A new report by Colby Jenkins, strategic advisor at analyst firm Aité-Novarica, finds that fixed income execution management system (EMS) vendor projections for growth are “tremendously optimistic over the next 18 months” current levels of market adoption among buy-side institutions remaining “surprisingly shallow”.
Entitled, ‘Fixed Income EMS: Turning E-Trading Up to 11’ the paper assesses prospects for growth for EMS providers, based on the evolution of the fixed income data ecosystem as it enables a greater degree of automated and algorithmic trading, composite pricing engines, and liquidity analytics all of which support the development of rules based, lighter touch trading, which requires desktop technology to function effectively.
Aité-Novarica estimates e-trading market share to have nearly doubled from pre-pandemic rates within some major fixed income markets, and putting investment grade electronic trading at 44% sets the current level about 10% higher than fellow analytics firm, Coalition Greenwich which has found the level in the US has balanced at around 40%.
Current market penetration of fixed income EMSs an estimated 15% to 25% today on the buy side and EMS providers tell Aite-Novarica Group they expect adoption rates to grow in 2023, with 73% of respondents indicated that they expect revenue to grow at an above-average rate, while just over a quarter expect revenue to track with previous years for the next 12 to 18 months.
“When asked about expectations for the competitive environment over the next two years, two-thirds of interviewed vendors expressed that they expect more new solutions to enter the market, while 27% expect further consolidation of providers, which are not necessarily mutually exclusive,” wrote Jenkins.
The full report is accessible here.
