Specialised technology can bring flexibility and efficiency to high touch, operationally intensive derivatives markets.
While electronic trading has transformed many areas of financial markets, a number of complex Over-the-Counter (OTC) workflows remain fragmented, manual and operationally intensive. As institutions seek to improve efficiency without sacrificing flexibility, there is growing demand for specialist technology that connects liquidity, execution and operational processes.
Workflow automation will be discussed this week at the Fixed Income Leaders Summit Europe, specifically at an October 13 buy-side roundtable that will include OTCX, a financial technology company and regulated execution venue for OTC derivatives and structured products.
Ahead of FILS EU, The DESK caught up with a quartet of top OTCX executives — Nicolas Koechlin, CEO & Founder; Nicholas Stephan, CEO Americas; Nicholas Leib, Head of Product; and Alex Muirhead, CTO — to learn more about the evolving landscape.
How have OTC markets advanced in recent years in terms of technology, efficiency and electronic trading, and how does the evolution compare with that of listed markets?
Nicolas Koechlin, CEO & Founder: Electronic execution has expanded across many asset classes, market data is more accessible and firms have access to a broader range of tools supporting pricing, execution and post-trade processing.
However, OTC markets have evolved differently from listed markets. Listed venues benefit from highly standardised products and centralised liquidity, whereas OTC markets remain more diverse, relationship-driven and often centred around complex risk transfer. As a result, success cannot simply be measured by the percentage of trades executed electronically.
The industry has made huge progress in electronification. The next challenge is making the workflow around the trade as efficient as the execution itself. We believe the next phase of evolution is less about moving more trading onto screens and more about modernising the workflows that surround the trade. Institutions increasingly want technology that helps them access liquidity, execute risk and operate more efficiently, while retaining the flexibility required for complex OTC markets.
Which parts of OTC markets remain high touch and operationally intensive, and why?
Nicholas Stephan, CEO Americas: The most complex OTC workflows remain highly dependent on expertise, communication and coordination between market participants. This is particularly evident in areas such as interest rate derivatives, swaptions, OTC options and structured products, where transactions often involve bespoke risk profiles, multiple counterparties and significant information exchange.
Much of the industry’s electronification to date has focused on the point of execution itself. While that has improved transparency and efficiency, many pre-trade and post-trade processes remain fragmented across voice, chat, email and multiple internal systems.
High touch is not the problem — the problem is when interaction is surrounded by fragmented and inefficient processes. Thus we believe the next opportunity lies in reducing the operational friction around workflows. Technology should help market participants discover liquidity more efficiently, manage information more effectively and automate manual processes, while preserving the relationships, judgement and flexibility that remain essential to OTC markets.
What is the evolution of OTC markets currently? Is it advancing slowly? What catalyst might speed up the advance?
Nicholas Leib, Head of Product: The market is continuing to evolve, although not at the same pace across every product or workflow. Standardised activity has generally progressed faster, while more specialised markets require solutions that can accommodate greater complexity.
The biggest catalyst for the next phase of evolution will be changing client expectations. Buy-side firms are under increasing pressure to improve efficiency, access liquidity more effectively and achieve greater interoperability across their technology stack. They are no longer looking for isolated tools. They want connected workflows.
This is driving a shift in industry priorities. The focus is moving beyond execution alone and towards creating seamless links between liquidity discovery, dealer interaction, execution and post-trade processing. Firms that successfully connect these stages of the workflow will accelerate adoption far faster than those simply introducing additional functionality.
The next wave of innovation will come from connecting workflows rather than simply adding more technology.
What are the challenges specific to workflow fragmentation in OTC markets?
Nicholas Stephan, CEO Americas: One of the clearest examples of workflow fragmentation today is liquidity discovery. In many OTC derivatives markets, valuable information remains dispersed across chat messages, email conversations, voice discussions and individual dealer channels.
This creates inefficiencies for buy-side traders, who often need to monitor multiple sources simultaneously to gain a complete view of available liquidity. The challenge is not a lack of information. The challenge is bringing that information together in a way that supports better and faster decision-making.
This is one of the reasons we’re launching OTC Axe. We saw an opportunity to help clients aggregate dealer axes into a single workflow, making liquidity easier to discover, compare and act upon. We believe the future is not simply about delivering more information. It is about making liquidity more visible, accessible and actionable.
What are the challenges specific to operational complexity in OTC markets?
Nicholas Leib, Head of Product: Operational complexity exists because many OTC markets are genuinely complex. Swaptions, package trades, structured products, unwinds and other specialist workflows often involve requirements that cannot easily be accommodated within standardised technology models.
As markets evolve, firms increasingly need solutions that adapt to the way they trade rather than forcing them into rigid workflows. This is particularly important where specialist products, bespoke structures or unique execution requirements are involved.
Complexity isn’t going away — the opportunity is to manage it more intelligently. At OTCX, we partner with both buy-side and sell-side participants to understand how their workflows operate in practice. Whether through tailored execution workflows, bespoke integrations or specialist functionality, our objective is to help clients modernise complex trading processes while maintaining the flexibility needed to support real-world trading activity.
What is the role of technology, including AI, in the evolution of OTC markets?
Alex Muirhead, CTO: Technology’s role today is increasingly centred on integration. Institutions don’t want to leave their existing workflows to access liquidity or execution services. They want those capabilities embedded within the systems they already use.
This is why our integration with BlackRock’s Aladdin platform is so significant. Mutual clients can access OTCX pricing and execution capabilities directly within their existing investment workflow, helping streamline the process from price discovery through execution and post-trade processing.
AI also has considerable potential, particularly in helping firms navigate growing volumes of market information and automate repetitive tasks. However, AI is only as effective as the workflows and data that support it — giving AI a fragmented workflow is like hiring a brilliant employee and only giving them half the information they need to do the job.
Before organisations can fully realise the benefits of AI, they need connected processes and structured, accessible information.
What is the enduring role of personal relationships and human expertise in OTC markets?
Nicholas Stephan, CEO Americas: Relationships and expertise will remain fundamental to OTC markets because many transactions still require judgement, context and nuanced decision-making that cannot be replicated through automation alone.
But, high touch doesn’t have to mean low tech, and the future is not a choice between technology and human interaction. The most successful firms will combine both. Technology should remove operational friction, improve transparency and streamline processes, while allowing market participants to focus on sourcing liquidity, managing risk and maintaining client relationships.
We see technology as an enabler of better interactions rather than a replacement for them.
Which market segments are innovating in the OTC space?
Nicholas Leib, Head of Product: Innovation is taking place across the entire OTC ecosystem. Buy-side firms are seeking more efficient workflows and better liquidity access. Dealers are investing in connectivity and automation. Technology providers are developing new ways to bridge gaps between participants, systems and liquidity pools.
The best innovation happens when technology is built around how participants actually trade, and when different market segments collaborate to solve specific market challenges. Rather than introducing standalone tools, the focus is increasingly on improving interoperability, workflow efficiency and access to liquidity.
Complex OTC markets often require a combination of market expertise, technology expertise and close client collaboration. We believe specialist providers have an important role to play in helping the industry solve these challenges in a practical and scalable way.
What might change or evolve in OTC markets over the next year?
Nicolas Koechlin, CEO & Founder: Over the next year, we expect continued progress in workflow automation, connectivity and liquidity discovery across OTC markets. We also anticipate further electronification of more complex workflows, particularly in areas such as swaptions and other OTC derivatives markets where significant operational inefficiencies still exist.
We’re still in the early stages of what’s possible in OTC markets. As workflow, liquidity and technology become more connected, we believe the pace of innovation will accelerate significantly.
From an OTCX perspective, we’re particularly excited about developments across OTC Axe, swaptions, dealer connectivity and broader workflow integration initiatives. We also continue to invest in our global growth strategy, including expansion in the Americas and the development of our EU MTF.
More broadly, we believe institutions will increasingly seek technology partners that combine market expertise with flexible workflow solutions. We were honoured to be recognised as OTC Trading Venue of the Year by GlobalCapital both globally and in the Americas, which we believe reflects growing demand for specialist providers focused on solving complex OTC market challenges.
What is the longer-term outlook for trading and market structure in OTC markets?
Nicolas Koechlin, CEO & Founder: The future of OTC markets is unlikely to be fully manual or fully automated. Instead, it will be increasingly connected, data-driven and workflow-centric, and it will be defined by how efficiently information, liquidity and risk move across an interconnected ecosystem.
The firms that succeed will be those that are able to combine human expertise, efficient access to liquidity and modern technology in a way that improves outcomes without sacrificing flexibility. Market participants are looking for solutions that simplify complexity rather than ignore it.
At OTCX, our long-term ambition is to be the trusted workflow partner for OTC markets globally. We believe institutions will increasingly gravitate towards specialist providers that understand the nuances of complex OTC trading and can build technology around the way clients actually operate.
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