Technology solutions level the playing field in fixed income
19 October 2018 Stamford
Image: Shutterstock
Off-the-shelf technology solutions are helping non-bulge bracket fixed-income dealers increase market share across a range of capital markets products, according to a New Greenwich Associates Report.
Expensive technology is becoming one of the key drivers of success in fixed income, with large global banks with multi-billion dollar technology budgets benefitting the most, the report revealed.
According to the report, an increase in technology available from third-party providers means that everything from trading technology to RiskTech can be purchased and customised.
This allows regional and middle-market dealers to auto-quote US Treasury prices alongside the world’s largest dealers.
Access to technology has had a direct impact on the market share of non-bulge-bracket firms, the report revealed.
Greenwich Associates’ research found that the aggregate market share of non-bulge-bracket dealers has grown between 2013 and 2017 across at least seven of the fixed- income product segments that are tracked.
According to trading desk heads and technology providers, the technology areas having the biggest impact on growing non-bulge-bracket market share are data and analytics, real-time information, client intelligence, and auto-quoting.
Kevin McPartland, head of market structure and technology research at Greenwich Associates and author of the report, said: “The ability of fixed-income market participants to interact electronically allows a middle-market dealer in Kansas City to find a new customer in Albuquerque and vice versa—without the need for a steak dinner or a cold call.”
“Ten years ago, this interaction would not have been possible; not because the technology didn’t exist, but because those middle-market firms could not afford the time or money to build the technology required.”
“While the broad relationships and large balance sheets of the biggest banks keep them front and centre, the remaining business that is won based on speed and price is increasingly up for grabs in large part due to the leverage that new technology provides.”
Expensive technology is becoming one of the key drivers of success in fixed income, with large global banks with multi-billion dollar technology budgets benefitting the most, the report revealed.
According to the report, an increase in technology available from third-party providers means that everything from trading technology to RiskTech can be purchased and customised.
This allows regional and middle-market dealers to auto-quote US Treasury prices alongside the world’s largest dealers.
Access to technology has had a direct impact on the market share of non-bulge-bracket firms, the report revealed.
Greenwich Associates’ research found that the aggregate market share of non-bulge-bracket dealers has grown between 2013 and 2017 across at least seven of the fixed- income product segments that are tracked.
According to trading desk heads and technology providers, the technology areas having the biggest impact on growing non-bulge-bracket market share are data and analytics, real-time information, client intelligence, and auto-quoting.
Kevin McPartland, head of market structure and technology research at Greenwich Associates and author of the report, said: “The ability of fixed-income market participants to interact electronically allows a middle-market dealer in Kansas City to find a new customer in Albuquerque and vice versa—without the need for a steak dinner or a cold call.”
“Ten years ago, this interaction would not have been possible; not because the technology didn’t exist, but because those middle-market firms could not afford the time or money to build the technology required.”
“While the broad relationships and large balance sheets of the biggest banks keep them front and centre, the remaining business that is won based on speed and price is increasingly up for grabs in large part due to the leverage that new technology provides.”
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