Reports that buy-side traders are able to manage trades directly in the MarketAxess platform via execution management system (EMS) Flextrade are creating considerable interest.
Most EMSs currently require fixed income orders to be manually rekeyed into bond trading platforms, and the trade execution must then be separately managed within that platform’s own interface. The inefficiency and risk this adds to the process has been a considerable barrier to adoption of EMS technology in the bond space, according to market participants.
“One of the key benefits [of direct connectivity] is that it is more efficient and less risky; anywhere you have to rekey the information is a roadblock,” said one head of trading.
The DESK understands that a collaboration between Flextrade and market operator MarketAxess is allowing buy-side traders to use the EMS to initiate and manage orders in MarketAxess’s platform without leaving the EMS.
Flextrade declined to comment, MarketAxess could not be reached for comment; market responses were positive.
Integration between a multilateral trading platform and an asset manager’s internal trading tools potentially allows buy-side traders to better apply their own investment and execution criteria to the liquidity available in an electronic marketplace, creating improved execution outcomes and potentially allowing them to spot trading opportunities more effectively for the portfolio manager, reducing trading costs and increasing returns for investors.
Initiating orders in an EMS, which are then routed out to markets and/or counterparties, is part of the normal workflow for traders in the equity and FX markets.
Fixed income trading workflows are typically harder to streamline than other instruments. There is a wider universe of instruments available, which reduces liquidity, which in turn reduces the data available for pricing and liquidity formation. Consequently automation of processes is lower, reducing trading efficiency.
In this year’s Trading Intentions Survey, FlexTrade stood out amongst EMS providers with 13% of traders saying they planned to use it, the largest pipeline in its peer group, while MarketAxess was ranked the most effective platform for finding liquidity.
©The DESK 2020
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