AxeTrading – fixed income trading software company for market making, quoting, bond pricing and order execution

AxeTrading has undergone a year of transformation with a whole new layer of senior leadership brought in to drive the firm’s next stage of growth. In its first move since the appointment of new chief executive officer, Greville Lucking, the technology provider expanded its suite of products to including interest rate swaps. Raiffeisen Bank International (RBI) was the first participant to execute one of the instruments on AxeTrading in August.

The firm has also integrated its pricing library for calculation of non-standard swaps in a bid to boost quoting confidence for traders. Looking further back towards the end of 2021, the firm integrated pricing data and analytics tools from the Intercontinental Exchange (ICE) in a bid to help traders make more informed investment decisions.

The tools, including ICE’s evaluated pricing, continuous fixed income evaluated pricing, best execution services and liquidity indicators, are available via AxeTrading’s quoting and execution management system (QEMS).

BondCliQ – Centralised bond quote system

As Europe and the UK teeters on the precipice of implementing a consolidated tape, BondCliQ is set to continue making waves in the market this year and next. The firm offers several ways to facilitate the consumption of pre-trade institutional pricing data and post-trade TRACE data in the US.

Its quote platform encourages market makers to compete for client order flow based on customer service while it claims to offer dealers better access to pre-trade information and monetise quote data. As the industry’s first consolidated corporate bond quote system, it claims to aggregate 70,000 pre-trade bid and offer quotes on 15,000 bonds daily from more than 40 dealers.

It’s received backing from major institutions and venue operators including the London Stock Exchange Group (LSEG) which led a Series A funding round into it in January to support its expansion into Europe. Also, to show its support was buy-side giant Vanguard, which has formed a strategic partnership with the firm.

Glimpse Markets – buy-side data pooling network

Aimed at addressing the growing issue of rising market data costs, Glimpse Markets launched into the market earlier this year with a bang.

The post-trade data sharing network is designed to give more autonomy to the buy-side over the data accumulated through their transactions. It launched its ‘data dividend’ initiative – a system that rewards firms for their contribution of their data to the pool with a fee – in June last year and has since gained significant ground with the buy-side.

With a lack of a consolidated tape in the UK and Europe, firms are increasingly depending on disruptor initiatives such as this one to avoid soaring data costs. The data sharing network entered into a partnership with Wave Labs in April, linking to its credit trading system eLiSA ahead of its roll out due to take place this year. The two-way integration will mean that users of the eLiSA (Electronic Liquidity Seeking Application) will be able to leverage Glimpse’s European buy-side contributed trades data while also contributing to the network themselves.

The pair later extended this partnership at the end of September that will see Wave Labs provide Glimpse’s clients with access to a free web-based dashboard that will allow them to view and analyse the live and historical buy-side trade data that has been shared over the Glimpse network.

Wave Labs – eLiSA (Electronic Liquidity Seeking Application) – credit trading system

Wave Labs is the creator of eLiSA – the electronic liquidity seeking application aimed at revolutionising institutional bond trading by solving issues in fixed income that current execution management systems (EMS) do not.

Recently, Wave Labs launched an extension package, namely SIA, which is a no-code workflow automation and systematic investment toolset for fixed income.

Wave Labs started the roll out of eLiSA to its first pilot client earlier this year. It claims to offer the first technology that takes Neptune Axes and uses machine learning to predict whether a bond is mis-priced and by how much – a process that is now under way for its pilot client.

The firm also entered into a strategic partnership with Glimpse Markets – focused on complex data analysis and other trading functions including primary market trading – and also with the intention of linking it with eLiSA once launched. The partnership will see it provide a free web-based dashboard to Glimpse clients to allow them to analyse the data pooled by the network.

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The move will allow clients to view and analyse the live and historical buy-side trade data that has been shared over the Glimpse network.

Glimpse launched its data sharing network in June, with a selection of asset managers sharing their trade data globally on a ‘give to get’ basis.

The firm stated that data on approximately 10,000 unique ISINs has been shared, with this number expected to increase as more buy-side are onboarded and as product coverage broadens.

“Glimpse and Wave Labs are aligned in their belief that increasing transparency and reducing data costs are good for the market and end investors and we’re excited to collaborate and play our part to improve the ecosystem.”

“Our partnership with Wave Labs provides Glimpse clients with an additional layer of flexibility and allows them to dig deeper into the data that has been shared on the network to extract more value and unique insights,” said Paul O’Brien, founder and chief executive of Glimpse markets.

“Glimpse is free for all buy-side asset managers, with access to this new analytics dashboard also provided for free, further helping us achieve our objectives of levelling the playing field, reducing data costs and democratising access to financial data.”

Ahead of Glimpse Market’s roll out in June, Wave Labs integrated data from the firm into its Electronic Liquidity Seeking Application (eLiSA) credit trading system. The two-way integration allows users of the eLiSA to leverage Glimpse’s European buy-side contributed trades data while also contributing to the network themselves.

Speaking to The TRADE about the latest partnership, Miles Kumaresa, founder and chief executive of Wave Labs, said: “We’re collaborating to dramatically increase market transparency by making essential trade data available in an immediately useful format to all buy-side firms at zero cost.

“Glimpse and Wave Labs are aligned in their belief that increasing transparency and reducing data costs are good for the market and end investors and we’re excited to collaborate and play our part to improve the ecosystem.”

Glimpse Markets and Wave Labs have both been shortlisted for The TRADE’s Outstanding Innovation in Fixed Income, Editors’ Choice Award 2022. You can view their entire shortlist here.

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The two-way integration will mean that users of the eLiSA (Electronic Liquidity Seeking Application) will be able to leverage Glimpse’s European buy-side contributed trades data while also contributing to the network themselves.

“This piece of work allows buy-side clients to seamlessly contribute their trades to Glimpse, allowing them to participate on our data sharing network without the need for any technical integration work,” Paul O’Brien, founder and chief executive of Glimpse, told The TRADE.

“Furthermore, integration with eLiSA means clients can leverage the full value of the Glimpse dataset within their execution workflow.”

The system credit execution management system (EMS) uses cloud-based APIs to route orders and execute trades and is the brainchild of former Nordea Asset Management head of trading, Miles Kumaresan, who launched Wave Labs in 2018.

It is connected to major execution systems that cover all areas of fixed income trading and Wave Labs confirmed in May last year that it had added three new liquidity providers, Bloomberg, UBS BondPort and MTS, to its roster.

It later completed a controlled trading exercise in June, which saw Paris-based Groupama Asset Management execute the first bond trade with Bank of America Merrill Lynch and Morgan Stanley.

“We are pleased to share that the version of eLiSA scheduled for roll out to pilot clients in Q2 and Q3 2022 will have Glimpse data integrated into its liquidity centric workflow. eLiSA is also able to create the daily data files contributed by the buy side to Glimpse for sharing,” said Kumaresan.

Watch The TRADE’s deep dive into fixed income execution management systems and their evolution including insights from Kumaresan on the launch of eLiSA here.

The first pilot due to be rolled out in the second quarter will be available to clients only, while a second pilot expected in the third quarter will see it rolled out to the wider market.

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Wave Labs founder and CEO, Miles Kumaresan, confirmed that Groupama Asset Management executed the live transaction with Bank of America Merrill Lynch and Morgan Stanley.

The controlled trading exercise was undertaken ahead of the planned launch of the eLiSA platform, which acts as an order and execution management system with pre- and post-trade analytics, later this year in September.

“eLiSA allows a new way of executing by integrating all of the execution channels available within different execution scenarios,” Eric Heleine, head of trading desk and overlay management at Groupama Asset Management, commented. “The scenario building capacities enriched by analytics for price discovery, timing and smart counterparties assessment is an enhancement that goes beyond the simple request for quote (RFQ).”

Wave Labs is continuing work on order logic exercises with several other buy-side firms, which are working with Kumaresan to expand the platform’s connectivity and trading functionality.

eLiSA has connected with various bond venues and liquidity providers before its launch. The execution system is now certified to send dealer RFQs via APIs with Bloomberg and UBS BondPort. Connectivity to MTS has also been completed with certification pending. Additionally, the start-up hopes to connect with Tradeweb and other sell-side institutions to provide clients with tradeable streaming prices.

Kumaresan, who is the former global trading head at Nordea Asset Management, commented that the trading exercise with Groupama Asset Management was a major milestone for Wave Labs.

“We are grateful to Eric, not only for conducting the live trading, but also for his continued support on the evolution of eLiSA ever since his first demo,” he added.

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Wave Labs, founded by Miles Kumaresan in 2018, has made various partnerships as it prepares to begin a three-month phase of controlled trading with one or two asset management clients before the platform goes live in September.

Known as eLiSA (Electronic Liquidity Seeking Application), the execution system is now certified to send dealer request for quotes (RFQs) via APIs with Bloomberg and UBS BondPort. Connectivity to MTS, now owned by Euronext, has also been completed with certification pending.

Wave Labs is also working on a connectivity to the ICE Bonds ecosystem, which includes the BondPoint and TMC Bonds platforms, which exchange operator ICE acquired several years ago. The start-up is also hoping to connect with Tradeweb and other sell-side institutions to provide clients with tradeable streaming prices.

Speaking to The TRADE, Kumaresan said partnerships with venues can be a major hurdle for new entrants as start-up platforms are expected to have clients before connecting to venues, but in most cases need clients before gaining access.

“We have been very fortunate to have so many buy-side backing eLiSA,” he added. “eLiSA is in fact a product that is shaped by these backers. Every single one of them have contributed to taking eLiSA to where it is now.

“An eLiSA demo is typically a mini-brainstorming session. Shortly after a recent demo, I received an email detailing request for new functionality. Within 48 hours, we had implemented a first cut of this feature and got back to the trader who had asked for it. This is what it is all about for us, to create a technology that the buy-side has actually asked for.”

Kumaresan added that as eLiSA specialises in credit trading, Wave Labs will connect to major execution systems that cover all areas of fixed income trading. He confirmed that work has already started on connecting the platform with Bloomberg TSOX and other EMSs on behalf of clients.

Highlighting the importance of system interoperability as an emerging trend between established players and specialist start-ups entering the space, Wave Labs also teamed up with IHS Markit and integrated its cross-asset order management and portfolio modelling system (PMS) thinkFolio.

“Enhancing trader user experience and delivering capabilities that facilitate collaboration with portfolio management are key focus domains for thinkFolio,” said Brett Schechterman, global head of thinkFolio at IHS Markit. “Wave Labs have developed a highly complementary workbench and market intelligence hub in eLiSA that offers traders a unique operating lens and streamlined workflow.”

Elsewhere, Wave Labs has also made various connections to data sources with eLiSA providing an open data portal to traders and portfolio managers which can channel structured and unstructured data.

The dataset includes continuous estimated prices, IOIs (indications of interest), axes, TRACE data and credit research. Data partnerships have also been formed with Neptune, Bloomberg and upcoming data pooling network Glimpse Markets.

“Connectivity to buy-side clients’ core workflow tools, such as order or execution management system (OMS/EMS), is integral to Neptune’s strategy,” Byron Cooper-Fogarty, acting CEO of Neptune, commented on the firm’s partnership with Wave Labs. “As such we continue to work with partners such as Wave Labs to provide the highest quality fixed income data to mutual clients.”

More recently, Wave Labs expanded its partnership with IHS Markit forged a data agreement with thinkFolio to source fixed income data and price discovery. New York-based corporate bond analytics provider BondCliQ will also provide the eLiSA platform with real-time quotes from more than 45 dealers covering 15,000 CUSIPS for 120,000 price points each day.

“We look forward to building on the strong partnership between Wave Labs’ eLiSA system and thinkFolio by collaborating further across bond pricing and reference data to deliver additional insights around liquidity and price discovery,” Nathan Kirk, executive director of fixed income strategy for EMEA at IHS Markit, commented.

As liquidity continues to migrate from traditional liquidity providers to trading venues and all-to-all trading in fixed income continues to rise, Kumaresan added that both makers and takers of liquidity need better systems for efficient trading. The buy-side is also increasingly taking on the role of price maker, which eLiSA aims to cater for by allowing asset managers to make prices in bonds.

“Growth in all-to-all trading will give rise to formation of more complex fixed income market micro-structure for the first time, a relatively new concept in fixed income,” Kumaresan said. “Liquidity will still remain fragmented, however, it will become more uniformly divided among the different venues. This trend will pose new challenges to the buy side trading desk – how do you harness this form of larger pools of fragmentation?

“The buy side has to respond to these changes to stay competitive. The question is no longer whether to invest in new trading technology, but more which technologies would offer flexibility to adapt and stay ahead. Now more than ever before, this responsibility falls on the shoulders of heads of trading to have a technology vision for their desk and lead this technology transformation as thought leaders.”  

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Established by former Nordea global head of trading, Miles Kumaresan, Wave Labs has created fixed income tools that are said to deliver a functional window through a trader’s perspective.

The start-up claims to challenge the void left by established EMS vendors that aim to keep up with advancing technology that has a high bar for success for each asset class.

Wave Labs’ eLiSA (Electronic Liquidity Seeking Application) is an EMS aiming “to get rid of tedious tasks”.

In an interview with The TRADE in August 2020, Kumaresan explained how Wave Labs is looking to revolutionise institutional bond trading. eLiSA offers a suite of tools for high-touch traders for visually identifying liquidity spots and price differences, as well as a data mining tool to score, rank and make broker recommendations.

Kumaresan believes a ‘black-box’ spurting out recommendations doesn’t suffice anymore. His system’s broker recommendations include a summary of why the broker is recommended, with the benefits of the recommended broker visually highlighted in comparison to all other brokers.

“Wave Labs’ success lies in the unconventional way in which we went about gaining an edge in fixed-income trading. It started with defining a workflow that is both liquidity discovery-centric and uniquely fixed-income in focus. With this at its foundation, Wave Labs set out to create a range of tools that supported the different pieces of the trading puzzle,” said Kumaresan, CEO and founder of Wave Labs.

“These components collectively form a fluid workflow that assists traders at every step of the trading lifecycle. A trader decides when and what he or she wants to use, depending on the task at hand.”

A recent report by Greenwich Associates found that every single basis point in IG spreads can equal $1 billion in savings for end investors, and for less liquid assets the increase is greater.

IHS Markit’s thinkFolio and eLiSA bring mutual clients streamlined workflows by leveraging cloud-based APIs and one another’s functional strengths across the investment lifecycle. Through the extension of thinkFolio’s suite of interoperable alliances, clients have access to a suite of options to utilise across their operating models – from portfolio construction and pre-trade risk analytics to execution and post-trade performance attribution.

“The plug-and-play integration of thinkFolio with eLiSA offers our end-users a smooth workflow between two complementary technologies that are specialists in their respective fields. While eLiSA is primarily a trading technology, it also seeks to address portfolio managers’ requirements from a liquidity and price discovery angle,” said Brett Schechterman, global head of thinkFolio at IHS Markit.

“These intraday market insights go hand-in-hand with thinkFolio’s bottom-up analytics, expose monitoring flexibility and sophisticated portfolio modelling capabilities. When married, as has been our objective with similar alliances focused on other asset classes, these technologies provide a cohesive workflow that enhances front-office productivity and perpetually enriches communication between portfolio managers and the trading desk.”

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Miles Kumaresan, founder and CEO, Wave Labs

Nordea Asset Management’s former global head of trading is looking to revolutionise institutional bond trading as he prepares to launch a bond execution system via his start-up. 

Miles Kumaresan, founder and CEO of Wave Labs, has unveiled details of the new platform exclusively to The TRADE ahead of its launch in early September.

The platform was due to launch earlier this year, but Kumaresan delayed the rollout due to the COVID-19 crisis. He has since demoed the system with six buy-side heads of trading, most of which he expects to onboard upon launch. 

Known as eLiSA (Electronic Liquidity Seeking Application), the web-based platform aims to solve the complexities and challenges in institutional bond trading that Kumaresan says he faced during his time with Nordea Asset Management, and that other fixed income execution management systems (EMS) have failed to address.

“At Nordea, I really struggled to grasp the nuances of fixed income trading which were new to me at the time,” he tells The TRADE. “When the penny finally dropped and I suddenly realised the complexities of the whole process, I understood there was no way I could solve these problems from within. A fixed income EMS is a hard sell for any vendor. The systems in the market have simply replicated workflows from equities, adding no value for traders, and any adaptations in these systems have been rudimentary – simply facilitating the status quo in liquidity sourcing.”

“I knew I had to find a solution to the fixed income EMS, and in order to do so, I had to look at the fundamentals – the A, B and Cs of fixed income – and solve each of those issues. I understood that only then will the fixed income EMS truly make a difference. This is what we have spent the past two years doing, creating a system with a vast array of features that would level the playing field for all market participants – a tech suitable for buy-side, sell-side, ETF liquidity providers, hedge funds and others.”

Senior buy-side bond traders have previously made the case that most EMS platforms in the market are a tool for equities markets and not fixed income. Like Kumaresan, they argued that many of the systems have applied equities models to fixed income, despite stark differences in trading processes and liquidity landscapes.

In contrast, Kumaresan states the backbone of the eLiSA system, which was developed by Wave Labs following in-depth discussions with traders, portfolios managers and analysts, is a new workflow that is inherent to fixed income trading, focused on in-depth analysis, and execution.

“This is a very innovative piece of trading technology that has a uniquely fixed income workflow,” Christoph Hock, head of multi-asset trading at Union Investment, told The TRADE about the eLiSA platform.

The system offers multiple channels for execution, including high-touch trading, semi-automated and fully-automated execution, auto-quoting, and automated liquidity seeking and smart order negotiation and routing functionality. 

eLiSA offers a suite of tools for high-touch traders for visually identifying liquidity spots and price differences, as well as a data mining tool to score, rank and make broker recommendations. Kumaresan believes a ‘black-box’ spurting out recommendations doesn’t suffice anymore. His system’s broker recommendations include a summary of why the broker is recommended, with the benefits of the recommended broker visually highlighted in comparison to all other brokers.

“This is a much more complex math problem than what meets the eye,” Kumaresan adds. “You need to have a complete lifecycle of adjusting scores up and down on a daily basis. How do you reward or penalise quotes that never resulted in a trade? How do you score two bad quotes? It’s equally challenging to give new or non-mainstream brokers a fair chance. If you don’t have much data, how can a model recommend someone with limited trade history? We believe we have a complete process for this with clear explanations.”

Elsewhere, eLiSA starts with the portfolio manager in providing granular pre-trade analysis, as well as data aggregation, historic and visualised axe, indication of interest (IOI), request for quote (RFQ) data, and the system’s flagship real-time fair value analysis.

Kumaresan explains that most bonds are interrelated and there are significant non-linearities in their relationships. This means that estimating an accurate fair value, or price, for a bond based on where others are trading is a big challenge for market participants, particularly doing so in real-time. The fair value analysis aims to solve this challenge by demonstrating recommendations that can be converted in terms of potential profit and loss. 

“We take pre-trade analysis to a much more granular level in terms of what the market is doing and the fair value. It is important that the trader has confidence in the fair value recommendations as this is absolutely key to the system. It runs throughout the entire platform. This is yet another deviation from the typical equities-style use of reference quotes only in fixed income,” Kumaresan says. 

The during-trade analysis also allows traders to monitor and analyse market conditions to find liquidity and track execution trends, alongside real-time estimations of probability of fill, and optimal execution parameter recommendations.

“Unlike equities, fixed income trading is closely linked to the portfolio manager and our tool starts with the portfolio manager, with pre-trade analysis and portfolio construction alternatives,” Kumaresan says.  

“Then, it goes to the trader in the form of single, list, portfolio, substitute or synthetic orders. With the exception of portfolio orders, you don’t just send it to one broker or venue, you work the orders in all available liquidity pools and with many different brokers. This is realised using a variety of protocols following trader specified scheduling logic to negotiate and execute that package of bonds, to then access that highly fragmented liquidity. Wherever the other side of a trade is posted, eLiSA will find it.”

For execution, eLiSA provides several order types including portfolio trading, which has surged in popularity with buy-side traders recently. However, Kumaresan explains that when engaging with portfolio trades, it can be difficult to know if the price of a bond from the 200 names in a portfolio is, in fact, a good price. His platform aims to offer more advanced slippage decomposition analysis and optimal execution evaluation to solve this challenge, with the aim of reducing transaction costs.

“With portfolio trading, it’s extremely important to get that price back from the broker, decompose it and see for yourself if you are being priced fairly or not on a bond-by-bond basis. You may see that 90% of the pricing is indeed fair, and want to remove the outlier bonds from the portfolio and source it separately. This is another way in which traders add significant value. 

“In a world where it is very difficult to know where a bond should be priced, verifying the broker pricing of hundreds of names in a portfolio in addition to all other trading tasks is a daunting prospect without tools to assist. But with our system, from a compliance point of view, at the click of a button one can document best execution in large portfolio trades,” Kumaresan says.

“The much-needed paradigm shift in fixed income trading needs catalysts for change and eLiSA may just be one of them. While liquidity in fixed income is highly fragmented, there is plenty of liquidity to be found at the right price and place. The challenge is for the holders of liquidity to make this available. Imagine a marketplace in which the natural holders of liquidity, namely asset managers, were to start offering portions of their liquidity? This would revolutionise the 1970s style market structure that we still have now in 2020.”

The buy-side has increasingly leaned towards taking on a price maker role in fixed income markets as relationships with dealers have evolved. BlackRock’s head of global trading, Supurna VedBrat, has previously highlighted that she sees the buy-side taking on the alternative role in disclosing prices, which could be beneficial for asset managers and the liquidity landscape.

Kumaresan adds the price making functionality on the eLiSA system offers any asset manager the ability to make prices in thousands of bonds while satisfying portfolio constraints. Using an example of a typical fund having positions in a smaller subset of names making up the benchmark index it tracks, Kumaresan explains that a position in 500 names out of 2,500 leaves the trader synthetically short of 2,000. By making prices on the 2,000 bonds, Kumaresan says, the fund achieves a reduction in tracking error and can capture bid/ask spreads associated with the illiquid bonds.

“This activity alone can boost the performance of the fund by 25bps or more if done right – meaning, if you usually make 50bps annualised, now you are making 75bps or more. The net effect of this is the fund’s performance ranking will climb upwards,” Kumaresan claims. “This is particularly useful in extreme or volatile market conditions, where besides capturing much larger gains, traders can help stabilise the market. A natural consequence of the price making activity is the flooding of new liquidity into electronic venues. Even illiquid venues can attract liquidity, so long as they offer innovative protocols.”

The execution platform is currently connected to a major fixed income trading venue, with plans to add more in the near future. It also includes auto-negotiating functionality which aims to give traders the opportunity to work multiple venues or multiple orders at the same time with zero touch, according to strict conditions set by the user.

“The auto-negotiation is like cruise control, and it’s extremely useful if you’re the driver with so many other things happening. It is just not practically possible for a trader to simultaneously work 300 names, and that’s why so many opt for RFQ because finding liquidity is so difficult and time-consuming at venues. The trader should do the thinking part and let the technology do the laborious liquidity seeking part.”

“Other systems simply operate as an interface to send orders to other platforms to be worked from there, which is a very manual process. With the automated liquidity seeking tool, our platform will find the liquidity, negotiate multiple bonds for you, and help navigate the execution.”

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Miles Kumaresan, chief executive, Wave Labs

A new start-up is taking aim at established fixed income trading practices by placing greater power into the hands of traders and portfolio managers.

Former head of trading and FinTech at Nordea Asset Management, Miles Kumaresan, founded Wave Labs last year after departing the firm and is confident that he has built the tools necessary to disrupt the dominance of voice-based trading in the fixed income markets.

“In a healthy market ecosystem, there is a need for all types of actors,” Kumaresan told The TRADE. “While the buy-side, who are the true liquidity owners, would form the backbone of such an ecosystem, there is an acute need for others such as banks and alternative liquidity providers too. All these players should compete on a level technological playing field to be both providers and takers of liquidity.”

Details of the Wave Labs product are currently under wraps until the official launch later this year, but the idea behind the venture is to bypass the middle-man in the trading process by allowing traders to find liquidity themselves, empowering them through a set of “finer controls for trading”, according to Kumaresan.

“While it will take away some of the tedious work, it will also add lot more complexity to trading,” he explained. “The net effect is that one can work complex contingent orders and get better prices. This will definitely not reduce head count on any desk.”

The eventual goal of the Wave Labs tool would be to drive bid/ask spreads tighter and ease the path to fixed income liquidity for traders, and Kumaresan has already received interest in the project from several buy-siders, most of which he will not disclose yet.

“Miles is working on a novel approach – we would like to be involved in order to evaluate, support and to provide input,” said Erling Skorstad, COO investments at Nordea Asset Management. “If the final product from Wave Labs meets our expectations, we will then look to make use of the tradable streaming prices offered to us by banks and alternative liquidity providers via this platform.

“To exploit the contingent trading features, we will evaluate a direct interface between the platform and our SimCorp back-end.”

Disruptive behaviour

While there have been numerous entrants in the fixed income world seeking to introduce a new element of disruption, electronifying the market has proved to be a slow process, and for some, an impossible task.

The most notable example is BondCube, which generated a huge level of interest after it positioned itself as the “eBay of the corporate bond market” only to fall apart a few years later. While there is no guarantee that the industry will embrace the Wave Labs proposition, Kumaresan is so far taking a far more cautious approach, keeping product and prospective client details close to his chest until it’s ready for launch and running the operation on a modest staff.

The larger incumbents in the fixed income market may put up more resistance to the presence of new challengers such as Wave Labs, although Kumaresan states his tech will in fact bring more business to the venues, rather than take any away.

“Electronic venues in fixed income are fundamentally import,” he asserted. “However, order matching protocols of these venues alone cannot facilitate matching of the full spectrum of orders. We are working on this missing part. This also include addressing the portfolio manager workflow.”

He reiterates the point that Wave Labs is first and foremost a technology vendor and that market participants will continue to look for liquidity on trading venues, although as evidenced by his experiences with them thus far – “I have only had preliminary conversations with two of them. One was very enthusiastic. The other one not at all.” – not everyone enjoys disruption to the status quo.

Personal mission

When The TRADE profiled Kumaresan for the Q1 cover feature last year, he admitted to being “consumed” by the problem of aggregating fragmented liquidity across asset classes, particularly in fixed income.

Having spent the larger part of the past three years combatting this problem through the development and creation of new tools to facilitate execution, Kumaresan decided that it was time to leave Nordea in September last year to take on this challenge solo.

“As head of trading, one of my primary responsibilities was to optimise trading cost. In other asset classes, this is easily doable using combination of statistical models and technology. In fixed income however, there is not much room for this. It is very difficult to even quantify execution quality in fixed income – a fundamental piece for the optimisation process,” he said.

“This bothered me endlessly as I could not make meaningful contribution to fixed income trading quality. While I immensely enjoyed working at Nordea AM, this became my pre-occupation full time and I needed to set out and see whether I could come up with a solution.

“All I knew when I left Nordea was that one needed to rethink everything we are currently doing in fixed income. You cannot fix a dysfunctional setup with a plaster.”

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