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Off-The-Shelf Tech Levels Fixed Income Broker Playing Field

Traders Magazine Online News, October 23, 2018

John D'Antona Jr.

Off-the-shelf technology solutions are helping non-bulge bracket fixed-income dealers increase market share across a range of capital markets products.

Expensive technology is becoming one of the key drivers of success in fixed income. This environment inherently favors the largest global banks with multi-billion dollar technology budgets.

However, an increase in technology available from third-party providers means everything from trading technology to RiskTech can be purchased and customized, allowing regional and middle-market dealers to auto-quote U.S. Treasury prices alongside the world’s largest dealers.

Access to technology has had a direct impact on the market share of non-bulge-bracket firms. Greenwich Associates research shows that the aggregate market share of non-bulge-bracket dealers has grown between 2013 and 2017 across at least seven of the fixed- income product segments that are tracked.

“The ability of fixed-income market participants to interact electronically allows a middle-market dealer in Kansas City to find a new customer in Albuquerque and vice versa—without the need for a steak dinner or a cold call,” said Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associates and author of Technology Opening Doors for Fixed-Income Dealers. “Ten years ago, this interaction would not have been possible; not because the technology didn’t exist, but because those middle-market firms could not afford the time or money to build the technology required.”

According to trading desk heads and technology providers, the technology areas having the biggest impact on growing non-bulge-bracket market share are data and analytics, real-time information, client intelligence, and auto-quoting.

“While the broad relationships and large balance sheets of the biggest banks keep them front and center, the remaining business that is won based on speed and price is increasingly up for grabs in large part due to the leverage that new technology provides,” McPartland said.

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