By Spencer Lee, Chief Markets Officer, TS Imagine
Fixed income markets are more complex than ever as the fixed income universe expands rapidly. The quest to harness vast, sprawling global electronic bond liquidity and huge swathes of data has defined modern fixed income desks and opened the floodgates to a plethora of trading solutions. However, with so much choice, a critical decision for a trading desk is selecting a trading system that simultaneously delivers simplicity and the highest levels of functionality.
Great technology improves our day-to-day lives – cutting complexity, automating processes, and allowing us to do things that we were not able to do before. The same is true of trading technology. Fundamental to the success of a trading system is giving traders access to liquidity and market intelligence, but, crucially, it also allows traders to focus on the job at hand without being constrained by clunky processes or lack of functionality.
The problem however is that, over time, many desks have acquired an amalgamation of tools and systems considered to be best in breed at point of purchase but have lost their shine, and their compatibility with newer systems has deteriorated. The result in many cases is an unwieldy tangle of systems acting as speed bumps in traders’ workflows and leaving some corners of the bond market out of reach.
Next-gen trading
The old idea that no single trading technology provider can offer the quality and breadth of service to deliver an all-in-one bond trading system no longer applies. Cue the rise of the Execution Management Systems (EMSs) – the culmination of functionality and innovation developed over the past two decades delivered through a single interface. These next generation fixed income technologies are sparking a trading revolution – 100% of fixed income EMS users who participated in a 2023 Coalition Greenwich research study said that the technology gives them an edge while trading.
These systems have moved beyond tools used for simple execution to all-encompassing engines essential for navigating bond markets. They have become the go-to tool for accessing multiple sources of liquidity, automating workflows, and aggregating multiple sources of data. This interconnectivity – giving traders options to tap into venues or plug in directly to dealer liquidity – coupled with such rich sources of data gives traders unparalleled maneuverability and insight when trading.
As a result, a growing number of trading desks are making EMSs the bedrock of their operations. The technology offers solid technological foundations on which they can continuously build, add new features, and adapt to shifting demand and trading conditions. The pace of change in fixed income markets over the past decade has reinforced the need for flexibility, allowing firms to quickly add the tools that they need – whether newer forms of analytics, sources of liquidity or trading protocols – to stay up-to-date and compete with the very best.
The benefits of modern EMSs are not confined to the user experience of individual traders. The network effect of the mass adoption of these electronic trading systems has a significant positive net impact on market function. As legacy systems are replaced at scale, liquidity bottle necks will be dislodged, drags on workflow shaken-off and access to data greatly improved – resulting in a more dynamic, functional market.
The future is now
There are few certainties in markets, but we can confidently predict that markets will become increasingly tech driven as old systems are replaced by powerful technology. Looking to the future, EMSs have the capability, functionality, and scale to become the dominant form of trading systems in bond markets – giving traders everything they need, now and in the future.
Clear consensus around the competitive advantages of EMSs among participants, as well as their contribution to the more efficient functioning of markets plainly demonstrates the benefits of the technology. For desks trying to decipher how to prepare for the future of bond markets – the solution is already here.
Spencer Lee is the Chief Markets Officer of TS Imagine. Spencer has over two decades of
experience as a fixed income trader, where he was an advocate for the adoption of technology and driver of the evolution of systematic trading of credit
securities.
Spencer brings extensive market structure experience and client perspective to TS Imagine. He most recently co-founded Agilon Capital, a systematic credit hedge fund with a strong technology value proposition. Prior to Agilon, Spencer led global credit electronic trading and West Coast fixed income trading at BlackRock.
Spencer graduated from Vanderbilt University where he earned a BA in European Studies. He is also a Chartered Financial Analyst.
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