Creating efficient trading workflow solutions

Peter Holmgren, Director International Markets at valantic FSA, explains why the need for automated workflow is now greater than ever.

How would you characterize the need for workflow efficiency in these markets?
Fixed Income markets are experiencing some interesting shifts. As with all asset classes, everything starts with the buy side and their requirements. Central to this is the challenge in sourcing liquidity as it continues to fragment across venues especially in credit. Markets continue to electronify with MarketAxess and Tradeweb regularly reporting record volumes. While this is good in the long run, it creates greater inefficiency and complexity in the short term as participants need to support a hybrid model to be effective. Add to this the increased regulatory scrutiny (especially in the US) and the need for automated workflow is now greater than ever.
This means that the buy side is looking for closer electronic links with its sell-side partners throughout the trade lifecycle. This is exactly what we are providing to our sell-side clients and empowering them to automate low value business while still providing the highest levels of service to the market. We also collaborate with some of our larger clients to provide liquidity to regional players in non-core flow.

What are the key areas you plan on expanding in your offering?
We are in the middle of a multi-million-dollar investment program that began over three years ago. This has seen us take the original highly robust, Fixed Income platform and transform it with the latest technology and modular, cloud-based deployment mechanisms. The result is that we can fast-track enhancements such as streamlining sales trading workflows within a single UI.
Our new HTML5 front end and low-code frameworks mean that our clients can achieve levels of data centricity that legacy platforms simply cannot deliver. Key to this approach has been to include multiple integration points for in-house or other 3rd party systems. We believe this is an essential part of surfacing data wherever they can be most valuable. It also means that clients can implement our platform in stages thereby giving them a much gentler glide path to full migration.
We are also increasingly seeing our clients as part of a broad ecosystem that includes some of the largest global flow providers as well as niche players in specific instrument types or geographic regions. This enables all our clients to offer better spreads and more comprehensive liquidity services to their own clients.
At a more detailed level, we are also expanding the sophistication of client workflow automation. This will enable traders to focus on the larger more complicated orders and RFQs that really do require human intervention but still respond with high quality liquidity and pricing for smaller sizes.

Where do you see the greatest growth coming from over the next year?
In order to understand the market dynamics better, we set up the valantic FSA Fixed Income Expert Network at the beginning of this year. We make the bulk of the data available for free on our website. This shows that expenditure on technology is going to accelerate with over a quarter of members planning to significantly expand their tech spend. The drivers of this are multiple and include making up for historical under investment and expanding electronic capabilities in line with the broader market dynamics. It seems like we are starting to see the resumption of the technological arms race as “keeping up with competitors” was cited as the second most important factor driving increased technology spend. Specifically, firms are targeting pricing, quoting/streaming and RFQ/RFS management as their top three areas for improvement through technology.
Finally, and, in line with the broader capital markets landscape, we are seeing a growing enthusiasm for cloud-based deployment as this confers significant advantages in terms of reduced TCO of market participation.

Is regulatory or cost pressure of greater concern to your clients?
Today, the sell side has to juggle a number of conflicting imperatives. Clearly cost pressures are a big factor right across capital markets but as Jack Welch says, “you can’t shrink to grow”. So, at the same time, the sell side is investing in technology to offer superior levels of pricing, quoting and RFQ/RFS management to win and retain clients. Finally, regulation is demanding greater transparency which manifests itself in more onerous reporting requirements. The answer lies in smarter workflow automation and the key to this is leveraging data. So, for example, there are great insights to be gleaned from all the trade data that gets sent to various trade reporting repositories, especially if it can be recombined with other client data that looks at historical trading behavior. So, the trick is all about repurposing data to understand your business and clients better.

What will be your greatest challenges and how will you overcome them?
We are always looking to deliver more functionality in response to growing and, in some cases, diverse client demand. This is why we took the decision to utilize low-code frameworks. These enable us to concentrate on delivering business functionality rather than starting from scratch with each new module we wish to develop. This is important as the demand for talent has pushed up costs for everyone and we want to make our dev resources as effective as possible.

What can clients expect from you over the next year?
We will continue to invest in the platform that already delivers the highest levels of performance and reliability and the lowest latency. We also believe that there are significant new roles that technology can play in pricing, quoting, axe management and trading across the complete fixed instrument universe.
We are committed to maintaining our current levels of investment in our platform and internationalizing our business footprint. One area we will be looking at over the next twelve months is bringing greater efficiencies into middle and back office. We are uniquely suited to do this because we have built up significant expertise in transaction automation, data enrichment and message management and so we are excited to be able to leverage this capability.

What has winning this award meant for the firm?
Together with the other awards we have won this year, it shows that firms are understanding the difference we can make to their trading operations both in terms of superior performance and lower TCO.
It is also an important recognition of the work of the whole team at valantic FSA, driving product innovation forward in a true partnership with our clients. The net result is a highly modular approach that continually solves for changes in the business activities and workflows of our clients. And that is a really good feeling.