Adam Gould, head of equities, Tradeweb
Fixed income ETFs have continued to prove their worth as an extremely flexible product for investors. They’ve enabled market participants to transfer risk quickly, even when the underlying bond market is restrained. ETFs have several different use cases for investors, including but not limited to cash equitisation and tax management, hedging vehicles and lower impact ways to express short-term tactical views on the market. All of these use cases should continue to proliferate next year, especially as we see the industry trend towards a heightened focus on trading costs, the rise of multi-asset trading and the continued liquidity demands.
Steve Toland, co-founder, TransFICC
Over the past few years automated trading has grown slowly in fixed income, but we expect 2024 to be the year when this really accelerates. All trading firms are looking for increased efficiencies, but many workflows have been seen as too complex to automate, meaning that manual trading persists in many parts of fixed income. This is no longer the case, as technology is flexible enough to follow any workflow currently performed by a person. Credit trading provides a good example of the benefits, where RFQ negotiation and trading can all be automated. Moving smaller trades to an automated process will improve response times, increase the number of trades dealt, and allow traders to focus on larger more profitable deals.
Legislation will also feature highly as firms prepare for DORA (Digital Operational Resilience Act), where compliance is expected by early 2025. DORA applies to more than 22,000 financial entities in the EU. Importantly, it also applies to technology providers in the EU, as well as those supporting EU entities from elsewhere. The aim is to strengthen the financial sector’s resilience to technology-related incidents and introduces very specific and prescriptive requirements, like having robust measures and controls on systems, tools and third parties, and having the right operational continuity plans, while continuously testing their effectiveness.
Vincent Grandjean, co-founder and chief executive officer, Propellant
As 2024 unfolds, the fixed income market landscape is experiencing a rapid transformation, driven by both technological advancements and regulatory changes. A key focus in this evolving arena is the enhancement of transparency and the efficient utilisation of data. A significant development is the integration of unique product identifiers, marking a stride towards standardisation in market transparency. Yet, this contrasts with regional divergences, especially in the UK and Europe, where transparency thresholds and reporting requirements vary. Navigating these diverse regulations requires a meticulous approach.
The transformative power of big data is also coming to the fore. With an abundance of data now available, there’s a shift towards using these vast datasets to inform pre-trade decision-making, thereby enhancing market strategies and risk assessment. Moreover, as technology increasingly becomes central to data processing, the industry faces rising costs and complexities in maintaining such infrastructures. This has led to a trend towards outsourcing to balance efficiency and cost-effectiveness. Additionally, the application of AI in extracting actionable insights from complex datasets is gaining momentum. This trend is expected to provide a competitive edge in the market. Overall, the fixed income markets are set to become more informed, efficient, and dynamic, navigating this evolving landscape with a renewed focus on clarity and strategic foresight.
Venky Vemparala, global fixed income product manager, FlexTrade Systems
This year saw a rapidly evolving fixed income EMS space, and in 2024, we expect innovation to continue at a lightning pace. Over the next year, I envision automation as a central theme, with data and analytics being adjacent solid themes. The buy-side will continue to push for efficiency in managing their trading blotters. In turn, venues and platforms will respond with increasingly rich automation functionalities, each with a distinct set of workflows, which is where an EMS is now becoming a crucial tool on bond trading desks to aggregate.
The buy-side will see additional value and optimise their overall trading workflows by opening the lifecycle of the venue’s automation via API and touchpoints to achieve more granular access and overall control of the automation functionality. In turn, venue and platform automation solutions will become more “algo” like with templated parameters, with the potential for common slippage and performance benchmarks defined and standardised in 2024. Alongside automation, the drive for sophisticated, actionable data will also be at the forefront of innovation, with deeply integrated analytics being crucial to assist with automation decisions and portfolio trading list iterations. It will be fascinating to see the innovation 2024 brings.
Mike Sobel, co-CEO and president, Trumid
US bonds recorded their best month in nearly 40 years in November. With attractive yields and increasing accessibility of the asset class, fixed income is drawing in a more diverse set of market participants. New interest players, such as systematic quants and retail investors, along with more traditional buy- and sell-side institutions are focused on the credit market.
With alternative participants entering the credit space, technological advances, and the proliferation of market data, the tailwinds for the adoption of more advanced electronic workflows are giving rise to a new era of tech-enabled credit trading. Client interest in intelligence and automation is accelerating as tech-savvy and data rich users seek agile platforms that can rapidly innovate alongside them and provide the aggregated and customised insights that they need.
The credit electronification story is far from over. Greater adoption is creating a network effect – driving liquidity and the velocity of the asset class. Over the next 12 months, we therefore expect technology to play a greater role with intuitive workflows, protocol flexibility, and data-driven decision-making tools adding the greatest value to traders and investors.