Good news for vendors as buy-side fixed income desks eye new tech platforms

Fixed income desks looks to multiple new technology solutions to meet best execution requirements and maintain a competitive edge.

Almost two-thirds of European fixed income desks are considering partnerships with at least three new platforms in the coming year, according to new research.

The study from WBR found that heads of desks stated the need for new technologies in order “to meet best execution requirements and maintain a competitive edge”.

When asked what new number of platforms and alternative technology solutions they were considering in the next 12 months, almost two-thirds said three or more, with 36% saying they would look at one or two.

The results showed that 10% said they would even consider over six new technology solutions.

According to WBR, the aim of the research was to show how MiFID II has had an impact on trading practices and the emerging technology requirements of European buy-side desks.

 “Buy-side desks are having to become more pro-active in their search for technology partners,” said Carl James, global head of fixed income trading, Pictet Asset Management, in the report. “At one level this is about an arms race for liquidity and survival.”

When evaluating new platforms, the heads of fixed income surveyed ranked its ability to integrate with a desk’s existing technology as the most important factor, closely followed by the credibility of the provider behind the platform.

Post-MiFID II, 30% responded that click-to-trade protocols present the most promising opportunities for the buy-side, as more participants move beyond the established request for quote (RFQ) system. This was closely followed by 27% viewing streaming executable prices as the most promising trading protocol. 

“While most bond trades currently occur on RFQ, survey respondents expressed a clear preference for trading on firm prices,” said Ian Shea, head of European fixed income trading at Jane Street.

“Whether it’s click to trade, streaming executable prices, or order books, two-thirds of all buy-side trader responses indicate a preference for seeing actionable prices before transacting.”

Elsewhere the results also showed that 29% of respondents have increased the number of counterparties they trade with by at least 50%, as a result of MiFID II’s best execution requirements.

Two-thirds also said they had changed their best execution practices in response to MiFID II.

“The way in which we execute trades has not materially changed, the way in which we document and monitor trades has changed and will continue to evolve overtime,” said Cathy Gibson, head of dealing, Royal London Asset Management.