Fixed income trading: the pace of technology adoption is speeding up
By Damien Jenner, Managing Director & Fixed Income Product Owner at Horizon Software-
Fixed income trading desks should experience significant transformation in 2019, facing an increasing electronification. The fixed income industry has only recently adopted technological transformation when the equity markets started to use IT platforms decades ago. A vast majority of trading operations are conducted over the phone resulting in a lack of transparency and low efficiencies. Many reasons could explain why the fixed income markets lagged far behind the equities’ one: more complex and non-standardized products including abundance of market data and issuer credit information, and mainly managed by the brokerage side.
With advances in machine learning and AI leveraging, technology has also become a must to realize efficiencies and enhance decision-making based on risk and performance analysis. We believe fixed income trading desks are today in an ideal position to benefit from software platforms and drive value for their clients while scaling their businesses, focus on best-execution, strengthen investment strategies and eventually move away from manual and non-automated tasks.
“Electronification embedding machine learning will become a real competitive differentiator”
A proven platform from the equities side appears to be a good choice as a cross-region and multi-asset technology solution will be able to provide a global view on risks and bring real added-value to the full investment spectrum. Also, a strong product heritage around equities and ETFs bring an interesting approach to the design of a disruptive fixed income solution, able to capitalize on a strong experience in equities management.
But what we find the most important at Horizon is probably the openness and flexibility of the solution to facilitate pricing and integrate with third-party and internal tools. An electronic fixed income trading solution needs to talk to a myriad of back-office, risk management and pricing systems. For the pricing, our clients need to customize external pricing and properly manage internally their risk management strategies. They need to easily integrate different interest rate scenarios to price their financial instruments in real-time. A proven flexible algorithmic framework is key to conduct all kind of pricing, risk and hedging simulations in a click.
“The ideal electronic fixed income platform is flexible, open, algo-oriented and transparent”
Whereas real-time pricing and automatic hedging were, until recently, only available to players with internal IT teams and budgets for in-house development, we believe it’s now a perfect timing to launch an algo-oriented and disruptive electronic fixed income solution that could benefit everyone. This solution won’t completely replace human skills but moving forward will enable bond traders to concentrate on managing the market and service their clients more efficiently as technology becomes a source of Alpha.
Ex-HSBC senior manager, Damien Jenner is a veteran in finance with over 15 years in Global Markets.
Previously Head of Americas (Fixed Income IT) – Risk and P&L at HSBC in New York, Damien brings significant experience and knowledge to Horizon as the company continues to expand in new asset classes. Previous roles include positions at HSBC France, Commonwealth Bank of Australia and Commerzbank. With his global and diverse credentials in quant analysis, financial engineering and interest rates derivatives, Damien is responsible for Horizon’s growth and success in the development of the Horizon fixed income electronic platform. Having started his career as a financial engineer in Global Markets with investment banks, he worked with some of the highest-level quant researchers in the industry, before delivering multiple flagship projects for Fixed Income IT as global team manager at HSBC. This all contributed to Damien’s strong background in handling front to back solutions and large-scale initiatives using cutting-edge technologies, a perfect fit with Horizon’s philosophy of providing clients with the very best in technology, functionality, and support.