Kicking off this whistle-stop summary as the number one most impactful innovation in the industry is the order and/or execution management system (OEMS) – the beating heart of trading desks around the world. Brought to market in the early 2000s, the sometimes combined and sometimes separated systems were designed to enhance the previously manual processes associated with managing and executing orders. They offer a nifty alternative to the previous plethora of both written records and later, excel spreadsheets that traders were previously forced to grapple with each day to keep things in order.

These systems touch upon all elements of the trading lifecycle throughout the front-to-middle-to-back-office including execution, order, risk and portfolio management. Traders’ order blotters sit within these systems and trading teams use these systems to consolidate data sources and research in one place to increase efficiency and speed when going about day-to-day activities. They also use them to access the market, connecting directly to counterparties to access liquidity. An EMS overlays an OMS by enhancing connectivity, aggregating data and being more flexible as it solely pertains to execution needs.

The systems are constantly evolving to meet the needs of the industry with new third-party vendors integrating their offerings via API in order to gain access to clients using them. While adoption is widespread in equities other asset classes such as fixed income have been slower to adopt these systems given the nuances of the workflows and liquidity landscapes in these markets. For more information on the various providers in the EMS market, check out The TRADE’s annual survey.

2. Bloomberg Terminal

Up next and needing little introduction is the Bloomberg Terminal, Bloomberg’s data and proprietary trading platform. First brought to market in the early 80s the system has over the decades earned its title as the leading market data source and a must have for any financial institution looking to execute in the markets. This is reflected in its annual subscription now nearing $30,000. For this reason, the system is favoured by institutional investors as opposed to individual ones.

Its black background and computerised white text might seem a little out of date to individuals outside of the industry but its role in the financial markets has cemented this interface as a poster child for financial services. Home to Bloomberg’s central data services the interface offers users access to news, data, analytics, and multi-asset trading tools. Given its widespread adoption by institutions it’s also a people move source as users can see up to date contact details of peers. According to Bloomberg, it offers  sell-side and independent research from over 1,500 sources as well as proprietary research on various industries and markets.

3. CLS

Coming in at number three is the multi-currency settlement system, CLS. While perhaps not one of the most exciting aspects of the trade lifecycle, settlement is a central process that acts as a pillar for the capital markets. The settlement period relates to the space of time between the trade date and the settlement date when a trade is considered complete. Within this window both the buyer and seller must undertake any necessary actions to ensure the transaction can be completed.

Established in 2002, the CLS network is designed to minimise risk and offer operational efficiency to institutions within the settlement window by avoiding bilateral settlement that is more likely to fail.

The settlement window has found itself in the industry spotlight as of late thanks to the recent decision from regulators in the US to move North American markets to a T+1 settlement period, down from T+2.

4. Central limit order book (CLOB)

While it is easy to romanticise the sheer graft that went into trading a few decades ago, the introduction of central limit order books (CLOBs) and streamed pricing were much-needed innovations. The idea that in order to understand the changing price of an individual stock or security, one would have to study daily directories and newspapers is something that many of those starting out in the industry today will never understand. With no central directory of orders in the market, understanding pricing must have been a headache to say the least, leaving many individuals subject to arduous process of calling everyone in the phone book.

CLOBs allow for transparency of live orders that are prioritised by price and time. By seeing what is available on the order book, traders have an idea of how much volume can be executed at a specific price. Facilitated by exchanges, a CLOB allows buyers and sellers to submit their trading interests and then utilises a matching engine to match buy and sell orders based on specific requirements such as price time priority. Once a trade has been matched the buy and sell orders are removed from the order book and the bid and ask prices are updated accordingly to reflect the change.

CLOBs offer greater transparency and consolidated liquidity meaning participants have a greater chance of trading. They’re typically used in equities given that this asset class trades on exchange unlike fixed income and some foreign exchange assets. Thanks to huge leaps in technology, participants can hide their full amounts in what’s known as “iceberg orders” that replenish the order book once liquidity has been matched and removed from the book.

5. Algorithmic trading

Rounding out the top five of The TRADE’s rankings of the most influential innovations to come to trading are algorithms and the concept of executing algorithmically or automatically. Most common for low touch and ‘easy flow’ algorithms are often used for small orders in highly liquid markets. Algorithms are a computer programmed trading workflow that follows a defined set of parameters. These parameters could be anything from liquidity seeking to volume dependant or venue-specific such as dark seeking.

Algorithms often offer traders a quick and easy route to market. They remove the opportunity for human error by taking away any manual processes and offer a low latency solution that will often achieve best execution and avoid any unwanted price changes.

While this all sounds fantastic and you may be wondering why they aren’t used for all flow, there are some downsides. Unpredictable activity in the markets such as Black Swan events can render algorithms that rely on historical data useless and result in losses for firms. At the other end of the spectrum, a lack of human judgement and intervention can sometimes result in lesser results in nuanced situations that require human intuition.

Buy-side institutions will often use a broker’s algorithmic suite for execution, with many sell-side institutions vying for the interest of clients with the launch of new and innovative products with flashy names. Less common is the development of proprietary algorithms inhouse on the buy-side given the cost, time to implement, and the speed at which priorities evolve. For more information on algorithmic trading providers, check out The TRADE’s annual survey.

6. The FIX Protocol

Think of the FIX Protocol – or the Financial Information Exchange Protocol – as a universal language allowing institutions to communicate clearly when looking to execute in the market. Used by the buy- and sell-side as well as venues and regulators the FIX Protocol is an industry standard used to complete transactions. It was originally cooked up in the early 90s by Robert Lamoureux and Chris Morstatt in order to exchange equity information between their respective firms Fidelity Investments and Salomon Brothers.

The crux of the protocol isa language comprised of a series of messaging specifications to be used in trade communications. Each specification whether it be size or time or client type has a number or letter associated with it making trading intentions clearer and more clean-cut no matter where they have come from. The protocol was designed in an attempt to simplify workflows and reduce error by creating an industry standard to adopted by all.

The standard is non-proprietary and free. It is owned by the FIX Trading Community made up of buy and sell-side firms, vendors, industry associations and trading venues. While originally only focused on equity information, the FIX protocol began supporting straight through processing (STP) in the 90s and also later added indication of interest (IOI) capabilities to its roster.

7. Dark pools

Dark pools are trading venues where institutional investors can access liquidity without giving away any pre-trade information. Dating back to the 80s these private pools emerged in the US as a way of institutional investors executing without showing their hand to the market in a bid to limit market impact, later arriving in Europe. Given the proliferation of high frequency trading (HFT) several investment banks chose to launch these alternative trading systems (ATS) as a means of protecting institutional clients who are typically slower to execute.

They were originally designed to facilitate block trading but have since evolved to support trades of all sizes – something that has led to criticism from some corners of the market in recent years. Some regulators – in particular those in Europe – have begun exploring how to limit dark trading in recent years given its potential role in reducing volumes on the price forming lit order books hosted by exchanges.

Dark trading is a popular practice globally. While there are specific dark pool operators such as Liquidnet and Virtu, many of the incumbent exchanges also have dark pool offerings.

8. All-to-all trading

Next up is all-to-all trading – which does what it says on the tin. The protocol is a type of trading that allows buy-side institutions to provide liquidity and trade amongst each other. Historically trading has always involved a sell-side counterparty that will access the market and source liquidity on behalf of a buy-side client. The introduction of all-to-all trading has subverted this workflow and is an attempt from venues operating these liquidity pools to offer buy-side firms an alternative means of trading.

The protocol is heavily focused on the fixed income markets and has seen recent growth in the foreign exchange sphere. It has seen a boom in recent years as institutions have looked to diversify the way that they executed. Chief among the catalysts for its growth was the Covid-19 pandemic which began in 2020 and subsequently saw many traditional sell-side institutions reduce their balance sheet and withdraw from the market.

Tradeweb launched its all-to-all corporate bond trading functionality in 2017. Rival fixed income trading venue Bloomberg launched its global all-to-all bond trading service in 2022. However, first off the bat was MarketAxess which launched its Open Trading all-to-all trading environment in 2012.

9. Transaction cost analysis (TCA)

Transaction cost analysis (TCA) is perhaps one of the most heavily discussed industry topics as of late thanks to the plethora of data now needed to execute and to prove best execution to clients. The process is used by institutional investors to analyse data to evaluate their trade performance post-trade, ensuring they have achieved the most competitive pricing. The data is used to make decisions on which sell-side counterparties to keep on an algo wheel or ‘panel’.

While the process has historically been a post-trade one, in today’s trading environment many desks are now assessing how to feed this information into their processes pre-trade in order to ensure further efficiencies.

Today, buy-side trading desks are increasingly using new technology to evolve their TCA use towards something more proactive, utilising predictive analytics that enable participants to anticipate and mitigate execution risks, optimise trading strategies, and help to generate alpha. The data is increasingly being used as more than a simple measurement, but instead is being applied to make better informed trading decisions.

TCA can be done in-house but is also offered by third party providers.

10. Systematic internalisers (SIs)

Next up in The TRADE’s innovation rundown are systematic internalisers (SIs). Usually hosted by bulge bracket banks, SIs are an internalising mechanism that allow banks to execute flow over the counter or off exchange. They’re an alternative venue to the lit order books hosted by exchanges. Within SIs, banks can cross flow from their various business divisions using their central risk books without going out to the market to find the other side. Within these ecosystems they can cross client flow with each other or cross it with their own proprietary workflows.

As an alternative trading venue to the lit order books these venues have found themselves under scrutiny as of late from some that argue that SI volumes are harmful to wider market structure as they do not contribute to price formation and fragment liquidity. Flip the coin and many participants argue that if a trade achieves best execution, it doesn’t really matter where it was executed so long as it achieved the optimal outcome.

In Europe, the SI regulatory regime was introduced in 2007 as part of the Mifid I regulation. The quasi-dark venues properly took off in 2018 with the introduction of Mifid II and greater restrictions on dark trading.

11. Direct market access (DMA)

Many of the innovations in this lengthy list offer a new way for buyers and sellers to access the markets and direct market access (DMA) is no different. In years gone by, buy-side firms have placed orders via a sell-side broker to be traded on exchange. However, DMA is the process of directly connecting electronically to an exchange in order to trade on exchange securities without using a broker or intermediary.

These pipes require advanced technological capabilities and are usually developed by sell-side firms. Buy-side firms will often pay to integrate said pipes in order to gain direct access to the exchange without having to go through the sell-side counterparty. The process offers a disintermediation of the typical broker trading workflow and creates greater optionality for investors looking to access the markets.

12. Hight Frequency Trading (HFT)

High frequency trading (HFT) firms have extraordinary computing capabilities. Sometimes known as proprietary trading desks, these firms are famous for their high-speed connections to the markets that leverage co-locations at exchanges and enhanced proprietary data feeds to gather information. They capitalise on the information gathered in one location to trade ahead of slower institutional investors on other venues.

The process was first brought to the world’s attention in Michael Lewis’ 2014 novel ‘Flash Boys’ which unpacks the role of latency in trading in light of the shift to electronification. The crux of the story: electronification and the laying of fibre optic cables to access venues had opened the door for these faster and more predatory firms, able to nip in ahead of institutional investors.

Today, HFT firms will often use microwaves using satellite dishes at exchanges to gain greater speed still. Some venues, such as Aquis, banned HFT on their venues as part of their USP. Aquis, however, moved to lift this ban last year in order to expand its liquidity pool in a decision that had both supporters and critics.

13. Exchange traded funds (ETFs)

Exchange traded funds (ETFs) have seen a journey to dominance in the last ten years in the advent of more passive trading strategies as opposed to more active ones. ETFs offer investors a chance to buy and sell a basket of securities as if it were a single stock and transaction.

ETFs track and mirror how a pool of exchange traded securities is trading on exchange and price themselves accordingly. They can simply track an index or they can be made up of a custom basket of stocks. The first ETF to launch in the US was the SPDR S&P 500 ETF (SPY) in 1993. ETFs, among other index tracking investment vehicles, have become popular in the increasingly passive trading era where low risk index-based strategies offer greater returns for investors in exchange for half the fees charged by active investors. Given their low risk and low fee model they’re extremely popular with retail investors.

While these trading products are usually passive, active ETFs with an active manager picking and choosing what goes into them, have also seen a surge in popularity in recent years.

14. Periodic auctions

Coming in at number 14 are periodic auctions, an innovation which offer an alternative location for investors to trade instead of the lit order book. Like SIs, periodic auctions saw a boost in interest following the implementation of Mifid II regulation in 2018 and the restrictions it imposed on dark trading venues.

The core difference between a periodic auction and a CLOB is that periodic auctions are not continuous. Various models exist but at their core, periodic auctions collect buy and sell offers to determine a price and then triggers a call period whereby participants can see the indicative price and how many shares can be expected to be executed. Participants then have the option to submit firm orders into the auction. These built in inherent speed bumps favour slower investors and prevent them from being picked off as they might be in the lit books.

The venues have become increasingly popular in recent years because they help investors seek price improvement by prioritising order size over speed at the order allocation phase. They are price-forming rather than price-referencing and they introduce randomness in trade timing. Several alternative trading systems (ATS) being brought to market recently have built their offerings around the skeletal structure of a periodic auction.

15. The Cboe Volatility Index (VIX)

The Cboe Volatility Index (VIX), has become an increasingly essential tool for traders as of late and, given the current market dynamics it’s likely it’ll remain front and centre in traders’ minds for a while yet. Created by Cboe Global Markets in 1993, the original index was used to measure the market’s expectation of 30-day volatility suggested by at-the-money S&P 100 Index (OEX Index) option prices.

In 2003, the index was updated as part of a partnership with Goldman Sachs. Designed to reflect a new method of measuring volatility the index is now based on the S&P 500 Index (SPX) for US equities. It estimates volatility by consolidating the weighted prices of puts and calls on the SPX. It has become a priceless tool for participants looking to track market volatility and for those trying to understand investor sentiment in times of market stress.

The need for such tools has been exacerbated in the last few years thanks to several major unprecedented market events, not least the global pandemic and the new ‘black Monday’ seen on 9 March 2020.

16. Portfolio trading

Next up is portfolio trading. The concept is heavily linked to ETFs and is not dissimilar from program trading in that it allows for the trading of a basket of stocks. Portfolio trades allow traders to execute a basket of stocks in one single transaction, minimising costs and allowing traders to bundle less liquid or more difficult to trade instruments in with more liquid transactions. The concept has exploded in the last few years, egged on by market conditions and volatility brought on by the pandemic and other macroeconomic factors.

Electronically, it is a relatively new phenomenon to the last four to five years, and the protocol has gained momentum alongside other forms of electronic trading that differ from request for quote (RFQ) protocols on multi-dealer platforms, as participants look to minimise their market impact and avoid information leakage. Manually, however, the practice has existed for many decades using a laborious process involving excel spreadsheets and phone calls. Portfolio trades have historically helped many institutions to move big blocks of risk.

The protocol appeals to the sell-side for several reasons, namely the fact that they can take a basket of securities and use them in other trades, special purpose vehicles (SPV) or, importantly, the exchange traded fund (ETF) create and redeem process.

17. Axe trading

The next innovation on The TRADE’s list is axe trading, which is based on… you guessed it, axes. Coined from the phrase ‘an axe to grind’ an axe shows a trader’s interest in buying or selling a specific security. Shown as a grid these tools are used by participants to indicate to their counterparties what they want and need to get done in a certain security so that they might go off and set about getting it done for them in the markets.

Outside of a chosen list of counterparties, traders will usually keep axes private as they indicate potential future moves and this information could be used by someone looking to front-run them in the markets. The process was one typically associated with just bonds but it has since expanded into different securities. Several vendors and platform providers have sought to launch new and innovative solutions that integrate dealer axe data into workflows in a bid to streamline the trading process. The concept has given birth to new platforms and vendors in the market with axe-led quoting and execution management systems (QEMS) at their core.

18. Conditional orders

Conditional orders do what they say on the tin. Many different order types exist under the umbrella of the word conditional but the general premise is, they are orders that will only be actioned or executed if certain conditions are met. Unlike a typical market order where it is placed into the market and the price is not guaranteed, conditional orders set out the parameters on how they should be filled from the get-go. This sometimes means they never get executed as the conditions are not met. They are particularly popular with the buy-side as they allow firms to access liquidity without committing to a trade. Traders can represent orders on multiple venues without running the risk of being executed in multiple different places.

Some of the most common include the ‘limit’ order which will only be filled at a specified price or better, a ‘contingent’ order which simultaneously executes two or more transactions on the back of each other, or a ‘stop’ order which orders the buying or selling of a stock one it reaches a certain price.

19. Actionable indication of interests (IOI)

An indication of interest (IOI) is a conditional and non-binding indication of a buyer’s interest in a security that is still in the underwriting stage. It’s a way of participants gauging available liquidity in the market without committing to placing an order. Sell-side firms will often pitch IOI liquidity to clients as a way of offering a natural other side. An actionable IOI takes this one step further, firming up an indication and offering the liquidity up in a click to trade format.

IOIs can be executed via a variety of workflows. Firms can submit an IOI to a venue seeking liquidity as a non-actionable IOI. When a match is found they can then firm up said IOI to make it actionable. Some EMS providers have integrated this workflow into their technology to streamline it further. Participants can access actionable IOI liquidity straight from their trading blotter within their EMS.  

20. Request for quote (RFQ) and request for market (RFM)

Our final innovation on the list is request for quote (RFQ) and the request for market (RFM) protocols. Both have revolutionised the way fixed income, currencies and commodities (FICC) traders operate in recent years. Both sit under a similar umbrella but other slightly different iterations of each other’s offerings. At the core of both is the idea of allowing fixed income traders to access multiple liquidity providers at once.

Given how bilateral fixed income trading has historically been and how sparse liquidity can be in different markets, the protocols allow participants to maximise their chances of finding the other side by sending out requests to trade to multiple people.

RFQ allows buy-side firms to send out a request for a price to multiple firms at once for the purchase or sale of a security. RFM is a slightly different concept and offers firms the chance to request a price for both the buy and sell so as not to give away the direction they intend to trade in. The idea being that firms can protect themselves from market impact by concealing this information from the rest of the market.

These are the 20 innovations we at The TRADE believe have shaped our community’s landscape most heavily in the last few decades.

Our industry is continuously shifting and innovating. Every year new trends and phenomena come to market intended to disrupt and improve the way that traders go about executing in the market. With continuously growing data sets and the prospect of artificial intelligence and greater automation being used on the trading desk in the near future, it’s likely this list could look very different in a few years’ time.

For more TRADE 20 lists visit thetradenews.com

The post The 20 greatest trading innovations appeared first on The TRADE.

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 friend

The 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 liquify

There 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 strategies

Seemingly 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 paradise

The 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.

The CTP for shares and exchange traded funds ETFs will initiate in June 2025 with plans for a decision on by the end of 2025.

This in keeping with the previously confirmed timeline wherein ESMA confirmed it would be no more than six months after the launch of the selection procedure for bonds.

“Today’s announcement on the launch dates of the first selection procedures for the CTP for bonds and equities aims to foster a successful competition with multiple solid offers in transparent and fair selection procedures,” said ESMA.

Specifically, the “reasoned decision” on the selected applicant will adhere to the rules applicable to concession contracts (outlined in the Financial Regulation – EU, Euratom 2018/104636), which prescribes the steps and timelines to follow.

Read more: ESMA publishes new public consultations as Mifir review continues

Contract notice and procurement documents will be published on the EU Funding & Tenders Portal on the respective launch dates.

“Prospective applicants are invited to register and familiarise themselves with the Portal. In the coming weeks, ESMA intends to share additional guidance on the assessment of exclusion criteria,” confirmed the watchdog. 

Last December, Etrading Software confirmed plans to bid to become the consolidated tape provider (CTP) for both the UK and EU as the UK’s Financial Conduct Authority and European Securities Markets Authority (ESMA) continued with data consolidation plans.

The move followed news that the Bloomberg, MarketAxess and Tradeweb JV for a CTP bid had been scrapped due to “various developments”.

Following confirmation, it would enter the tender process to become the UK’s consolidated tape provider for fixed income, Ediphy has also confirmed its intention to bid for the European fixed income tape as well.

Last year a JV between major exchanges across Europe announced the incorporation of the new company, EuroCTP, through which the participants aim to bid to become the EU’s equities and ETF consolidated tape (CT) provider.

Read more: Battle lines are drawn over European consolidated tape project

Throughout the application periods, ESMA has confirmed it will be available to field questions from prospective bidders with applicants “granted as much time as possible, within the boundaries of EU procurement rules, to provide details on their projects”.

The post ESMA to pick bond CTP by July 2025 appeared first on The TRADE.

The trading event of the year is set to return once again at The Savoy on 7 November, bringing together our industry for a glittering evening of celebration and jubilation.

Today we are announcing our survey awards, bestowed on the back of a record number of responses to the TRADE’s Algorithmic Trading and Execution Management Surveys for 2024.

Alongside these, The TRADE is excited to reveal the Editors’ Choice Awards for 2024, recognising excellence from all corners of the capital markets industry, including exchanges, trading venues, technology and data vendor services and more.

Buy-side, Industry Person of the Year and Innovation Awards will follow in the coming weeks.

A huge congratulations to all of our shortlisted nominees, see you in November! 

Algorithmic Trading Awards shortlists:

Best Trading Performance

Berenberg

BNP Paribas

Jefferies

Redburn Atlantic

Best Access to Market

Berenberg

BNP Paribas

Redburn Atlantic

Virtu Financial

Best Price Improvement Capabilities

Berenberg

BNP Paribas

Citi

Redburn Atlantic

Best Client Service

Berenberg

Jefferies

Redburn Atlantic

Stifel Europe

Best Dark Pool Capabilities

Berenberg

Jefferies

Redburn Atlantic

Virtu Financial

Best User Experience – Large Clients

Citi

Goldman Sachs

Morgan Stanley

UBS

Best Provider – Hedge Funds

BNP Paribas

Citi

Jefferies

RBC Capital Markets

Best Provider – Multi-User Clients

Citi

Goldman Sachs

Jefferies

Morgan Stanley

Best Provider – Large Clients

Citi

Goldman Sachs

JP Morgan

UBS

Execution Management Systems Awards shortlists:

Best Market Access

LSEG TORA

Instinet Newport

Neovest

Virtu Triton

Best Platform Reliability

LSEG TORA

Instinet Newport

Neovest

Virtu Triton

Best User Experience

LSEG TORA

Instinet Newport

Neovest

Virtu Triton

Best Multi-Asset Capabilities

FactSet’s Portware

LSEG TORA

Neovest

Virtu Triton

Best Provider – Large Clients

FactSet’s Portware

FlexTrade

Instinet Newport

Virtu Triton

Best Provider – UK & Europe

Charles River

FlexTrade

TS Imagine TradeSmart

Virtu Triton

Editors’ Choice Awards shortlists:

Outstanding Exchange Group

Cboe Europe

Deutsche Börse

London Stock Exchange Group (LSEG)

SIX Group

Outstanding Dark Trading Venue

Liquidnet

POSIT – Virtu Financial

SwissAtMid

Sigma X – Goldman Sachs

Outstanding Fixed Income Trading Venue

Bloomberg

ICE BondPoint

MarketAxess

Tradeweb

Outstanding FX Trading Venue

Bloomberg FXGO

FXall

LMAX Exchange 

SGX FX Systems

Outstanding Derivatives Trading Venue

Cboe Europe Derivatives (CEDX)

EBS UK MTF – CME Group

Eurex

Euronext

Block Trading Venue of the Year

BlockMatch – Instinet

Cboe BIDS Europe

Liquidnet

Luminex

Clearing House of the Year

Cboe Clear Europe

Euronext Clearing

ICE Clear Europe

LCH

TCA Provider of the Year

BestX

IHS Markit – S&P Global

ISS LiquidMetrix

Virtu Financial

Outstanding Market Data Services Provider – Equities

big xyt

Deutsche Börse Xetra

FactSet

LSEG Data & Analytics

Outstanding Market Data Services Provider – Fixed income

AxeTrading

BondCliQ

Neptune Networks

Tradefeedr

Outstanding Non-Bank Liquidity Provider

DRW

Hudson River Trading

Optiver

XTX Markets

Outstanding Trading Technology Provider

360T

Edgewater Markets

FlexTrade

Trading Technologies

Sell-Side Market Structure Excellence

Anish Puaar, head of European equity market structure, Optiver

Hayley McDowell, EU equity electronic sales trader and EU market structure consultant, RBC Capital Markets

John Fruen, head of EMEA market structure and liquidity strategy, UBS

Belinda Mar, equities, market structure and product development, Bank of America

The post The TRADE announces Leaders in Trading awards shortlists for London event appeared first on The TRADE.

“Our inaugural New York-based event is set to take place on 19 November at Chelsea Piers and we couldn’t be more excited to be bringing the magic of Leaders in Trading over to the US for the first time in The TRADE’s 20-year history,” said The TRADE’s editor Annabel Smith.

Today we are announcing our survey awards, bestowed on the back of a record number of responses to the TRADE’s Algorithmic Trading, Execution Management and Outsourced Trading Surveys for 2024.

Alongside these, The TRADE is excited to reveal the Editors’ Choice Awards for 2024, recognising excellence from all corners of the capital markets industry, including exchanges, trading venues, technology and data vendor services and more.

So, without further a due, it gives The TRADE great pleasure to announce the following awards shortlists for Leaders in Trading New York 2024!

Algorithmic Trading Awards shortlists:

Best Trading Performance

Berenberg

Jefferies

RBC Capital Markets

UBS

Best Price Improvement Capabilities

BofA Securities

Liquidnet

RBC Capital Markets

Virtu Financial

Best Customer Support & Consulting

BofA Securities

Instinet

RBC Capital Markets

Virtu Financial

Best Dark Pool Capabilities

Goldman Sachs

Liquidnet

RBC Capital Markets

Virtu Financial

Best Provider – Large Clients

Jefferies

JP Morgan

Liquidnet

UBS

Best Provider – Multi-User Clients

Jefferies

JP Morgan

Morgan Stanley

UBS

Best Provider

BofA Securities

Goldman Sachs

RBC Capital Markets

Virtu Financial

Execution Management Systems Awards shortlists:

Best Market Access

FlexTrade

Instinet Newport

Neovest

Virtu Triton

Best Platform Reliability

FlexTrade

Instinet Newport

Neovest

Virtu Triton

Best User Experience

FlexTrade

Instinet Newport

Neovest

Virtu Triton

Best Product Adaptability

FlexTrade

Instinet Newport

Neovest

Virtu Triton

Best Multi-Asset Capabilities

Bloomberg

FlexTrade

Neovest

Virtu Triton

Best Provider – Large Clients

Bloomberg

Charles River

Instinet Newport

Virtu Triton

Outsourced Trading Awards shortlists:

Outsourced Trading Provider of the Year

CAPIS

JonesTrading

Meraki

StoneX

Coverage

CAPIS

JonesTrading

Meraki

StoneX

Execution

CAPIS

Marex

Meraki

StoneX

Operations and Post-Trade

CAPIS

JonesTrading

Marex

State Street

Client Service and Relationship Management

CAPIS

Marex

Meraki

StoneX

Editors’ Choice Awards shortlists:

Outstanding Exchange Group

Cboe Global Markets

Investors Exchange (IEX)

Intercontinental Exchange (ICE)

Nasdaq

Outstanding Fixed Income Trading Venue

Bloomberg

BrokerTec, CME Group

MarketAxess

Tradeweb Markets

Outstanding Futures and Options Trading Venue

Cboe Global Markets

CME Group

 Intercontinental Exchange (ICE)

Miami International Securities Exchange (MIAX)

Crossing Network of the Year

IntelligentCross

LeveL ATS

OneChronos

PureStream

Outstanding Post-Trade Services Provider

Baton Systems

Broadridge

S&P Global

The Depository Trust & Clearing Corporation (DTCC)

TCA Provider of the Year

Abel Noser Solutions

FactSet

OneTick

Virtu Financial

Outstanding Market Data Services Provider – Equities

BMLL

Exegy

FactSet

QUODD Financial

Outstanding Market Data Services Provider – Fixed Income

Bloomberg

ICE Data Services

MarketAxess

S&P Global Market Intelligence

Outstanding Innovation in Fixed Income

Bondway.ai

Investortools

OpenYield

Trumid

Outstanding Trading Technology Provider

Aladdin by BlackRock

Bloomberg

Charles River

SS&C Moxy

Sell-side Market Structure Excellence

Citi – Michael Masone, director and head of North America market structure

Jefferies – Anthony Pallone, managing director

Morgan Stanley – Sapna Patel, head of Americas market structure and liquidity strategy

Rosenblatt Securities – Justin Schack, managing director and partner

Agency Broker of the Year

BTIG

Cantor Fitzgerald

Instinet

Redburn Atlantic

Congratulations to all of our shortlisted nominees. Winners will be announced on 19 November at Leaders in Trading New York.

Please contact Patrick Wright at patrick.wright@thetradenews.com for sponsorship opportunities or to book a table for Leaders in Trading New York.

The post The TRADE announces Leaders in Trading New York awards shortlists appeared first on The TRADE.

Rich Schiffman

The new connectivity will offer mutual clients an enhanced trading experience through the integration of select MarketAxess credit protocols natively within the Aladdin platform.

“As the market evolves, we’re seeing increased adoption of our automation protocols, with many of our clients turning to our strategies for over 90% of their trading volumes,” said Rich Schiffman, global head of trading solutions at MarketAxess.

“We look forward to bringing the latest of our automation protocols, Adaptive Auto-X, as well as our market leading RFQ solutions, Open Trading, and Live Markets central limit order book directly to Aladdin clients through this partnership.”

Read more: ICE Bonds and MarketAxess connect liquidity networks to bolster bond market efficiency

BlackRock’s Aladdin technology platform offers a common data language within an organisation to enable scale, provide insights, and support business transformation.

Risk analytics are combined with portfolio management, trading, operations, and accounting tools on a single, unified platform.

“As the electronification of credit markets continues to accelerate, the demand for robust liquidity, sophisticated workflows, and analytics grows,” said Kamya Somasundaram, global head of Aladdin Partnerships. “We are excited to partner with MarketAxess to deliver an improved trading experience for our users.”

The post MarketAxess extends BlackRock partnership to enhance credit markets connectivity appeared first on The TRADE.

While the UK general election result was priced in, and data from TraX showing a slight uptick in UK Government bond prices, markets were rattled by gains made by the political far right – initially in the European Parliament elections, and then in France following Emmanuel Macron’s decision to call a snap election.

The expected initial gains by the far right in the French election led to a winning left-wing coalition in the second round amongst taxing political manoeuvres. The result is a divided Assemblée Nationale with no absolute majority, leaving Europe’s second largest economy without clear direction.

This has caused havoc for French capital markets, and it will certainly take time to reassure investors as the political picture slowly settles. We are already seeing a busier than expected summer in markets – which we largely expect to continue – with heightened volatility, a challenging liquidity environment and a likely continued ‘higher-for-longer’ interest rate scenario.

The events in Europe and their knock-on effects into markets have now been further heightened by the US presidential election in November. With President Biden dropping out and Kamala Harris now Donald Trump’s opponent, investors are weighing up the potential impacts of the respective candidate’s presidency. During the build-up to the election, markets will be in flux as they as prepare for a Trump or Harris presidency.

Despite all these uncertainties, the broad outlook for investors in bond markets remains promising – known for their relative security and stability, they have maintained high yields compared to recent history.

Investors need to focus on selecting the right markets and sectors, effectively managing risks, and allowing for best execution within that market.  

And while the challenge of market entry and accessing liquidity is always there, continued technological advancements are forming the foundation upon which innovative tools applied across the trade lifecycle are developed and refined. There are today a myriad of technologies and solutions that can help.

This approach forms the basis of how MarketAxess is innovating, with high-quality market data being at the core of any technological advancement. The proliferation of high-quality datasets in bond markets has also driven its broader evolution: the automation of the market.

As seen with many industries, the bond markets have also recognised the potential of artificial intelligence (AI) and machine learning (ML). At MarketAxess we have used this to address a range of activities, with one key example being price discovery – one of the main headaches for investors – wherein CP+ provides an accurate tool for predictive real-time pricing for global credit and rates markets.

Bond markets are democratising through the expansion of new liquidity pools and increased accessibility to global markets.

This is embodied in our all-to-all trading model, Open Trading. It has continued to strengthen markets by identifying new pockets of liquidity, which is critical not only for traditional markets such as Eurobonds, US investment grade and high yield credit, but also for unlocking opportunities in developing markets and enabling investors to access more opportunities, and with speed.

More and more markets are progressively opening up and evolving, as investors demand greater access to local and hard currency debt. A notable recent example is the inclusion of Indian government bonds in JP Morgan’s emerging market debt index, which enhances tradability and attracts foreign investment in India.

Looking ahead, the second half of this year will no doubt be uncertain for investors, with a backdrop of political and economic risks; elections, persistent inflation and central bank policies. This will challenge market participants on many levels.

For investors to successfully navigate bond markets during this time, they need the tools and data behind them to make effective decisions. While many are already using some of these tools today selectively, we expect to see much wider adoption across investor-types and markets going forward as they seek new ways to remain competitive in challenging markets.  

The post How can bond investors access liquidity and trade effectively in a challenging, politically fuelled market? appeared first on The TRADE.

Pete Borstelmann

The two firms plan to establish connectivity to their respective protocols and liquidity pools, with the move set to enable ICE Bonds’ automated trading system (ATS), ICE TMC, and MarketAxess’ Open Trading network to communicate with each other directly, enhancing depth and reach for users globally.

“This collaboration connects two mature liquidity networks in fixed income markets to offer new trading and risk management solutions for clients,” said Pete Borstelmann, president of ICE Bonds.

“By combining our complementary strengths, we aim to offer users expanded opportunities to access liquidity in corporate and municipal bonds, enhancing market efficiency and benefiting participants across both platforms.”

The interaction between these two liquidity pools aims to bolster price transparency, best execution and overall market liquidity for all users, through leveraging ICE Bonds’ retail brokerage and wealth management presence and MarketAxess’ institutional trading expertise.

Rich Schiffman, global head of trading solutions at MarketAxess, said: “We look forward to delivering enhanced value and innovation to our clients through this collaboration.Our joint efforts are focused on providing access to deeper liquidity across municipal and corporate bonds and diversifying trading options for participants in our marketplace.”

The post ICE Bonds and MarketAxess connect liquidity networks to bolster bond market efficiency appeared first on The TRADE.

Ninety One trader Tom Nickalls is set to leave the asset manager after 11 years to join Morgan Stanley. According to an update on social media, Nickalls will join the sell-side next month in an emerging markets credit role. He joined Ninety One in 2013 as a client operations analyst, moving into a portfolio implementation role in 2015 and taking up his current role as fixed income trader in 2018. He was recognised as a Rising Star of Trading and Execution at Leaders in Trading in 2021.

Robert Whelan joined Citadel as equity trader following almost eight years at Pictet Asset Management. Whelan joined Pictet AM as an equity trader back in 2016. Prior to that, he worked at Morgan Stanley, initially joining as an electronic trading associate before going on to a role as equity sales trader. Whelan will act as an execution trader on behalf of the desk and his role is non-risk taking, The TRADE understands.

Lara Jacobs was appointed vice president – equities electronic trading coverage at JP Morgan following six years with Liquidnet. She most recently served as head of international client trading, EMEA. Prior to this, she worked as a market structure and strategy analyst before moving onto a role as equity trader. Before her stint with Liquidnet, London-based Jacobs worked on the debt restructuring team for fixed income at M&G Investments.

Outset Global appointed William Bradley managing director within its London office. Bradley brings considerable experience in the equity sales and trading space to the role, joining from Goldman Sachs where he served as vice president on the cross-asset sales desk in New York. Before joining Goldman Sachs, Bradley served as assistant vice president at Barclays on the equities liquid markets sales trading desk.

Bill Spencer was appointed head of client solutions at MarketAxess following five years at UBS Asset Management, most recently as executive director, multi asset centralised trading. The role is newly created, with Spencer set to hold responsibility for buy-side experience within MarketAxess’ trading system. Whilst at UBS, he worked as a senior trader on the US fixed income desk, as well as working on the daily trading of cash rates, credit, ETFs, and municipal bonds. He also lent his expertise to the trading of credit derivatives and listed futures and options. New-York based Spencer also previously held ETF-related positions at: REX Shares, Gelber Group LLC, and Chicago Trading Company.

Chris Robinson was appointed multi-asset trader at Liquidnet, joining from Louis Capital Markets where he worked for almost 13 years. He most recently served as a EMEA and US equity sales and execution trader. Prior to this he worked in equity derivatives for six and a half years, focused on Eurostoxx and sectoral indices. London-based Robinson has also previously served in a pension execution role at BDO UK LLP.

The post People Moves Monday: Millennium, Morgan Stanley, Citadel and more… appeared first on The TRADE.

Bill Spencer

The role has been newly created, with Spencer set to hold responsibility for buy-side experience within MarketAxess’ trading system.

Whilst at UBS, he worked as a senior trader on the US fixed income desk, as well as working on the daily trading of cash rates, credit, ETFs, and municipal bonds.

He also lent his expertise to the trading of credit derivatives and listed futures and options.

Read more: Ex-RBC head of US credit sales joins MarketAxess as North American head of client sales

New-York based Spencer also previously held ETF-related positions at: REX Shares, Gelber Group LLC, and Chicago Trading Company.

The post MarketAxess appoints UBS AM director as head of client solutions appeared first on The TRADE.