European Markets Choice Awards Winner: Charles River

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The Evolving Fixed Income Trading Landscape: Leveraging Connectivity, Interoperability and Automation

Alun Cutler, Director, Product Management, EMEA at Charles River Development

Charles River has recently been honored as the recipient of “Best Fixed Income OEMS” in the inaugural European Markets Choice Awards. We’d like to share some thoughts on where we see the near-term future of fixed income trading for buy-side firms evolving, and the role of technology vendors in this dynamic environment.

The continuing low interest rate regime in global bond markets has encouraged record issuance from both corporations and central banks, met by enthusiastic demand from investors, most notably in EMEA.

Managing these growing fixed income allocations to institutional investment portfolios presents a number of challenges. Pandemic induced dislocations witnessed in 2020 may resurface in a different form, triggered by nascent inflation concerns, geopolitical events, or other shocks. Green bonds, bank loans and structured products all require robust analytics to help inform decision-making around liquidity, credit worthiness and valuations. The proliferation of liquidity venues continues to introduce fragmentation, making it difficult for firms to determine which venues to transact on and how to demonstrate best execution.

Against that backdrop, our focus as a technology vendor is on providing the connectivity, capabilities and data that investment managers, asset owners and insurers require to make timely, well-informed decisions across the entire fixed income asset spectrum.

In an era when proprietary, closed front office systems were fashionable, we instead opted to build an open-architecture investment management platform. This provided FIX connectivity to liquidity venues and API-driven interoperability with third party risk analytics and application providers that help buy-side clients meet the demands of their investment process and product mix.

With the proliferation of electronic communication networks (ECNs) and alternative trading systems (ATS) as traditional broker-dealers downsized their trade facilitation services, buy-side firms were left navigating a bewildering maze of potential liquidity providers. With more than 100 venues now operational, determining which venues are suitable for a particular fixed income sector, and capable of consistently providing liquidity at institutional scale, has become challenging.

Order and execution management system (OEMS) vendors bear the cost of establishing and validating connectivity with these venues, providing their buy-side clients with an aggregated, venue-agnostic view of liquidity. As some venues inevitably merge or cease operations, the buy side feels little, if any, impact. Technology vendors also ensure that the three mainstream trading models and their variants are supported, including request for quote, central limit order books, and the emerging all-to-all protocol.

Secondly, we built out a cloud-enabled data platform that helps empower traders with frictionless access to critical data. By capturing detailed, time-stamped trade data from their OEMS, and enriching it with market prices and other information from sell-side firms and external providers, traders gain important insights. Knowing which execution algorithms are most effective under varying market environments and identifying liquidity venues and broker/dealers providing the most efficient executions for the markets and asset classes they trade in help firms reduce trading costs.

Finally, an open architecture trading platform enables seamless interoperability with an expanding ecosystem of third-party providers. These include pre-trade data for making better-informed venue selections, risk analytics for accurate portfolio valuations, and trade automation solutions that helps enable traders to focus their time and talent on high-touch trades.

We believe that the growing migration of investment management and trading platforms to interoperable, open architecture solutions will best serve the needs of buy-side firms adapting to rapidly changing global fixed income markets, enabling them to trade more intelligently and cost-effectively, while leveraging their preferred liquidity, risk, data and application providers.

Learn more at crd.com


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The material presented is for informational purposes only. The views expressed in this material are the views of the author, and are subject to change based on market and other conditions and factors, moreover, they do not necessarily represent the official views of Charles River Development and/or State Street Corporation and its affiliates.


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