The prime brokerage industry is back to its best. After a few turbulent years stemming from market volatility, rising interest rates, geopolitical turmoil, inflation, soaring energy prices, client performance, fee pressures, a mini banking crisis, looming regulation, constant tweaking of risk models, rising client complexities and the notorious Archegos saga… well, things are looking up.Not that the seemingly never-ending list of aforementioned market occurrences had noticeably hindered the prime business. The ‘one thing after another’ era was a thorn in the side for a segment that is particularly sensitive to market forces impacting its clients’ appetites for lending and other prime services. But the headwinds have subsided, and the tailwinds have finally arrived in the form of new fund launches, a rise in allocations and increasing returns for funds, not to mention the continuing emergence of multi-strategy hedge funds. Prime brokerage is an industry which thrives off its clients’ growth, and that’s exactly what we’re seeing now.“Year-to-date, we’re seeing for the first time in many years a notable uptick in new fund launches and spin outs from bigger places,” says Jack Seibald, managing director, co-head of Marex prime services and outsourced trading. “Within that, there’s more billion-dollar and above launches in the last twelve months than there were in the preceding several years. That’s adding a level of interest in the sector again by allocators. From our cap intro team, we’re certainly seeing from the allocator community renewed interest in hedge funds.”According to Coalition Greenwich, the top dozen investment banks offering prime services saw revenues rise to a record $20.4 billion in 2023. Meanwhile, with regards to equities, revenue deriving from prime brokerage compared to trading shifted from a 30% versus 70% ratio a decade ago, to 40% to 60% in 2023.Dominic Rieb-Smith, managing director, international head, prime services sales, JP Morgan, refers to the past year as “a standout”. Meanwhile, Patrick Travers, head of distribution at Clear Street, says he agrees with the sentiment around it being a good 12 months for prime brokers: “From our perspective, the markets have remained strong with pockets of volatility which tend to allow for investment opportunities and increased balance activities which are key drivers across the equity finance landscape.”In addition to the billion dollar-plus launches, CIBC Mellon also points out to us the noteworthy increase in scheduled fund launches with assets under management of $500 million or greater – up almost two-fold on what was observed in 2023.Penny Novick, global co-head of prime brokerage at Morgan Stanley, picks up on this point, stating: “With heightened dispersion across equity markets, hedge funds continue to see strong opportunities to generate alpha globally, which has led to increased levels of gross exposure being deployed across the fundamental long/short universe. “Additionally, multi-manager hedge funds have continued to win the lion’s share of the new capital coming into the industry as they have been rewarded for their ability to mitigate risk while still delivering positive alpha to their investors. The positive performance combined with markets trading at all-time highs and elevated gross leverage across the hedge fund client base has meant prime brokerage balances have reached peak levels.“Views from the allocator universe towards the broader hedge fund industry also remain positive, and while this hasn’t necessarily led to net inflows to the industry as a whole up to this point, the forward-looking expectations based on our recent Investor Survey would point to increased allocations to hedge funds in the next 6-12 months, which we expect will also have a positive impact on the prime brokerage business.”We spoke to around a dozen primes across this feature, and anecdotally, there were also countless examples of growth, including – but not limited to – an uptick in growth in Europe, something backed up by a recent IFR article titled ‘Europe’s hedge fund industry is taking off after lost decade’, while there was also positive news out of APAC and opportunities highlighted in the Middle East and Australia.And the purple patch isn’t confined solely to the largest players, the chasing pack, or the plucky young upstarts – the overall PB pie is growing, meaning everyone’s slice is now more lucrative than ever before. Bigger and betterJust five years ago when JP Morgan surpassed $500 billion in prime brokerage balances, the bank’s head of global head of prime finance, Jonathan Cossey, quipped: “Next stop, one trillion!”. Well, fast forward to 2024 and the PB behemoth and its counterparts in the ‘big three’ are all reportedly around that coveted milestone.Data from Convergence tracking the top 25 prime brokers showed their market share grew from 83.3% in April 2023, to 92% in 2024. Goldman Sachs, Morgan Stanley and JP Morgan all increased their market share substantially, despite the former two seeing drops in the number of funds they have relationships with. According to Convergence data, JP Morgan saw both new client additions and a double-digit market share percentage growth.“I think the last 12 months for us in particular have been standout,” says Rieb-Smith, which has logged its best score in our sister title Global Custodian’s Prime Brokerage Survey since at least 2016. “In terms of client demand and what we have to offer, I think we’re really unique and we have benefited from that.”Part of this has been down to the continuing rise of multi-strategy (multi-strat) funds which have very sophisticated and specific demands which can only be met by certain service providers with scale and a broad offering covering a range of asset classes.On the topic, Rieb-Smith adds: “We’re in an environment where you’ve seen the macro community morph into multi-strats (because they’ve gone into equity strategies whether that be volume, capital markets and ultimately quant). Then you’ve got the quants who have started to look at fixed income products. These could be systematic, macro, or systematic credit funds, but you’ve seen more and more of those firms evolve into what look like multi-strat strategies. There are also the multi manager platforms that, in order to be fully diversified and attract the capital that they’re after, have become multi asset and therefore could be bucketed as multi-strat.“If you look at what those firms need in terms of prime-related services, well, cash PB and synthetics are just the basics. Those are the relatively commoditised parts of the business. There aren’t many banks that are organised the same way as JP Morgan, whereby my team in prime financial services sales are responsible for marketing not only all those prime finance related products, but all our clearing products as well.”“When you go through these really volatile periods of time, if the multi-managers that are really well diversified do come out stronger than monoline hedge funds, then there is an argument for investors. That’s why the money’s with them and they will probably attract even more capital. They are now trading in all these other asset classes. They need a financing platform to support all of that. We’re one of the only providers that can do all of that for them. So you can see how this growth and momentum just starts to really build over time.”JP Morgan’s rival Morgan Stanley have been serial outperformers in the aforementioned Prime Brokerage Survey for some years now – picking up the Best Prime Broker accolade in 2022 and an Overall Excellence Honour in 2023 – and 2024 was no different, beating the global average by 44 basis points. The bank also highlights to us how “as a global multi-asset class prime broker, we are structured to deliver the widest range of services regardless of strategy type or product complexity”.“At Morgan Stanley prime brokerage, we continue to be focused on growing our market share with existing clients by leveraging our unique integrated investment bank and firm strategy to deliver holistically across advisory, financing and sales and trading as well as our ability to tap into wealth and asset management channels to provide solutions to our hedge fund clients,” explains Novick. “Additionally, we remain vigilant in working with emerging talent early and providing them differentiated resources across consulting capital introductions, talent management, technology and client service to help these new entrants launch their businesses successfully.”The big three can sometimes be passed over when it comes to media coverage of the prime brokerage sector, simply because of how far out in front they are with regards to market share – believed to be somewhere between 40-60% depending on metrics and who you talk to – but their capabilities and service levels are not dropping and there are still billions of dollars being invested between them into the technology underpinning these units. The challengersBut the growth of the overall pie is also benefitting players outside of the top three, as the headline of this piece suggests.Ever since the exits of Credit Suisse and Nomura from the business – along with Deutsche Bank’s sale to BNP Paribas back in 2019 – the prime brokerage landscape has been dramatically shaken up to the benefit of those remaining in the business.Over the past year, each of the top 25 primes have increased their market share – according to Convergence – with 16 of those experiencing double-digit percentage growth.Some of the larger funds who were contemplating their next move following an exit of their previous provider moved up the table to the big three – which they likely already had relationships with already – while others switched to some of the ascending players in the industry.In addition to this – and somewhat because of these new funds – there has been a trend of the biggest prime brokers offboarding clients or limiting access for numerous funds, leading to many mid-tier PBs looking to move upstream and ambitiously add clients who have either fallen foul of exiting primes or been offboarded. “You had a flurry at the time, and then it slowed down, but we’re still seeing trickles of that business two years later,” explains Seibald, referring to the exits of other primes. On the topic of offboarded clients, he adds: “Emerging and mid-sized managers continue to be, for the most part, ignored/shunned by the bulge bracket prime brokers as the largest participants have been able to build their books with more desirable, larger revenue producing funds that found themselves in need of alternative banks following the demise/exit from the business of several of the largest players. “This has created an ongoing opportunity for mid-tier prime brokers, particularly those with broad asset class and geographical capabilities comparable to those of the bulge bracket banks. This is an ongoing pattern that we suspect will continue for some time.”Some of the aspiring players are present in the Prime Brokerage Survey, with outperforming scores set by players including Pershing, CIBC Mellon, Marex, Cantor and TD Securities. Clear Street is also continuing to make waves, despite being a much newer player on the scene.For Marex – previously TD Cowen – a new chapter has begun under a new owner, and the transaction has been relatively seamless with the prime broker retaining its team members, and even adding talent. Seibald added that under Marex, the prime brokerage unit is starting to explore opportunities in segments of the market it previously had little to no exposure to, but where Marex is a prominent participant, specifically, commodities and futures.Seibald’s team is joining in the upstream movers by some of the players named above, along with the likes of BTIG, Interactive Brokers, JonesTrading, and near to a dozen of the largest banks. It should be noted that in a market which has experienced provider exits, the shedding of less profitable clients and with looming increased capital requirements – don’t underestimate the lure of staying power and commitment to the business.Multi-strat growthAlong with the opportunities from wanting clients, it’s really been the rise of multi-strategy hedge funds which continues to benefit the industry, particularly players with diversified capabilities across all of the asset classes and securities, as well as in the futures and commodity space. This trend, and shift away from an equity-centric sector, has cemented these prime brokerage divisions as the jewel in the investment banking crown for many of the largest players in financial services.“A lot of the really big funds have taken in a lot of the assets that are coming into the marketplace,” says Aaron Steinberg, head of prime services at BNY Pershing, “A lot of that money from the institutional allocators, has been funnelled to a number of very large multi strategy and or multi manager platforms that those investors are just more comfortable with. There’s been a consolidation of where the assets are in the marketplace, and the biggest of the funds have gotten bigger. “We started to see a little bit of what I imagined was going to be the evolution of that market, which is a number of strong portfolio managers from those multi manager platforms coming out, launching their own funds. And we’ve seen some significant launches this year in that space. We’ll probably continue to see that trend.”With two fewer major players in the space, the competition has been heating up and requires significant investment. Some of the banks behind the big three have been aggressively looking to capitalise on the continuing trend, with lots of positive noise around Bank of America, Citi, BNP Paribas and Barclays. It’s no easy thing to service these funds though, with significant investments, talent and scale required.Outside of competing on capabilities, tech and the ability to service a range of strategies, one thing that shouldn’t be underestimated is the importance of client service. It’s for this reason that the category is such an important mainstay of the Prime Brokerage Survey and while not the ‘sexiest’ attribute of a prime broker to talk about in this fast-moving world, it is critical none-the-less.“If you read some of the more recent Global Custodian surveys over the past few years, specifically as it relates to our business, one of the things that is stood out is the high level of client service,” adds Steinberg. “As all firms are looking to create more automation and create a stronger technological base and frankly, reduce overhead costs, something that’s gotten lost in that is that prime brokerage has traditionally been a high level of touch client service model. “That’s what drives clients’ ability to get the services they need, not only from the prime broker, but from the broader bank itself. A lot of the clients that we’re talking to – again, the big multi-platform, multi strategy funds – they want to have enough counterparties where they can invest how they want to when changes happen in regulation – whether it’s around RWA or whether balance sheet changes for a specific bank or there’s buying opportunities, but they also want to be really valuable to those counterparties as a whole and in total. And so, they want to be more to their counterparties, and we want to be more for our clients.”Travers concurs: “With regards to the sell-side and prime brokerage specifically, we are all in client service on a daily basis,” he says. “The premise of what we do day in day out is to facilitate our clients’ needs and enhance their business every day. Regarding the client service team, we find that the best way to differentiate our technology offering is to have best in class client service personnel.”Challenges ahead?It’s not all sunshine and rainbows in the prime brokerage world, however. Looming regulatory issues and the ever-increasing complexities of the business have led to constantly evolving risk management systems.Among the major changes is the Basel III ‘endgame’ update, the widely anticipated capital requirements hike for Global Systemically Important Banks (G-SIBs). Last year, US regulators unveiled the new capital rules for lenders, with G-SIBs seeing an increase by an aggregate of 16%.The requirements align the US with Basel III standards which were agreed following the 2008 crisis with capital, leverage and liquidity requirements rolled out in the ensuing years, as the latest reforms look to end the reliance on internal models in the US for estimating risk and introduce standardised frameworks. While there is no exact timeline on the final ruleset being published and implemented, banks are preparing now and certain prime brokers have become increasingly sensitive to strategies with more punitive RWA and capital treatment. Additionally, in February, the Federal Reserve Board released four new hypothetical elements as a means to analyse different risks within the banking system. Two of these scenarios include two sets of market shocks which observe the hypothetical failure of each bank’s five largest hedge fund exposures under unique market conditions. This analysis will bring to light the results of a hypothetical major market disruption and the implications of it. Most recently, Bloomberg reported that the Bank of England is also reviewing lenders’ practices within their prime brokerage business as part of a long-running review into their exposure to hedge funds and other non-banks.The arrival on the radars of various regulators stems from the fallout of the collapse of Archegos Capital in 2021, where its various prime brokers – of which there were many – were not fully aware of the size of the fund’s positions with other banks, and as the Bank of International Settlements put it, they thereby underestimated its overall leverage and impact on the markets in which it was active.The silver lining was a complete reassessment of client relationships within the prime businesses of the biggest players and a wake-up call which was spun as ‘good’. However, the downside has been increased regulatory scrutiny.“We’ve seen many of our competitors adjust and ‘revisit’ both their counterparty credit and risk policies following past events in the marketplace,” says Travers, though Clear Street had no involvement in the Archegos saga. “We believe that a robust risk and credit policy coupled with a stringent KYC policy will be key to avoiding another market event specifically within the prime brokerage space.”ABN Amro adds: “The post-Archegos stabilisation trend is also evident with central clearing of OTC products, increased capital requirements and introduction of UMR. This has led the business scope for prime brokers to expand to full collateral management optimisation across multiple industry areas, with the largest benefit to UMR impacted clients. In addition, there is also interest in more efficient financing solutions, such as repo paired with custody.”Of course, there are multiple other market structure developments and regulations for prime brokers to contend with from markets moving to reduced settlement cycles to new cyber security requirements. Ultimately, in 2024, the headwinds should only be a footnote to the main story – and that is around an industry reaping the rewards of a patient approach through some frankly wild years post-Covid. There was a phrase used throughout our outreach that the biggest are getting bigger – with regards to hedge funds – but that growth also relates to the entirety of the prime brokerage business. What this means is a likely increased investment and focus on these units from the largest players as this lucrative business begins to grow as an increasingly prominent part of each organisation. But they aren’t the only benefactors – it’s been a big year for primes of all shapes and sizes, and all those left in the market have lofty ambitions for the future.The post The prime brokerage pie is growing, which means bigger slices for everyone appeared first on The TRADE.

What are the key issues associated with manual data reconciliation processes?Historically, the technology and processes to support manual data reconciliations have been very much geared towards addressing challenges around sharing the data, looking at the data and then using very linear technologies over the top. But a series of trades doesn’t simply add up to a position. It’s a very simple statement, but an important one.This is compounded by a couple factors -the increase in transaction volumes and more complex assets being transacted. This is leading to frequent errors (due to different systems and non-linear processes) resulting in a costly mess of point-to-point reconciliations and mistakes.We really need a very different approach than the one that exists now. One long-term solution to this is tokenisation and digitisation, where everyone is looking at the same record. But even then, that’s not enough on its own. The optimum state is having the ability to make a summation of those records by using non-linear enabled technologies which can be aligned to clear business processes.How can new data management technologies help reduce operating costs?It’s important to note how new data management technologies can not only reduce operating costs, but also reduce risk. This means individuals can be granted permission to access only the specific data they need therefore ensuring compliance with market data licensing and regulatory obligations while being authorised to perform the right action. Therefore, creating a safer environment: people can then see the bits of the puzzle they need for their specific role, without necessarily seeing all of it.Again, the issue with the push towards tokenisation and digitisation, means a lot of the public blockchains have access to everything. So that’s not quite the right solution. It’s about finding the balance which reduces duplication, synchronisation issues, translation problems, and breaks, while maintaining the controls required for financial services.What is the key driver behind the push for real-time data sharing?It’s largely driven by the increased sophistication of the ultimate capital allocators. If you look at sovereign wealth funds and pension funds, as a macro trend, they’re starting to insource more of their own risk management. In order to do that, they need to look at the same data.So, they’re starting to ask their managers and their custodians and administrators for data that’s at the same time point. When quick decisions are necessary, relying on data that’s 90 days old here, 30 days old there, or even just a few days outdated can hinder the process. The goal is to have all relevant information in real time to enable better, more informed decisions on a macro level. We’ve seen that trend an awful lot more where the end capital owners are becoming much more sophisticated in their approach.What are the main pressure points for asset managers when it comes to their operating models?There’s a change in the asset mix with the end allocators wanting both public and private assets. There is also a change in the demand for data with asset managers wanting all their data in real-time. For allocators, fee compression is a significant concern. As more machine learning, AI, and automation are introduced, they may ask, “Why should I pay 1.5% or 2% in fees when I could be paying just 0.5%?” Additionally, with interest rates staying relatively high, investors may question, “Why take on risk to earn 7% when I can get 5% or 6% from government bonds – and avoid paying you a 2% fee?”This combination of factors has created a perfect storm: capital flight from traditional managers, pressure to lower fees when they do secure capital, and an increased demand for complex asset mixes. All of this contributes to a significant challenge for the profitability of asset managers.The post Fireside Friday with… FINBOURNE Technology’s Tom McHugh appeared first on The TRADE.

Nasdaq has integrated AI into its Calypso platform to enhance bank and insurance risk calculations, in a move set to process risk calculations up to 100 times faster. Gil GuillaumeyThe offering offers new methodology to conduct investment portfolio risk calculations and produce predictive analytics, based on advanced machine learning. As well as improving execution time, the offering will also reduce costs, said Nasdaq. Users of Calypso include: banks, insurers, and other global financial institutions looking to process front-to-back office treasury workflows, manage risk, and meet regulatory reporting obligations.   Gil Guillaumey, senior vice president and head of capital markets technology at Nasdaq, said: “All financial institutions trading OTC derivatives are required to perform increasingly complex calculations to meet internal risk controls and regulatory mandates. Maintaining the necessary infrastructure and systems can be outrageously expensive, inefficient, and increasingly impractical regardless of cloud elasticity strategies.” Nasdaq combines its machine learning technology with a specific form of mathematical modelling – via its XVA Accelerator – which also “significantly” reduces the amount of physical infrastructure required to run the relevant calculations.    With this technology, the Nasdaq Calypso risk analytics suite is able to rapidly adjust during times of heightened volatility and fluctuating interest rates. Guillaumey added: “The sheer scale of computing power required to meet the most demanding regulations, alongside the strategic benefits of more accurate real-time analytics, is driving a profound rethink about how we can leverage AI to reduce the cost of compliance.” The post Nasdaq to process risk calculations up to 100 times faster through integration of AI appeared first on The TRADE.

Asset manager Thomas Miller Investment (TMI) has selected Amundi Technology and its ALTO Investment platform to bolster its operating model and consolidate its investment management systems.  By using ALTO Investment, TMI will leverage a solution covering the entire front-to-back value chain.  The ALTO platform consists of tools including analysis, data management, trading, cash management, investment compliance, performance contribution, reporting, and attribution.   TMI will also benefit from a modular cloud-based system; data connectivity with connections to over 150 data providers; and open APIs for workflow automation, cloud security, and monitoring.     “This strategic partnership is set to significantly enhance our operational efficiency and deliver superior service to our clients, with faster response times and more comprehensive reporting capabilities,” said Mark Moran, chief operating officer at TMI.  Amundi’s ALTO platform will provide real-time data access, improve workflow automation, and streamline middle-office operations. By leveraging Amundi’s expertise, we aim to optimise our operational processes, ensuring greater accuracy and efficiency.” Amundi Technology’s expertise in middle-office outsourcing will be leveraged by TMI and will be served by a dedicated team within the firm.  Outsourcing middle-office operations to Amundi Technology will also allow the firm to focus more primarily on its core service proposition. “This new partnership in the UK further demonstrates our ability to serve a wide range of financial companies through our technology platform, helping them achieve their goals by leveraging the latest innovations,” said Olivier Bouteille, chief client officer at Amundi Technology.  The post Amundi Technology selected by Thomas Miller Investment to bolster operational processes appeared first on The TRADE.

Eric Heleine, head of the buy-side trading desk at Groupama Asset Management, is set to step away from the firm before the end of the year, The TRADE has learnt.His departure comes in the wake of the new Groupama-Amundi partnership – which he has led for the last two years.Heleine is not set to join the new offering, and instead will be moving on to embrace a new challenge according to sources familiar with the matter.Read more: Groupama and Amundi team up to boost tradingGroupama Asset Management and Amundi Intermediation’s strategic partnership, announced in May 2024, saw the firms merge their trading capacities to enhance trading efficiencies.Speaking at the time, Heleine explained: “With Amundi Intermediation, we share the conviction that execution is changing radically with rapid and global digitalisation. “[…] By making the most of advances in AI and data science, Groupama Asset Management and Amundi Intermediation aspire to define new standards of excellence in transaction execution, while strengthening the teams’ ability to respond quickly and precisely to market challenges.” Read more: Fireside Friday with… Groupama Asset Management’s Eric HeleineHeleine had been with Groupama AM for 15 and a half years and has also previously worked in other buy-side roles at firms including BGC Partners and Etoile Gestion.The post Heleine set to depart Groupama AM appeared first on The TRADE.

Europe’s top markets watchdog has signalled its intentions for moving EU markets to a T+1 settlement cycle through a statement outlining both the urgency of acting and the preference for aligning with the UK and Switzerland.The European Securities and Markets Authority (ESMA) acknowledged the benefits of reducing settlement times but highlighted how harmonisation, standardisation and modernisation will be needed and will require investments.Harmonisation within Europe is a top regulatory priority at present as the continent looks to improve its competitiveness on the global stage. Subsequently, ESMA has concluded that in the context of needing an efficient and competitive market “it is urgent to act if the EU wants to avoid prolonging and amplifying the negative impacts of the misalignment with major jurisdictions internationally.”ESMA noted that Europe would likely need to amend CSDR to mandate a harmonised shortening of the settlement cycle in the EU.With regards to a timeline ESMA acknowledged the high level of interconnectedness between the EU capital markets and those in other jurisdictions in Europe, highlighting how a coordinated approach across Europe is “desirable”.The regulator added that alongside other European groups, it considers it “necessary to accelerate every aspect of the technical work needed to pave the way to any future move to T+1 in the EU.” ESMA, in close coordination with national competent authorities, and sub-groups from the European Commission and European Central Bank, have therefore agreed to establish a governance structure, incorporating the EU financial industry, as soon as possible to oversee and support the technical preparations of any future move to T+1.  “In order not to lose momentum, details of the governance structure will follow shortly. It will be important that this governance is inclusive and ensures balanced sectorial and geographical representation,” said ESMA in its statement.ESMA’s public stance was revealed just a day after the European T+1 Industry Task Force voiced support for a co-ordinated move to T+1 in the EU, acknowledging the benefits of an aligned approach across the entire European region, including the EEA, the UK and Switzerland.   The task force stated that this followed a range of views being expressed as to whether the date identified for the UK transition, H2 2027, could also be a feasible implementation date for the EU. The task force did, however, emphasise that depending on the exact definition of what regulatory, technical and operational changes will be required, a transition period of between 24 and 36 months will be required to accommodate the complexity of the market infrastructure in Europe.  Established in 2023, the European T+1 Industry Task Force comprises of 21 trade associations involved in European capital markets, bringing together a range of industry stakeholders who would be impacted by a move to T+1 settlement for securities traded and settled in the EU.The post All signs point towards Europe aligning T+1 move with UK and Switzerland appeared first on The TRADE.

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With the advent of an ever-more technologically innovative and globally connected capital markets sphere, fixed income emerging markets (EM) have demonstrably become an increasingly appealing area of interest for investors.As trading of these assets has become easier and market conditions are predicted to fall in line, the industry has seen a swathe of new EM-focused hires, increased attention paid to developing markets’ performance, and enhanced offerings from providers.Across the industry more attention is noticeably being paid to this universe as the expectation of lowering dollar rates looms nearer, with the potential for new liquidity opportunities proving irresistibly appealing to market participants.“There is a structural case for emerging markets, and it is set to remain a core part of the fixed income opportunity set,” asserts John Espinosa, head of sovereigns and portfolio manager for Nuveen’s global fixed income team. “It is currently 10% of the Bloomberg Global Aggregate Index, which is a bellwether that captures the world of global fixed income.”The trend is our friendThe consensus appears to be that this is firmly an area where the best is potentially yet to come. As Jean-Charles Sambor, head of emerging market debt at TT International Investment Management tells The TRADE: “The emerging markets fixed income sphere is recovering, and we expect inflows back to the asset class after years of investor exodus.”Dan Burke global head of emerging markets at MarketAxess and former global head of credit e-trading at Standard Chartered, agrees, confirming that from his perspective what started as a challenging year for EM is now turning into a favourable backdrop thanks to inflation starting to moderate globally.Burke explains: “At MarketAxess, we have seen huge growth in local markets coupled with an increase in larger trade sizes. In Q1 of this year, our local market volumes were up 23% year-on-year, while trades larger than $25 million were up 23% in 2023. I expect this trend to continue throughout the remainder of the year as the macro backdrop improves and rate cuts are all but guaranteed.”Notably this is an area characterised by its ebbs and flows, continually impacted by major global events including the pandemic, war in Ukraine, and the intense tightening of monetary policy.Speaking to The TRADE, Niels Nooy, EM execution specialist at Liquidnet, says: “I have been involved in emerging markets since the early 1990s and have seen many market cycles over that period […] Traditionally, with higher interest rates, capital tends to leave emerging markets because there’s less of a need for the extra yield pick-up. Now, there is clearly more value in emerging markets in terms of real yields, so the timing is probably right for an improvement in sentiment at least, and maybe for some funds to flow back into emerging markets fixed income.”Since last year EM fixed income was expected to do well however, currently market changes are yet to pass.Geoff Yu, senior EMEA market strategist at BNY, explains that though the iFlow data showed that in Q1 some of the best performing regions were in frontier markets as investors rewarded reform intent, overall, despite a positive future outlook, [EM] hasn’t done as well as predicted.“It’s fair to call it lacklustre […] the reason ultimately is because dollar rates are still quite high and then see if they come down and we don’t see US yields coming down aggressively yet for example,” he says.However, firms are continuing to gear up for future flows into the area despite slow developments, recognising the consequences of not harnessing the potential of EM bonds and biding time for what many believe is the inevitable.“Looking at the second half of the year, emerging markets stand to do very well, especially those without direct exposure to US politics or global politics in general […] the bottom line is we need to see a clear trigger, and then on a risk adjusted basis, the EM fixed income sphere should be one of the best-positioned asset classes for the second half of the year and beyond,” says Yu.Diversify to liquifyThere are undeniable, established upsides of this asset class which investors are keen to capitalise on once the market is primed. One of the key ways that emerging market fixed income is poised to become an increasingly essential part of investment portfolios going forward is of course for diversification purposes.“The significance of EM cannot be understated, especially as the macro backdrop continues to improve,” asserts Burke. “The rise of capital flows from the Middle East are one example of the growing importance of EM, and as these markets grow, they will continue to allow greater diversification of EM portfolios.”Not only is the asset class a highly efficient way of broadening scope, but emerging market bonds have also historically offered higher yields than developed markets and as such can help reduce the overall volatility of a portfolio – an increasingly important factor given the current state of play.Speaking to the key advantages, Sambor explains: “We believe it is a particularly good fit for active investors with a contrarian slant. EM investment styles and processes are becoming increasingly bifurcated between large passive or quasi-passive investors and very nimble ones that can exploit a volatile environment and sudden changes in flows or investor asset allocations.”Moreover, there is no looking back when it comes to emerging markets being increasingly integrated into the global economy and the continued promises of more aligned international processes.These factors “improve visibility and attract a wider variety of investors,” asserts Flavio Paparella, managing director at BTIG global emerging markets fixed income, who adds that “local currency bonds are now as regular investments as hard currency bonds”.Speaking to the increasing importance of emerging market bonds for desks going forward, Paparella highlights that the rapid economic growth of developing countries can re-value bond prices over time, enabling investment and infrastructure opportunities which further increase demand for bonds.“Many emerging markets are implementing structural reforms to improve their business environment and the economic growth that comes with it can positively affect the bond markets,” explains Paparella. “Investors are challenged to be mindful about where to invest within emerging markets.”Despite these positives, currently, markets are in a bit of a waiting game when it comes to the space, and are, for now, anticipating an inflection point, say experts. But, of course, there is more to come, and the market is prepping.Espinosa affirms that though for the last five or so years EM has had an overhang – related to events such as the pandemic, geopolitical risks and rising rates in developed markets which has placed pressure on the asset class – the market is very close to the tipping point where those factors are waning.“Traders are of course looking to maximise opportunities clearly and looking for an upside but how do you reconcile that with a challenging political environment or geopolitics? That’s always going to be an issue but our iFlow data shows that the EM fixed income sphere is just waiting for a trigger,” adds Yu.Shifting strategiesSeemingly in preparation for this both firms and providers across the market are focusing in on how to take advantage of the space most effectively. One key way has been through new hires to push into new regions and establish internal processes.“EM is a mosaic of sub-asset classes rather than a unified universe. It requires very different skills to trade EM FX versus rates or credit as the liquidity and price discovery mechanisms vary markedly. Desks that are designed to be nimble and opportunistic should be able to provide alpha through skilful execution,” comments Sambor.In addition, several technology vendors have been incorporating EM bonds and enhancing their offerings in other ways to service client demand.“As it is a very broad and growing segment of the market, it is driving managers to beef up their talent and resources. EM fixed income offers lots of benefits to clients from a risk adjusted return perspective, but it is not something you can beta efficiently. It requires resources to be able to invest effectively across a universe of 70 different countries,” explains Espinosa.Various hires, new initiatives, and offering enhancements in the space have peppered the headlines in recent times. Recent examples include Fernando Ortega having been appointed head of emerging market sales at KNG Securities as part of its strategy of expanding in emerging markets across all areas of its business, and Paparella who joined BTIG’s fixed income group in July 2024 to help expand the firm’s presence across Latin America.He explains: “Recently, more firms have expanded their emerging markets divisions in response to growing investor demand for diversification and higher-yielding fixed income assets. This involves hiring talent with specific skillsets and investing in dedicated infrastructure, including foreign offices, developing new platforms, and expanding marketing efforts.”Various vendors have also continued to enhance their scope to meet investor demand for greater access to new jurisdictions, such as MarketAxess’ enhancement of its Open Trading platform to include a functionality focused on the local currency bonds of Poland, Czech Republic, Hungary and South Africa, and JP Morgan including Indian government bonds in its emerging market debt index.Demonstrably, the asset class is growing with a swathe of firms moving to position their teams in the strongest position possible.“Bank trading desks continue to add human and algo trading resources to the sector, and that paired with the increase in alternative liquidity providers is proving that EM can provide unrivalled liquidity,” asserts Burke.A stock picker’s paradiseThe emerging market fixed income sphere is not one, simple and homogeneous set. As an asset class it is a universe full of intricacies and niche knowledge. Though bolstered by rebounding economies, increasing globalisation and accessibility, what is key is knowing where – and how – to maximise opportunities.“In this world, it is about selectivity. Emerging market fixed income is a bit of a stock picker’s paradise,” declares Yu.But just how is this being enabled? As the EM investment community expands, of course so does the ecosystem which surrounds it.The space, which by nature is fragmented both geographically and in terms of instruments, and thus complex, is being democratised through the enhancement of the systems. Namely, technological innovation through automation and electronification.Nooy tells The TRADE: “Different regions and countries have different domestic rules about what you can and can’t do and what you can trade. On the currency side, you need to be able to settle locally which includes custodians, so it is not easy.”Over time, as more of these sectors start getting traded electronically via different platforms the interest will continue to increase despite the fact that EM is lagging slightly behind developed markets.”Of course, the extent to which e-trading is prevalent across emerging markets, and the processes which interact with it is yet to reach the same levels.Burke confirms that “There has also been an increase of alternative liquidity providers within EM, specifically systematics and ETF providers. We’ve also seen an increase in portfolio trading activity in the market.”He adds: “Clients are turning to our protocols like request-for-market (RFM) to execute larger trades. During the recent volatility in early August, our RFM volume was up 103%.”When it comes to trading you must be acutely aware of what you’re dealing with, and emerging markets require particular focus. The minutiae of each jurisdiction and region in question requires a thoughtful approach.Speaking to the specifics when it comes to the actual trading itself, David Everson, head of fixed income trading EMEA at Liquidnet, explains: “EM has always been an important part of our business as our dark pool protocol is well suited for trading those harder-to-trade names. If you look at the more illiquid bonds in the EM market, a dark pool is appropriate as you want to minimise information leakage and get trades done without leaving a footprint.  “The EM market is so vast. If we consider the more liquid bonds in the EM market, it is full of potential. One of our protocols – Rebalance, our dealer-to-dealer electronic business – is suited for that. We see smaller trades in Rebalance while our dark pool is better suited to less liquid bonds and larger-sized tickets.”Evidently, the emerging market fixed income sphere is trading. As Nooy adds: “In our new issue trading platform, our primary trading protocol, we’ve definitely seen a pick-up in emerging market issuance, which had been quite absent in the last year or two.”For EM FI teams to be truly successful, what is required is comprehensive support in the form of efficient, up to date, and importantly innovative systems. It is a complex world which requires effective tools for risk management, data and information, to make the most of local processes and to take in relevant regulations and compliance requirements.Paparella explains: “This complex set of needs has naturally driven the growth of the vendor industry […] In line with broader market trends, emerging markets benefit from innovative technology and platforms that enhance visibility and transparency. The increased availability of information is a game-changer.”As a distinct asset class, EM fixed income is well positioned for a rebound as the investment community seeks alternatives offering higher risk and returns while maintaining appropriate levels of safety and transparency.”As institutions demonstrably expand their remits through stronger teams and enhanced solutions, the message is clear – we’re getting ready.This asset class is perhaps boundless, as the markets (and governments) in question continue to evolve and face increasingly unpredictable times. To maximise opportunities in the space, the time for preparation is now.The post Don’t sleep on emerging markets fixed income appeared first on The TRADE.

FTSE Russell will make a price source change to include Tradeweb FTSE benchmark closing prices for US Treasuries, European government bonds and UK gilts in FTSE’s global fixed income indices, including its World Government Bond Index (WGBI).Lisa SchirfLaunched 40 years ago, The WGBI measures the performance of fixed-rate, local currency, investment-grade bonds and comprises sovereign debt from over 25 countries, denominated in a variety of currencies. Tradeweb FTSE Closing Prices are expected be included in March 2025.“The World Government Bond Index is FTSE’s flagship global index and a leading global benchmark for fixed income markets,” said Lisa Schirf, global head of data and analytics at Tradeweb.“The inclusion of Tradeweb’s benchmark closing prices in FTSE’s indices validates our continued commitment to develop the next generation of fixed income pricing and index trading products for traders and investors worldwide.”These benchmark prices can be used in index construction, as well as reference rates for a broad range of use cases, including trade-at-close transactions and derivatives contracts.In addition to providing benchmark closing prices, Tradeweb stated that it plans to bolster electronic trading functionality for FTSE Russell fixed income indices and customised baskets.For clients seeking to efficiently express a view on FTSE Russell indices and baskets, Tradeweb added that providing enhanced trading functionality can help efficiently manage what are often their largest and most critical trades.“We’re pleased to announce the price source change within our global fixed income indices to include Tradeweb FTSE closing prices for these significant global rates markets,” said Scott Harman, head of fixed income, currencies and commodities at FTSE Russell.“It ensures our indices continue to incorporate transparent, representative data sets across the diverse universe of fixed income markets that they track. Additionally, FTSE Russell’s benchmark administration of these prices brings a new level of transparency and rigorousness to the valuation of fixed income markets and our indices.”The post World Government Bond Index to include Tradeweb FTSE benchmark closing prices appeared first on The TRADE.

Hugh Whelan has been named head of liquidity management and data strategy at SGX FX, having previously worked as head of CME Group owned EBS Direct.Hugh WhelanThe move comes as SGX FX seeks to bolster its liquidity provision and data offering. Jean-Philippe Malé, president at SGX FX, said: “[Whelan’s] vision and expertise in building strategic partnerships with liquidity providers and technology service vendors worldwide will be instrumental in this next chapter of our growth. “With his proven track-record in FX markets, Hugh is uniquely positioned to lead our efforts in enhancing our platform and expanding the SGX FX franchise globally.” Specifically, London-based Whelan will be responsible for overseeing the strategic direction and growth of the liquidity provider client segment. He is also set to develop the data products within SGX FX.Whelan’s career has had a strong focus on FX markets, having previously led the launch of EBS Direct into a new bilateral FX trading venue – which is now owned by CME Group.  Speaking to his appointment, Whelan, said: “I am thrilled to join SGX FX at such an exciting time in the company’s growth. I look forward to collaborating with the team to enhance our platform offerings and ensure we maintain a competitive edge in a fast-evolving market.”The post Former head of CME Group’s EBS Direct joins SGX FX appeared first on The TRADE.

What factors do you use to analyse bank performance and set panels?We consider a variety of factors, but pricing quality is first and foremost and cannot be overlooked. Under this idea is a multitude of factors including a constant assessment of bid ask spreads, counting rejects in terms of both absence of pricing and trade rejection, historical performance in terms of currency, size of trades, and importantly, the measure of bank availability in ‘crisis’ i.e. how reliable our liquidity providers are in difficult trading times. When the market is functioning well, spreads are tidy, liquidity is abundant, and quality pricing is easier to find. In those 5% of times when the market is under stress, that’s when we need to know where to look.Fill ratios and hit rates are also important factors when considering bank performance.How do you structure your panels?Our process for LP selection is dynamic, meaning we can adjust our LP panels easily and there is no real lag between analysis and panel adjustment. This flexibility helps us respond quickly to changes and to maintain trading efficiency. We can segment our flow into specific currency buckets based on several characteristics such as currency, groups of currencies, and size. We then decide what tier the trade or groups of trades fit into in terms of difficulty.Underneath this, we also consider market conditions or the desired outcome for a particular trade. While we have an idea for the number of banks a trade would ideally have, we don’t believe that throwing as many LPs as possible into an aggregator will allow us to achieve an efficient spread.  I think the market now agrees too.How can you move into the position of ‘preferred customer’ and what benefits can this bring?We see our relationships with our liquidity providers as partnerships, and we take a strategic approach that emphasises mutual value and long-term partnership. We don’t want or expect our LPs to be the best at everything. We value transparent communication – if you aren’t going to be efficient with GBPUSD but you are going to add value somewhere else, then let’s have a conversation and we can structure our panel accordingly.As I’ve mentioned before, we place a lot of value on reliability and consistency in both good and bad times. All of this helps to create a more efficient environment. Moreover, the benefit of this mutual understanding is that it fosters the creation of long-term successful relationships and a well-functioning market.How do you leverage bank relationships to get the best pricing?We use a combination of engagement and transparent communication to leverage bank relationships to obtain quality pricing. When you reach a point in the relationship where you have regular dialogue, consistent trading volume, and productive use of technology in terms of analytics and execution, then you have a good base for building lasting relationships that support your competitiveness in the market.The post Dynamic panel structuring is key to maintaining trading efficiency appeared first on The TRADE.

BNY has launched a new EU trading desk in Dublin, Ireland as it seeks to expand its execution across Europe and deliver integrated execution serviced to its clients.The desk is live and fully operational and specifically aimed at facilitating more efficient trading for EU-based clients across both fixed income and equity markets globally, focusing on streamlining the firm’s offering across different regional markets. Adam VosAdam Vos, global head of markets at BNY, explained: “Expanding into the EU is a direct response to the growing demand from our EU-based clients for execution services. The addition of our new team in Ireland enhances our ability to offer seamless and efficient services.“We’re committed to strengthening our international offering of execution services and meeting the needs of our clients in the EU and beyond.”The development enhances BNY’s operational ecosystem execution services offerings in Europe. Solutions include comprehensive execution to custody for BNY’s Markets, Pershing and Asset Servicing clients.Bianca Gould, head of equities and fixed income EMEA, markets, at BNY is set to lead the execution services offering across the region. Read more: BNY Mellon names new head of fixed income and equities EMEA and head of US fixed incomePaul Kilcullen, country head of Ireland at BNY, explained: “Clients can execute equities and fixed income with enhanced support across time zones by BNY’s global team. This is a key milestone in our international growth strategy, which will have a positive impact on Ireland’s growing role as a key financial hub in Europe.”The post BNY goes live with new trading desk in Dublin appeared first on The TRADE.

The European T+1 Industry Task Force has voiced support for a co-ordinated move to T+1 in the EU, acknowledging the benefits of an aligned approach across the entire European region, including the EEA, the UK and Switzerland.In a new report, the task force stated that this followed a range of views being expressed as to whether the date identified for the UK transition, H2 2027, could also be a feasible implementation date for the EU.Read more: Inside the UK’s blueprint for the move to T+1 settlementThe task force did, however, emphasise that depending on the exact definition of what regulatory, technical and operational changes will be required, a transition period of between 24 and 36 months will be required to accommodate the complexity of the market infrastructure in Europe.“The task force is supportive of a move to T+1 in the EU, and recognises the potential benefits in terms of efficiency improvements and risk reduction,” said the task force in a report.“It is clear that a move to T+1 would be a complex, multi-year undertaking, and requires the collaboration of all industry stakeholders to ensure that we do not introduce new risks or damage the existing efficiency, liquidity and functioning of EU securities markets.”In the report, the task force also provided a range of further suggestions to ensure the industry can move to T+1 safely and efficiently, including a maximum possible notice period for transition.For a successful transition, the task force highlighted that public authorities should consider a temporary suspension of cash penalties over the implementation period.On the same topic, the group added that public authorities should avoid implementing complex changes to the CSDR cash penalty rules in advance of the transition to T+1.Elsewhere, the task force stated that ESMA should consult as planned on “measures to reduce settlement fails” and make a determination as to whether further regulatory changes are necessary to support enhanced settlement efficiency, and which of these changes, if any, should be sequenced before a move to T+1.Key findings also included that changes to the daily timetable for trading, clearing, settlement, and ancillary processes will be required to preserve current efficiencies.In addition, pre-settlement matching was noted as being essential to identify and remediate potential issues as soon as possible.Established in 2023, the European T+1 Industry Task Force comprises of 21 trade associations involved in European capital markets, bringing together a range of industry stakeholders who would be impacted by a move to T+1 settlement for securities traded and settled in the EU.The post European T+1 Task Force acknowledges benefits of aligning with UK for transition in H2 2027 appeared first on The TRADE.

The US Securities and Exchange Commission (SEC) has charged Chicago-based firm Cumberland DRW with operating as an unregistered crypto asset dealer. Jorge TenreiroSpecifically, the watchdog concluded that Cumberland DRW had operated as an unregistered dealer since “at least March 2018 through to present” in more than $2 billion of crypto assets offered and sold as securities. This was “in violation of the registration requirements of the federal securities laws that are designed to protect investors,” said the regulator in an official announcement.Cumberland operates 24 hours a day, seven days a week and refers to itself one of the world’s leading liquidity providers in crypto assets. “The federal securities laws require all dealers in all securities to register with the Commission, and those who operate in the crypto asset markets are no exception,” said Jorge Tenreiro, acting chief of the SEC’s crypto assets and cyber unit (CACU).“Despite frequent protestations by the industry that sales of crypto assets are all akin to sales of commodities, our complaint alleges that Cumberland, the respective issuers, and objective investors treated the offer and sale of the crypto assets at issue in this case as investments in securities, and Cumberland profited from its dealer activity in these assets without providing investors and the market with the important protections afforded by registration.”The SEC’s complaint specifically charges Cumberland with violating section 15(a) of the Securities Exchange Act, seeking permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.The post Cumberland DRW charged for operating as unregistered crypto dealer by SEC appeared first on The TRADE.

Citi has moved to expand its FX markets team in Asia with the appointment of two new individuals, according to an internal memo seen by The TRADE.Anand Goyal has been appointed head of FX institutional sales for Japan, Asia North, Australia and Asia South, based in Singapore.He will report to Cécile Gambardella, head of sales for markets for Japan, Asia North and Australia and Sam Hewson, global head of FX sales.“As we look to build on our market leading position across the region, Anand’s appointment is a significant move that aligns with our strategy. His expertise will enhance our ability to deliver tailored FX Solutions and foster stronger partnerships with our institutional clients,” said Hewson.Goyal joins from JP Morgan where he had been serving as head of macro FX and real money sales for Asia Pacific.Alongside him, Hooi Wan Ng has been appointed head of markets for Malaysia. She will report to Sue Lee, head of markets for Asia South and Vikram Singh, Citi country officer and banking head for Malaysia.She also joins from JP Morgan where she had been serving as head of local corporate sales and private side sales.“With Hooi Wan’s extensive experience and deep understanding of the local market, we are well positioned to grow our Malaysian franchise further,” asserted Lee.“She will lead the markets business in Malaysia with a client centric approach, leveraging our global footprint and solution structuring capabilities.”The post Citi expands Asia FX markets team with JP Morgan hires appeared first on The TRADE.

Edgar Castel is set to join Nordea as an equity trader following almost five years at Candriam, as revealed by The TRADE. Castel most recently served as a trader focused on equities (cash and swap), foreign exchange, and listed derivatives. Castel was one of The TRADE’s Rising Stars of Trading and Execution in 2023, recognised as a budding buy-side talent in the institutional trading space. He will begin his new role as of 1 November, based in Denmark, The TRADE understands.Jason Green was named director at BNP Paribas, focused on systematic macro sales following 10 and a half years at Morgan Stanley.  Whilst at Morgan Stanley he most recently served as executive director in electronic FX institutional sales. Before that, Green worked in fixed income derivatives solutions at Barclays Investment Bank. Olivia Gassner joined JP Morgan as VP, equity electronic sales trader following a stint at RBC Capital Markets. New York-based Gassner served in the same role at RBC Capital Markets for three years prior to the move. In the past, she worked at Barclays for almost five years, most recently as an associate, equity electronic sales trader. The post People Moves Monday: Candriam, BNP Paribas and JP Morgan appeared first on The TRADE.

How is the capital markets sphere reacting to the increasing presence of AI?At a high level, I think that most teams are pretty excited about the prospects of AI and the opportunities that it presents. Certainly we see very good usage among our teams. Despite this, there are certain concerns, understandably, and hallucination is certainly a topic that people are aware of. But at the end of the day, before trust comes education. It’s about helping folks understand where these models can add value right now and where they can’t.    A lot of the wariness also comes because AI models are known not to be good at certain tasks and this taints opinion when it comes to others. For example, AI models are not good at math – that’s just not what they’re trained to do. The key is to educate [our] internal users and explain that they shouldn’t get spooked because, when it comes to the analytical path, the potential is there.   How is AI already having a positive effect on trading processes? The traditional ChatGPT system, similar to our design internally, is focused on quick questions and quick answers. It aims to save people 20 to 30 minutes, on average. The deep research system we are working on allows one to rigorously research complex questions for results that can potentially save people 3 to 5 days.AI has the ability to unlock a lot of productivity for investment professionals, allowing those within capital markets to discover and digest information even faster than they were previously able to do.You could either be the fastest or you can be best, and we all want to do both but there are a lot of factors to consider.How are firms across the industry adapting their teams to be more AI-focused?In the future, our firm, and others, will want every team to effectively be an AI enabled team. At this point in time, however, what is of most benefit to organisations is to take a centralised approach. We have a team that is dedicated to AI as a centre of innovation – with technical expertise, doing research and building tools, but as importantly, looking for opportunities within the firm.   A lot of my role and the role of my team is connecting the dots and finding commonalities across teams at Balyasny. If something is working really well in one team or one vertical, it then becomes about translating that. It’s never a direct translation but taking the lessons about what’s working well somewhere and then adopting it somewhere else allows us to achieve more scale within the firm.The post Fireside Friday with… Balyasny Asset Management’s Charlie Flanagan appeared first on The TRADE.

Automation was central to a panel discussion on pre-trade transparency and front-to-back trading workflows last week at the Fixed Income Leaders Summit, with panellists noting that automation has different use cases and levels of success within the context of fixed income. Panellists argued that automation can be applied in some instances such as rates, whereas in others ultimately clicks are just reduced with only certain functions of the trade automated. Automation was therefore described by the experts as being a spectrum.“You have to understand that automation is not the same across various areas of fixed income,” said Ricky Goddard, head of credit trading at Schroders.“In credit, automation effectively is just reducing the number of clicks on the trade. We’re not at the point where we’re going to have our OMS or EMS read for certain characteristics and then have them push orders forward. For rates that can happen, but for credit markets it will be an entirely different process.”Some panellists did acknowledge that even on a high touch desk, high levels of automation can be achieved. This was noted as being useful particularly in times where smaller trades do not take precedence and pressure is on fulfilling larger trades.“Even on a high touch desk, we can have a hybrid setup where we initially set a list of trades to be automated and the algo will look at whether it fills these conditions. If met, it will execute, otherwise it needs a human trader to interact,” said Anuj Thakur, lead, high touch fixed income trading at Nordea Asset Management.Automation was described by some panellists as a “vicious cycle”, given that a lot of pre-trade data is a prerequisite to be able to automate.Thakur added: “As automation has picked up on the sell-side, whether it’s algos, pricing, RFQs quite quickly or various other protocols, that generates more data, which gives confidence both to the buy- and sell-side on approximately where the mid is.”With some benefits clear, panellists were hesitant to claim that full automation would be applicable in the fixed income context. However, some panellists noted that it’s best to never say never.This was in part an acknowledgement to the already huge advancements of procedures through electronification, which previously may have not been believed to be possible.“We do, however, need to get to the point where we’re able to really trust how we put that process in place and why we’re selecting the banks that we’re selecting. Also, are we putting certain trades that are automated all-to-all or some to a bespoke group of three to five brokers because the trade is potentially illiquid?” added Goddard.“When I’ve looked at some of the automation protocols in place for products in the past, you can fully automate who you want to send certain products to because you have a fairly good idea of market share in those asset classes. You need to be able to tailor it and that all leads back to having good quality data.”Goddard went on to add that he does not believe that we currently have the quality of data required to fully automate broker selection.Still seeing the positives associated with automation in fixed income, Thakur added: “We want our traders to focus on those block trades. A lot of time can be saved if a lot of that flow gets automated where you’re automating 60-70% of the number of tickets which you’ve done manually. This will ultimately free up time to focus on block liquidity.”Automation was a key discussion point in various panels at the conference, with many panellists highlighting the gains that new technologies are providing. As with any advancement though, it was agreed that adoption must rely of good data for gains to be actualised.The post The challenges of automation in fixed income: ‘Credit is an entirely different process’ appeared first on The TRADE.

Olivia Gassner has joined JP Morgan as VP, equity electronic sales trader following a stint at RBC Capital Markets. New York-based Gassner served in the same role at RBC Capital Markets for three years prior to the move. Read more: JP Morgan taps Liquidnet for VP, equities e-trading coverage In the past, she worked at Barclays for almost five years, most recently as an associate, equity electronic sales trader. The post RBC Capital Markets trader joins JP Morgan appeared first on The TRADE.

Following the US shift to T+1 settlement in May, the UK is gearing up for a 2027 shift and set to benefit from “second mover advantage” according to Andrew Douglas, chair of the T+1 technical group (TGT) of the UK Accelerated Settlement taskforce (AST). Andrew DouglasIn September the AST published its proposed recommendations for a transition to T+1 in the UK, calling for market feedback on its automation-heavy approach.The report outlines 43 ‘principal recommendations’ and 14 ‘additional recommendations’ which are open for consultation from any and all participants in the UK equity market until the end of this month (October 2024).Within the report are several ‘LEL’ markers – which Douglas interestingly revealed to a gathered roundtable this week is an acronym referring to ‘lessons learnt from the US’. Having the advantage of an example has been useful, agreed panellists, with support from the regulatory community pinpointed as a principal key to success across the board.In addition, Douglas explained, moving second has allowed for a range of cautionary tales: “For example, FX wasn’t really considered in the US but we have a work group specifically looking at FX and what the impact on that would be, and we also had the advantage of seeing what the impact of T+1 has been on stock lending so we can be smart after the event and do things differently.”The US’ shift is demonstrably helping to pave a way, identifying where things could be done differently.Notably, Douglas highlighted the weight of advice from US Securities Exchange Commission chair Gary Gensler who advised that other regions should “pick a date and stick to it” – an approach the UK’s Taskforce is embracing seriously. Speaking to potential roadblocks for a UK shift, Thomas Hansen, vice-chair of the European repo and collateral committee at the International Capital Market Association (ICMA), said: “It’s a plumbing issue akin to the UK’s current problems with its water supply – the plumbing is old but [it has to be done], you have to start somewhere.” He added: “The industry as a whole has had to become more efficient in its settlement process, front-to-back but it’s been very different the way we’ve solved this in different segments of the market […] overall it’s a massive challenge and obviously not everyone is going to be positioned the same way.” Read more: UK settlement taskforce pencils in October 2027 for T+1 switchOnce the AST’s recommendations are finalised in December, the report states that it is expected that “the recommendations, and their compliance, will be treated as a post-trade code of conduct setting expectations of behaviour of all UK market participants and as such, could be used for supervisory purposes”. When it comes to striking the right balance as to how many so-called ‘rules’ the market must adhere to, Douglas emphasised that the key issue lies in “over regulation versus over reliance on market practices”. In essence, when it comes to motivations to adhere, Douglas was succinct, explaining “if you don’t do these things, you won’t be fit for purpose”. Read more: Transition to T+1 ‘harder than expected’ finds Citi reportDespite major trepidation, the shift to T+1 in the US was largely hailed a success as the industry saw affirmation rates remain comfortably high and fail rates stay reasonably low.This success has been largely pinned down to one key factor – the big push made by the industry to pre-emptively adapt workflows and future-proof processes, as well as the implementation of highly alert, round-the-clock ‘war rooms’ and ‘command centres’.When asked about the notion of a safety net in the UK following the shift, the panel confirmed that there are no ‘press in case of emergency’ buttons available, and rather it will become a case of learning on the job, with those who prepare to fail bearing the brunt. “Markets are nimble, they do sort things out, they do find a way to function,” asserted Corinna Mitchell, General Counsel at Symphony.The post Inside the UK’s blueprint for the move to T+1 settlement appeared first on The TRADE.