andy aitkenhead
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Accelerating the Growth of Electronic Trading Systems to Gain a Greater Share of Fixed Income Trading Activity. Andy Aitkenhead. Business & technology. Global perspective Business and technology issue - PowerPoint PPT PresentationTRANSCRIPT
ONCOURT Ltd.
Accelerating the Growth of Electronic Trading Systems to Gain a Greater Share of Fixed
Income Trading Activity
Andy Aitkenhead
ONCOURT Ltd.
Business & technology
• Global perspective• Business and technology issue
– Technology has and will continue to drive the future of the fixed income market in order to effectively and efficiently handle the increasing volume of trade activity
ONCOURT Ltd.
Greater Share … More Liquidity?
• Three main themes:– Connectivity– Content– Business Models
ONCOURT Ltd.
How are we doing?
“Collectively the world’s leading commercial and investment banks are making rather a mess of transferring parts of their business to the internet. Many are committing fundamental mistakes they would never allow to get through in their traditional operations. Leadership of internet initiatives is often confused, as are their objectives. A few banks may have built good sites for specific businesses but none has come close to putting together a complete set of internet offerings.”Euromoney internet awards, November 2000.
ONCOURT Ltd.
Strategic or Tactical Approach?
• Most banks are struggling to develop a coherent, consistent e-commerce strategy.
• Many e-commerce initiatives are taking financial markets business backwards.
ONCOURT Ltd.
Themes
• Connectivity– External - proliferation of systems– Internal – moving from new to legacy
technology– Numerous protocols, different protocols
dominant in different markets– Data model issue
• Content – Difficulty of combining content &
applications– Relevance
• Business Models– Will continue to develop
Technology can be frustrating
ONCOURT Ltd.
Connectivity – Internal & External
• Internal– Most e-commerce projects in fixed
income have been front end web based trade capture
– Firms have substantial legacy infrastructure for trade processing
• External– Proliferation of ECNs, ATSs,
portals, etc.– In the main each initiative has
determined the connectivity
ONCOURT Ltd.
Proliferation of Electronic Trading Systems
ONCOURT Ltd.
Proliferation of Electronic Trading Systems
ONCOURT Ltd.
Connectivity - Protocols
• Proliferation of protocols developed for different markets– FIX – equities, now FIXML, FIX for
Fixed Income– FpML – interest rate derivatives, some
extension, FX & MM (also TOF for FX)– MDML, ResearchML – market data,
research– Proprietary XML – NTM, FINXML
• If we’re combining multiple types of content and applications we need to deal with numerous protocols
ONCOURT Ltd.
Content
•2-3 years ago …–Should we go online?
•1-2 years ago–Execution
•0-1 year ago–Execution & content
ONCOURT Ltd.
Content
–How relevant is the available content?•Role based, combined with applications•Importance increases with more credit intensive business
–Two levels•Desktop productivity•Client added value
–Cover any area•Origination, distribution, trading•Issuer, sell-side, buy-side
ONCOURT Ltd.
Role Based Content
• Co-mingling of Content & Applications• Need framework for providing this • Desktop real-estate is still an issue• Content & transaction capability
combined• Webstation
– Web-based content – Window on content and applications– E.g. market data, news, research, analytics,
trade capture, chat, video, position keeping
ONCOURT Ltd.
Webstation for …
• Fixed Income Fund Manager• Corporate Bond Trader, Salesman• Emerging Markets Syndicate• Asset Backed Trader• Analysts• Etc, etc, etc
ONCOURT Ltd.
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Business Models
• e-trading has taken markets backwards!• Most initiatives are single asset class • In the last decade there has been an
increase in integration of business lines with more structured business taking place.
• So far not many firms have co-ordinated initiatives across the separate trading businesses.
ONCOURT Ltd.
Combining Business Streams on the Web
– Need for: • Strategic view• Interoperable technology• Synchronous pricing engine
– Ability to provide interaction for the client/user across the business
ONCOURT Ltd.
Several of These?Trading Portal
Trading Portal
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Analy
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Firewall
Server Integration
Transaction Server
Analytics Servers
Research Servers
Market Data Server
Firewall
Client
Liquidity Provider
ONCOURT Ltd.
Treasury PortalEquity Portal
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Or This?Trading Portal
Fixed Income Portal
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An
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tics
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Firewall
Server Integration
Transaction Server
Analytics Servers
Research Servers
Market Data Server
Firewall
Consensus Estimates
Share Price Data
News Brokers Research
Client
Liquidity Provider
Synchronous Pricing Engine
Market Data Providers
ONCOURT Ltd.
Changing Business Models…
• Internet changing the market like never before?
• What about the telephone?• Markets will change …
– shouldn’t just be automating the existing model
ONCOURT Ltd.
Wholesale Trading
HubWholesale Trading
Hub
Wholesale Trading
Hub
Satellite
Satellite
Satellite
Satellite
Satellite
Satellite
Bank Fund Manager
Retail Client
Retail Client Investor
Bank
Retail Client
Investor
Fund Manager
Integrating Retail Business into Wholesale
ONCOURT Ltd.
Is it Still a Relationship Business?
• How might it change? • Democratisation of the market?• Characteristics of the organisation• Maintaining the Relationship
ONCOURT Ltd.
Liquidity Constraints
• “Investors slam dealers for not providing liquidity and for high costs” – Forrester Report
• Electronic systems increasingly targeting credit markets
• Can systems help to enhance liquidity?
ONCOURT Ltd.
Connectivity, Content & New Business Models!
• Combined they provide greater traction• New liquidity models will emerge• Potential for convergence of wholesale
& retail business in some markets• Back to more structured products
electronically?• Platforms for trading multiple products
will take time
ONCOURT Ltd.
Combining Transaction Capability with Content
• Increased value-add
• Increased flows, increased market share
• Increased liquidity
• Potential to tighten spreads/increase
revenue
