Over 60% of fixed income institutional investors do not currently use an execution management system (EMS), a survey from Barclays has revealed, suggesting firms still heavily rely on their bilateral banking relationships.
The investment bank’s global fixed income market structure research, which surveyed 130 institutions including central banks, asset managers, insurance companies and hedge funds, also found that less than half are looking to implement an EMS by the end of this year.
Barclays said that while an EMS can potentially automate the whole lifecycle of a trade, from pre-programmed trading to settlement, less than 25% of investors’ flow is executed using automation.
Respondents indicated in the survey they have experienced pricing fragmentation across different platforms for the same instrument in both credit and rates. In the Americas, almost 90% of investors said they had experienced pricing fragmentation across platforms in rates, compared to 37% of investors based in EMEA.
Senior buy-side traders have argued in the past than an EMS in fixed income is not a key requirement given the nature of the market, while others believe the system can provide a tool for evidencing best execution and aggregating data.
Elsewhere, Barclays’ survey showed that notional value and volume of electronic trades in increasing. The gap between the number of tickets and notional value traded electronically in rates and credit is also closing.
Many clients told Barclays they use electronic trading for emerging market currencies and interest rate swaps, suggesting that electronic trading is not always focused on the more liquid instruments.
“We’ve seen significant electronification, as well as adjustments in how firms trade fixed income securities over the last five years, but also observed a rapid acceleration over the last couple of years,” Matthew Coupe, director of cross-asset market structure for the Global Markets business at Barclays, commented on the findings. “As more firms migrate to electronic trading, the trend becomes self-perpetuating.”