cost pressures are forcing firms to choose how best to integrate their dealing platforms.

Traders typically aim to integrate their platforms across the spectrum, from market monitoring to idea generation, trade execution, analysis and risk measurement. However, although the usual image is of a trader operating with a multi-screen setup, there are limits to what can realistically be monitored simultaneously.

Many trading strategies require dealing in multiple asset classes to better reflect their view in the marketplace, whether the strategy is macro-, quantitative- or arbitrage-based. In addition, screen real estate remains at a premium.

These pressures are driving a wider adoption of integrated automated platforms for different asset classes, notably to incorporate simultaneous trading in cash equities and futures.

A multi-asset platform can take several forms and indeed will rarely comprise a single solution. As a result of the varying requirements of a number of complex financial products, a multi-asset platform will typically be made up of disparate platforms that have their own specialisations. These become multi-asset by applying a veneer of technology or human management – and frequently a combination of the two – to enable them to work together.

Choosing the right platform
Platform selection is a matter of personal choice, and depends on numerous factors. Connectivity, product availability and individual experience are commonly cited as the most influential considerations, with one eye always kept on the overall cost and maintenance of the trading ecosystem.

Furthermore, the demands of the platforms are quite different between buy- and sell-side firms. The buy-side normally links to two or more brokers with the aim of using a consistent suite of tools that will connect to the relevant systems within their own infrastructure as quickly as possible.

In contrast, the sell-side aims to have one platform that can receive connections from multiple clients and enable the firm to manage cross-asset flow.

FIX is the predominant protocol for transactional messages between dealing platforms. Ancillary systems frequently use a combination of different methods, such as secure FTP of text files that are used for, among other things, static data and trade position information.

Although the traffic flowing through the system is FIX-based, other components are also often used to connect the buy- and sell-sides, that do not speak the FIX language. Moreover, the set of components that comprise platforms frequently include legacy applications, or applications that have been added through acquisition or “tactical” solutions, so the existing structures, and the roadmaps that led to it, are often convoluted, complex and confusing.

Regulation is also a key issue here. As all market participants increase their focus and resources on new rules and requirements, and as the pace of regulatory development accelerates, buy- and sell-side firms have to make adjustments to previously stable, workable platforms to ensure compliance.

In Asia in particular, the number of diverse regulatory jurisdictions across the region can add another dimension to the complexity in the design, implementation and maintenance of an automated system.

Restraints on automation
An alternative path, especially for buy-side firms, and if the costs and complexity are too great, is to emphasise the role of human agency. A lack of staff and capital resources might limit the ability to install new automated systems, while the difficulties of dismantling engrained and often impenetrable legacy systems might make firms unwilling to replace them. In any case, many firms, even those that deploy sophisticated automated trading systems, value the human element to generate ideas, gather market colour and control information leakage.

In addition, trade execution algorithms (“algos”) typically follow a specific set of rules, whereas a human trader has more flexibility to follow more complex and variable instructions. Certainly, algos are moving towards less rigid, formalised functions, but again this might not be to every firm’s taste or budget. Of course, a compromise for some investment managers is to pass over the trade execution process to a broker or sell-side agency desk.

Clearly, the state of the industry is in flux. Market participants have to adjust to a rapidly evolving regulatory environment while digesting and perhaps assimilating new technologies. The danger is that the new, expensive and disruptive systems might be overtaken and made redundant by even more sophisticated systems that adapt better to future regulatory changes and are able to facilitate trades more successfully.

There is no common set of requirements or functionality for platforms to aim at. It is likely that if such a standard did exist, it would become outdated faster than it could be maintained because of the pace and scale of changing requirements generated by regulation, products and technology.

Platform functionality at its very basic level is quite simple, requiring just product and transactional information – what to buy or sell, how many shares and at what price. However, the shifting landscape means that both buy- and sell-side firms must be flexible and prepared to embrace systems that work best now and that are likely to be sufficiently adaptable to function in the future.

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Simple Binary Becomes A FIX Standard

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GlobalTrading

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August 15, 2017

By Don Mendelson, Owner, Silver Flash LLC and Technical Architect, FIX Trading Community

SBE has led to both a technical and an organizational revolution for FIX and is increasingly being adopted throughout the financial industry.

For over two decades, FIX Protocol has been encoded on the wire in more-or-less humanly readable formats. The original FIX format, called tag=value encoding, is still the world-wide standard in trading messages. It was followed several years later by FIXML, which predominates in clearing. That was the state-of-the-art until it crashed into a contradiction of high performance trading.

Very simply, computers cannot operate directly on humanly readable character data. Rather, they calculate using binary numbers and data structures. Something had to change to avoid latency introduced by the unnecessary translation between character and binary data.

Several venues created proprietary message formats to solve the problem. But the FIX Trading Community is in the standards business. It would be to any trading firm’s advantage to have a FIX standard for binary messages rather than having to invest in supporting numerous proprietary formats. Therefore, the FIX organization launched a project to create such a standard. It was ultimately named Simple Binary Encoding (SBE).

SBE is a FIX standard—any existing FIX message can be encoded with it and gain some benefit of low latency processing. At the same time, it conveys the same business semantics that people are familiar with. The huge knowledge base that firms have of FIX messages and fields still applies. Software developers need to learn the details of the encoding, but business leaders can still rely on what they already know about applications.

Breaking down barriers to participation
The SBE effort led not only to a technical revolution for FIX, but also an organizational one. Although the FIX Trading Community has broad membership in the financial industry, it was seen by some technologists as a closed system. Many small trading firms and vendors do not have the resources to participate in a standards organization, but they can benefit from transparency and a way of making their voices heard. Therefore, the FIX Global Technical Committee (GTC) made a conscious decision to break down barriers to participation in technical standards development.

One decision was to make FIX technical standards projects open to the public in GitHub, the one-stop shop for open-source code. Projects are created there for new standards and for demonstration code to get developers started. Any software developer can obtain their own user ID from GitHub for free. They do not need to be members of FIX Trading Community, nor does the FIX organization need to grant them rights to see the projects.

That is as transparent as you can get. Not only that, but anyone can enter issues in the GitHub issue tracker to make corrections or request enhancements. They can even propose changes to standards or contribute new features in code, through what is called a pull request in GitHub.

Another aspect of opening standards is publishing them with clear legal rights to copyrighted material. FIX technical standards are published with Creative Commons Attribution-NoDerivatives 4.0 International License.

To summarize, the license says that anyone can republish the material so long as it is attributed to FIX Trading Community and the standard is not altered. (An altered standard is not a standard.) FIX demonstration code is open-sourced under the liberal Apache License, Version 2.0. It grants rights to developers to use and alter the code as they see fit, so long as they attribute it to the original author.

Development process
Each new FIX technical standard is developed by a working group that is formed by the GTC. Some of the groups, such as the High Performance Working Group, have a number of standards under their wing, so they are divided into subgroups. There is a subgroup for Simple Binary Encoding, as well as several other message encodings and session-layer standards under development. Each working group is supplemented by anyone in the world who wants to participate through GitHub.

Another important decision was establishing a documented process for developing and approving FIX technical standards. The process follows the proven industry trend of agile project development. Its most important principle is iterative development.

It is impossible to foresee every impact or realize every requirement at the beginning of a project. Rather, new information and requirements are discovered by doing. In the FIX process, a milestone is reached by publishing a release candidate, an interim draft of a standard. Each release candidate either adds features or refines the work of earlier iterations. In the case of SBE, it went through four such iterations before reaching final form.

Each release candidate is published on a FIX web site as well as in GitHub for a period of public review.

Typically, the public review period for a release candidate is 90 days. User comments may be entered either in a forum on a FIX site or in GitHub. They are taken as input to be considered for a possible next iteration.

Criteria to become a standard
When a working group is satisfied with its product, then it recommends promotion to draft standard. There are two requirements that a draft standard must meet to be accepted.

First, the public review period for a draft standard is extended to at least six months to make sure that all voices have been heard. Second, there must be at least two interoperable implementations of the proposed standard.

Different Flavours Of Self-Match Prevention

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GlobalTrading

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August 8, 2017

By Vaibhav Sagar, Senior Technology Consultant, Open System Tech

Brokerages need to customise their EMS to avoid crossing orders with the MPIDs on external trading venues.

One of the major compliance issues for broker dealer firms is to avoid crossing each other’s orders at a particular exchange. If both sides of the order are represented by the same market participant identifiers (MPID) and if this action results in a price movement the broker firm could face potential fines or even temporary suspension from trading for price manipulation.

Although each individual desk internally crosses transactions, orders from two different desks with the same MPID can reach and cross on the exchange. To avoid these scenarios, exchanges and other external trading venues provide an option to enable Self-Match Prevention (SMP) across an MPID. This SMP can be enabled with several configurations, as described below:

Simply cancel a sitting passive order: If an incoming aggressive order will cause a self-match with an existing passive order, the passive live order is cancelled first and then the new aggressive order will participate in the market and any open quantity will sit in the market.
Trade through the market and cancel a sitting passive order: If an incoming aggressive order will cause a self-match with an existing passive order, the aggressive order will first participate with other entities in the market and any open quantity will sit in the market and the passive live order will be cancelled.
Reject an incoming (taking) order: If an incoming aggressive order will cause a self-match with an existing passive order, then the incoming aggressive order will be rejected while the passive order will continue to be live in the market.
Trade through the market and self-match the rest: If an incoming aggressive order will cause a self-match with an existing passive order, then the aggressive order will first execute with other live orders in the market and only the remaining quantity will be self-matched and this execution is marked as an “internal trade”. Also, the remaining orders will remain live in the market.

This is the best of all solutions since it avoids cancellation of any live orders and hence creates fewer order management system (OMS), position and trade risk complexities.

However, the choice depends upon the flavour of SMP implemented by the destination exchange and also the flavour the client prefers. Each implementation has its own set of challenges.

In configurations one and two, which involves the cancellation of an active live order, there are OMS and position risk issues. Since the order is cancelled by the exchange, the OMS has to have a stated provision or else manual intervention is required for the order to be resent to the exchange at a later time. Until then, the cancelled order results in a position on the book and hence is an open risk.

In configuration three, where all new crossable incoming orders are rejected, the OMS or a human trader has to continuously keep track of when the other aggressive crossable order can be resent for execution. This again produces a scenario where positions cannot be squared off instantly resulting in positional risk.

In configuration four, since the orders can cross with each other, the challenge is how these orders which are marked as “internal trades” are reported for clearing. If these self-crossed internal trades are not reported for trade clearing, then the broker dealer needs to filter out these internal executions so as to avoid trade brakes.

In all cases, additional custom development in the execution management system (EMS) is required to handle self-cross executions.

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Plato Partnership: Addressing The Challenges For Successful And Cost-Efficient Block Trading

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GlobalTrading

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August 8, 2017

By Mike Bellaro and Nej D’Jelal, Co-Chairs, Plato Partnership

As the current trading landscape transforms, it will be critical for the marketplace to deliver continual improvement and provide innovative solutions that address investor concerns.

Recent years have brought some of the biggest challenges ever to be faced by the global equity trading marketplace, with the Markets in Financial Instruments Directive (MiFID) II arguably representing the greatest single challenge in a generation. Institutional equity markets are a complex ecosystem and these changes have had a particularly significant impact on the buy-side’s experience of trading in size. It was in response to these challenges that Plato Partnership was born more than two years ago.

At its core, Plato Partnership (Plato) is about anticipating how trading is going to change, what impact these changes will have on end-investors, and how it can deliver the most successful and cost-efficient solution for the marketplace. There is a notable shift towards block trading, a trend that has taken shape during the past 12 months and will continue to emerge, with volumes increasing markedly as we approach MiFID II implementation.

Working in partnership
Since its inception, Plato realised that cooperation across the value chain was essential. Plato has brought together asset managers and broker dealers in order to identify the issues in the market that are having the biggest impact on end-investors. Crucially, not only have we brought together collective views of the market but we have created the vehicle through which real change can be explored and implemented.

Today, Plato consists of a wide range of market participants, from the largest firms on both sides of the trade to newer entrants, infrastructure providers and suppliers. In March, it announced 15 new Plato partners, joining the 16 founding members from both the buy- and sell-sides. This breadth and depth of membership ensures we identify the pressing issues and bring creative solutions as quickly as possible.

Turquoise Plato for automated block trading
It was clear to us, given the performance benefits of block trading and MiFID II’s recognition of these benefits, that one of the strategic priorities was to produce an automated block trading mechanism.

We recognised in Turquoise an established, automated block trading mechanism in the form of block discovery. Turquoise Plato Block Discovery has matched over €18 billion since its 2014 launch, of which more than €14 billion or 78% has been matched since the September 2016 announcement of Plato Partnership’s cooperation agreement. Every month in 2017 has seen Turquoise Plato Block Discovery register volume highs.

These figures showcase the emerging shift towards increased block trading in the years ahead. This growth has in fact not surprised us and underpins the rationale behind Plato Partnership’s cooperation agreement with Turquoise.

While MiFID II represents one of the biggest challenges the market has faced in decades, and one that will have a profound impact on equity trading, a clear outcome will be a strategic move towards large-in-scale block trading. This shift can deliver significant performance benefits for end investors by delivering stronger implementation results and reducing market impact. The big challenge is to create a marketplace that is efficient and focuses on price impact and post-trade reversion.

Delivering successful block trading
The intention is to increase transparency, reduce trading costs, simplify market structure and support end-investors. We are working with Turquoise to develop a mechanism that allows users to call an event on demand for less liquid securities, including small and medium-sized enterprises (SMEs), a vital driver of growth in the economy. Delivering Turquoise Plato trading innovations for small- and mid-cap SME securities will contribute to a more attractive capital raising environment for growth companies.

Furthermore, Plato has signed a cooperation agreement with LiquidMetrix, a best execution specialist, that will enable us to research, design and implement a stronger methodology for assessing block trade performance. This will allow firms to assess the execution quality achieved by block trading between different block venues and other execution options.

A separate cooperation agreement with Trade Informatics PLIA will allow Plato members to raise standards and better understand counterparty risk, in turn strengthening best execution processes. This partnership also has Trade Informatics supporting the work of our MI3 research incubator as part of this collaboration through shared revenue, which will ensure additional research can be undertaken by Plato to provide further direction around market structure simplification.

Collaborative research
The MI3 research incubator is only now getting started, with its first piece of rigorous research due to be published in June. This is fundamental to our model – we bring together all parts of the marketplace to identify the most pressing problems we face, we commission independent research working with the academic community in order to design solutions, and we then work as a group to deliver the change that will work in practice as quickly as possible.

A key part of the collaborative approach is to offer the forums through which all market participants can come together to discuss the issues that have the biggest impact on their activity. The first of these forums is taking place in May with our MiFID II Question Time, where more than 250 people will gather to hear from leading minds in the market and address some of the critical questions being faced by the buy-side as we approach MiFID II implementation.

By taking part in Plato our members ensure they have significant influence in shaping our work, which will have a notable impact on the future of equity market structure in Europe.

Any organisation interested in becoming part of Plato Partnership can register their interest via the website at www.platopartnership.com

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Greenwich Associates : US Equity brokerage business down by 40%

By

Ian Rycott

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August 3, 2017

By Flora McFarlane.

Analyst firm Greenwich Associates has found that US equity brokerage market business has shrunk by nearly 40% since 2009. Despite the S&P 500 growing by three and a half times in the equity bull market since 2009, the effects of the boom in equity valuations have not been felt by brokers.

According to its recent study ‘Brokers Adapt to Shrinking Equity Commissions’, between Q1 2016 and Q1 2017, total US equity commissions dropped 13%, from US$9.7 billion to US$8.4 billion, contributing to the total 40% decline in the equity brokerage business.

The report, suggests that a combination of factors has led to the drop:

The steady increase in stock prices has led to asset managers favouring a buy and hold strategy;
Lower volatility contributing to lower turnover
Equity assets in the U.S. have been shifting into passive funds, generally turning over less frequently with lower commission rates;
A downwards trend in commission rates for most of the period

Commission rates, which had been on a steady decline since the abolition of fixed commissions in 1975, however, have stabilised and even been on the up over the past few years.

“Investors recognise the need to compensate their brokers for services like research and liquidity,” said Richard Johnson, author and vice president of market structure and technology at Greenwich Associates. “As a result, they continue to direct trading volume to higher-priced ‘high-touch’ trades executed through broker sales traders, which remains the dominant execution channel used by buy-side traders.”

©BestExecution 2017

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Trading China’s Bond Markets With Confidence

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GlobalTrading

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August 1, 2017

By Ee Chuan Ng, China Head of Sales for Bloomberg L.P.

In global markets currently characterized by political and economic uncertainty, China’s $9 trillion bond market presents a potential long-term investment opportunity for yield that is getting harder to ignore.

In the past, global investors have had limited exposure to Chinese bond markets, partly because of difficulty in accessing quotas to trade Chinese bonds and partly reinforced by a perception of the lack of transparency into the market.

All this however, is set to change as the world’s third largest bond market opens its doors to global institutions. Chinese government bonds are offering an increasingly interesting yield pickup against US Treasuries, in part driven by a deleveraging campaign that is causing yields to rise and credit spreads to widen. Further economic and financial reform could lead to market conditions that make it even harder for investors to stand on the sidelines.

Boosting Access

In the past few years, China has taken concrete steps to accelerate the opening of its vast bond market, with moves to make its domestic bond markets global.

Foreign institutional investors can now invest directly into China’s burgeoning interbank bond market via agency banks in China. New rules have made it easier to access onshore currency hedging markets and regulators are also working to make tax requirements more transparent to foreign investors. The recent announcement by the People’s Bank of China and Hong Kong Monetary Authority on the framework arrangement of the Bond Connect scheme is encouraging, and a positive step in making Chinese bond markets even more accessible to investors in the CNH markets.

Due to the increasing accessibility to China’s bond market, Bloomberg launched two parallel global indices earlier this year which include China bonds, offering investors a new approach to analyzing China’s domestic bond market. We were the first index provider to include China bonds in a global indices offering.

In March this year, it was revealing that the majority (59%) of offshore market participants in Singapore we surveyed say they are actively exploring to invest in China’s bond market, while 29% say they are already investing in the market.

This shows us that international fund managers are starting to acknowledge that Chinese onshore debt is bound to become a big part of global fixed income portfolios in the medium to long-term.

Tools for Fixed Income Investment

With the inevitability of Chinese markets opening, global institutions today need to understand the opportunities and risk this market presents. To do this, they will need transparency into the prices of bonds, reliable yield curves, economic indicators, trading analytics and measures of credit risk.

Sophisticated bond investors may take this for granted, but the ability to bring all these together in a single, seamless workflow for a developing bond market such as China’s poses numerous challenges.

In response to this need, we recently launched the Bloomberg ‘RMB Bond Suite,’ giving investors around the world the gold standard in China fixed income trading and investing. We believe the RMB Bond Suite is the industry’s most advanced set of fixed income tools for onshore and offshore investors tracking China’s bond markets.

The suite brings real-time pricing data from Inter-Dealer Brokers in China as well as the China Foreign Exchange Trading System (CFETS) and presents them to any investor globally via a tried and tested platform. The localization further enables us to customize yield curves, trading analytics, calculators to analyse PBOC’s open market operations, comprehensive credit analytics and a full news service covering this market in-depth.

As investors eventually move beyond sovereign quality Chinese Government Bonds and Policy Bank Bonds and to credit markets, investors will be needing a powerful default risk model that can analyse the credit health of a company by estimating its default risk over a period of time. Only with these tools can a bond investor gain a deeper understanding of the risks and opportunities at hand.

Bloomberg’s heritage in fixed income has given us a rich understanding of how markets evolve and the essential tools investors need to enter a new market. These set of tools demonstrate how technology is helping to bring transparency to China’s markets, boost efficiency in bond pricing and liquidity and determine risk.

Assessing Risk & Opportunity

It is becoming apparent to investors that market access to China’s bond markets is no longer an obstacle. PBOC’s Deputy Governor, Yi Gang, spoke last month at Bloomberg’s New York headquarters, stating that China will cut red tape, help create more hedging instruments and simplify tax codes to lure foreign investors to the domestic bond market. His message was resoundingly clear – China is serious about opening up its bond markets and providing access to foreign participation – and more will be done to facilitate access and spur inflows.

With new tools like the RMB Bond Suite, over time, data transparency will also no longer be a barrier for global investors to enter China’s bond market.
That said, there may still be investors who will prefer to wait on the sidelines as they look for more concrete steps by China to increase access, improve transparency and stabilize the yuan.

Market factors driving investment decisions are constantly volatile, and we expect this to continue, but at the right time, a confluence of the right factors will produce conditions for outperformance.

Foreign investors – who only make up 1.3% of China’s bond market – are realizing that China fixed income will inevitably be a part of global asset allocation. New York-based Neuberger Berman Group is considering launching a private fund with a focus on bonds after Fidelity International became the first global asset management firm to do so in China earlier this month. Firms who get in early into China’s bond markets will stand to gain.

Many major market participants are beginning to seize the opportunity. And those who have the right tools of the trade are best positioned to capture the opportunities offered by the world’s largest untapped debt market.

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DevOps for Financial Services Firms: Introducing Agility, Control and Efficiency into the Capital Markets IT Environment

By

Ian Rycott

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July 31, 2017

DevOps for Financial Services Firms: Introducing Agility, Control and Efficiency into the Capital Markets IT Environment

GreySpark Partners presents a report that provides financial services firms with guidance on how to introduce automation and flexibility into their daily operations to remain competitive within the industry. After the financial crisis, it became evident that institutions need to become stronger, more risk resilient and technology-savvy to curb industry-wide risk and market abuse and to foster transparency.

https://research.greyspark.com/2017/devops-for-financial-services-firms/

Enhancing Trade Execution With AI

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GlobalTrading

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July 25, 2017

By Vaibhav Sagar, Senior Technology Consultant, Open System Tech

A tech consultant reviews CLSA’s Eugene Kanevsky’s recent article about a new generation of trading algorithms.

In a well-argued article, Eugene Kanevsky shows how complex algorithms and machine learning-based artificial intelligence (AI) processes are helping stock trading firms make rapid decisions based on hard objective data, eliminating human emotions and biases.

Kanevsky, who is global head of electronic trading at CLSA, describes how his firm’s “ADAPTIVE” technology builds rules and identifies stock categories, then adapts in real-time as the significance of data fluctuates and trends shift. The system categorises stocks and predicts future price movements based on historic trends, short-time changes, market capitalisation and liquidity in order to automatically implement trading decisions.

If a stock is in one category today, it could be moved to another a few months later based on changing patterns. The process is constantly evolving and learning from itself.

ADAPTIVE creates a data science framework, and decision-making is conducted by a proprietary neural network that can read patterns and anticipate future price, volume, volatility moves based on pattern repetition.

Clearly, many brokerages are in a race to build the latest and best trading technology, providing tremendous career opportunities for quant and algorithm development experts. However, Kanevsky stresses that although AI machine-driven trading has an ever-increasing role due to its speed and continuous learning capabilities it still requires human intervention and monitoring.

Therefore, it should be considered as an aid to a sales trader rather than a replacement, an example of humans and machine working together to create greater efficiency and reliability.

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Buyer’s Guide: Sellside Cash Equities OMS and EMS — Broadening the Customer Pipeline

By

Ian Rycott

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July 25, 2017

Buyer’s Guide: Sellside Cash Equities OMS and EMS — Broadening the Customer Pipeline

GreySpark Partners presents a report reviewing eight third-party technology vendor Cash Equities OMS and EMS utilised by the sellside.

The vendor solutions surveyed for this report are:

Bloomberg’s Sell-Side Execution and Order Management (SSEOMS)
Eze Software’s EZE EMS
FIS’ Global Trading
FlexTrade FlexOMS and FlexTRADER
Horizon Software’s Platform for Automated Trading, Delta-1 Trading and Agency Trading
Itiviti’s Tbricks
QUIK’s OEMS
Ullink’s High-Touch and Low-Touch.

https://research.greyspark.com/2017/buyers-guide-sellside-cash-equities-oms-and-ems/

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By Flora McFarlane.

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