Buy-side traders are seeing their sell-side counterparts offering direct streamed prices as an alternative source for data and direct trading, which dealers see as a direct route to greater trading efficiency. Speaking at the Fixed Income Leaders’ Summit (FILS) in London, market participants heard how banks are offering these services to best effect.
Mauricio Sada-Paz, the global head of eFICC Sales at Bank of America Securities, said, “Yes we are providing it, we provide axes, pre-trade streams and executable streams direct to clients and direct to some EMSs. We also have a pipeline of other partners clients we are looking to onboard. We started with credit, we are expanding to rates and munis as well.”
He notes that his clients are investing a lot in sophisticated EMSs, and they need both liquidity and data to support automation of trading.
“They need that data and we can provide it independently; if they can get it in a cheaper way without any intermediaries, that is how we like having the last mile between the client and ourselves,” he says.
Simon Linwood, credit sales trader for UBS Bond Port EMEA said, “We have actively connected EMSs and OMSs to our platform Bond Port, so we operate a platform within a bank. What that gives clients is firm executable pre-trade data.”
The pressure to deliver these services is coming from the margin compression that banks face as trading becomes more electronic, which runs up against the trading fees which platforms offer, and the difficulty that can be created if they do not offer seamless connectivity to execution trading tools, says Linwood.
“The platforms, and I am going to name them because they are here sponsoring – Tradeweb MarketAxess and Bloomberg they need to open up, they need to allow more interoperability with those EMSs to allow greater transparency and greater efficiencies for the buy-side trader,” he argued.”
The chair of the panel, Constantinos Antoniades, global head of fixed income at Liquidnet, asked whether the effect of increased fees from one platform – presumably Bloomberg which increased its charges to the sell side at the start of the year – had been a motivators for sell-side connectivity.
Linwood replied, “Absolutely, 100%, why not?”
Sada Paz observed that his bank’s use of platforms did not affect prices delivered to clients, but the use of less direct trading models did.
“At the moment we are not differentiating on venue, but the number of counterparties that the client asks does affect the quote rate and the price because, for example, it is harder to monetise an all-to-all trade than a request-for-quote to three to five dealers,” he said.
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