Re-shaping fixed income: from spreadsheets to automation

By Stephen Murphy, CEO of Genesis

As the world of capital markets becomes increasingly digital, and technology such as microservices transform businesses across the board, fixed income markets are rising to the top of the agenda.

Fixed income markets are ripe for transformation because they operate in a constantly changing environment driven by a plethora of new regulation. Firms are waking up to the fact that they need to mimic the automated workflows that have revolutionised equities and FX markets, not just to meet new regulatory requirements, but to streamline costs, redefine operating models and give themselves the best chance to thrive.

Manual processes, missed opportunities

Many people from outside the sector would struggle to believe how some treasury desks still manage fixed income workflows between the buyside and sellside. Quotes, orders and trades are processed using outdated methods and multiple external trading platforms. Communication still tends to be done via email or phone call, and data capture via spreadsheets.

These unconnected, manual processes are slow to execute and carry inherent issues of mismanagement. They also rule out any ability to provide end-to-end electronic workflow and pricing at a glance. As anyone operating in the highly regulated market knows, this ability to provide price transparency and efficiency has increasingly become a competitive advantage.

For example, as the number of fixed income execution venues increase, traditional traders are unable to take advantage of the bigger marketplace because they are only able to respond to fixed income requests for quotes (RFQ) through the user-interface provided by their electronic trading platform. This presents two fundamental problems that can only be resolved by leveraging a new technology solution:

1) Sell-side traders have to interact with an overwhelming number of platform interfaces, this limits the efficiency and effectiveness of each trader. 2) Increasing adoption of electronic trading by buy-side firms has caused a major increase in the number of RFQ enquiries. Sell-side traders receive multiple RFQs every minute throughout the trading day. The manual process for organising and responding to RFQ enquiries is insufficient, ultimately the profit and risk-reduction opportunities are lost.

The rise of automation

Change is on the way. Forward-thinking treasury desks have started to meet the demand for smarter end-to-end workflows and deliver real-time valuable insights. They are automating how they manage quotes, orders and trades, with solutions that deliver efficient pricing and workflow management. It’s encouraging to witness the technical advances taking place, and, for us at genesis, it’s exciting to be part of the transformation.

A holistic approach to digitisation

We have invested four years in building our microservices technology framework designed specifically for the world of capital markets. The microservices framework allows changes to be made and built upon any function quickly and efficiently. It is designed to break down challenges into small components of functionality and can cut build timeframes from months (or even years) to a matter of weeks.

A holistic approach is what’s really needed, rather than solving one asset class or one desk issue. The workflow needs one consistent approach that is equally flexible and agile. Our microservices approach enables firms to scale and future-proof their businesses by putting in the foundations that can be further developed and added to over time. It enables firms to leverage the explosion in market information and extract the most from their valuable data by centralising the workflow.

We believe it is the combination of microservices coupled with established market expertise that will create the real winning combination for those competing in this space. Our microservices and domain expertise provide firms with the tools and the capability to accommodate today’s needs.

As fixed income markets enter a new age with rapidly expanding data sets, the old ways are no longer fit for purpose. For those used to the opaque markets of the past the takeaway is clear: evolve or die.