U.S. bond investors are coming around to using technology more to trade fixed-income products, as they seek to inject efficiency into processes that are still largely done manually, a study by financial analytics firm Coalition Greenwich and global fintech firm TS Imagine said.
Traders have slowly adopted execution management systems (EMS) in their workflow to enhance their execution capabilities as the market evolves, wrote Audrey Blater, senior analyst at Greenwich, in a report released on Tuesday.
The fixed-income market adoption of EMS is at “a tipping point” where some traders, while reluctant to use technology, “acknowledged a change of habit is imminently necessary,” said Blater.
Data-producing channels have expanded over the past five years to include many new factors: execution protocols, dealer prices, evaluated prices, liquidity scores, a plethora of communication pipes, and enhanced post-trade regulatory reporting, she said.
Legacy methods such as order management systems and phone calls or chats, however, “are ‘seeing’ a smaller and smaller fragment of the overall market, limiting the liquidity picture and pre-trade transparency,” she said.
The tech makeover of a market that sees billions of dollars of trades in a year though is still gradual.
The study found that only 39% of some 41 senior fixed-income traders in US asset management firms, hedge funds and insurance companies, identified using an EMS.