Paul Reynolds, Head of Fixed Income here at TradingScreen states, "When I asked a buy-side head of desk recently what he thought of Fixed Income trading infrastructure he paused at length then replied, “I know what it needs to do, but I don’t know what it looks like. He is not alone. Fragmentation, varying workflows, different business models contribute to a challenging scenario for trading desk decision makers. Probably the worst aspect of any decision is whether the multiple moving parts will actually work together, both technically and commercially." Reynolds adds, "At TS we strongly believe in co-operative vendor solutions that solve client pain points. We have developed a very open, neutral and co-operative strategy that is evident in our FI EMS Roadmap. This thoughtful article from Sean Burton endorses this growing phenomenon in Fixed Income."
We can learn a lot from a mongoose.
It's an exciting time in the fixed income FinTech space. For years, larger-scale investment banks have developed in-house systems and processes in order to make trading ‘a little’ more efficient. It always shocked me when I moved to trade at a new dealer how bespoke these systems were. There were of course the constants – Bloomberg, MarketAxess, etc. – but the variance in local systems was frightening. Some dealers had excellent systems while others were operating on Excel and little else. It wasn’t always who you’d expect. Each desk had differing systems developed by different people. There was little crossover between sectors within the bank, and all too often technical efficiency came down to the individual personalities of the desk heads.
Now, there is some genuinely impressive innovation coming from a number of FinTech firms in the space. Dealers have also become more comfortable with the idea that their data can be managed securely and effectively by external firms, and cloud-based offerings are no longer the red flag they once were. We are entering a golden age of financial technology. Or, perhaps more honestly, banks are being dragged reluctantly into a brave new world.
There is, however, a problem. I spent several years at a Fintech firm meeting with desk heads at dealers and funds. We’d talk about the problems we were trying to solve with our systems, why those systems were so effective, and how we planned to tackle market issues with further developments. Very rarely was the message not accepted as valid. We had a great product, but it required critical mass in order to function properly. The investment market is a network, pure and simple, and in order for a FinTech system to be truly effective, it needed to cover a majority of that network. But how do you build a network at the early stages when there is so much competition for time with other systems?
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