Data & Analytics Insights

A dialogue with Trumid on technological innovation in corporate bond trading

Emil Parmar

Emil Parmar

Director, Credit Trading Solutions

As we know, there is a growing trend towards greater electronification across asset-classes and corporate bonds are not to be forgotten. Recently, LSEG spoke with our collaborative partners over at Trumid to discuss this trend and the opportunities and challenges that come with it. 

  • Global bond markets continue to move towards advanced electronic execution as we see a proliferation of data become more and more available to traders.
  • There is a growing need for innovative analytics platforms that can help make sense of the data and convert it into actionable information.
  • Recently, LSEG spoke with our partners over at Trumid to discuss this trend and the opportunities and challenges that come with it. 

Global bond markets are progressively moving from traditional voice and instant message-based trading to advanced electronic execution. While still a long way from achieving the levels of electronic execution seen in asset classes such as equities, exchange-traded derivatives (ETDs) and FX, there is a clear long-term trend towards greater electronification – as the hunt for liquidity drives more solutions to alleviate the grit from day-to-day trading workflows.

Kevin McPartland, Head of Research, Market Structure & Technology at Coalition Greenwich, sets the scene. “Almost everyone is trading electronically today, including asset managers and hedge funds that have credit strategies. It's now a matter of starting to use electronic trading in more ways. Maybe firms didn't use it for high yield, or they would always trade blocks or do their rebalancing over the phone. But now they're starting to use things like portfolio trading tools and expanding their use of electronic trading for bigger sizes and more complex trades.”

Much of this is due to the proliferation of data, explains McPartland. “There's more data now for bond markets than there ever has been, and the growth is probably exponential. The challenge seems to be less about finding the data, given its abundance, and more about how to use it effectively. How do you aggregate it, pare it, and analyse it so it's useful?”

This is where innovative analytics platforms can help, by ingesting content from multiple sources including market data providers, trading platforms, and direct streams from market makers, to then convert that data into meaningful, actionable information.

We had the opportunity to speak with Trumid’s Jason Quinn - Chief Product Officer and Global Head of Sales and Mutisya Ndunda – Head of Data Strategy and AI about making sense of data in trading workflows:

JQ: “Pre-trade aggregation of data is a crucial feature in any electronic system. We believe that clients should have access to all the various ways to get trades done electronically. Every trade has different sensitivities, and based on that, you should be able to complete the trade using a workflow that makes the most sense given those sensitivities.”

MN: "In today's markets, data is the currency of success. Our platforms harness vast amounts of data, turning them into insights designed to help empower our users to make decisions with precision and confidence."

With the improved sophistication of workflows, is there a point when all bonds are traded on a platform?

JQ: The global credit markets can best be described as semi-liquid, with a spectrum ranging from highly liquid to very illiquid extremes. This means that electronification is not always appropriate. Continuous liquidity comes from continuously available pricing, which isn't a thing in our market. It will very likely never be 100% electronic.

What’s getting in the way from bond markets being fully electronic?

JQ: There's always going to be this less liquid end of the spectrum, which I don't believe can be eliminated, for a couple of reasons. One is that there will always be issuers that fall off from a credit rating perspective and become more distressed. The second reason is that investment bankers are very creative. There's always going to be innovation around the structure of debt, to help lower the cost of debt for issuers. This means in certain cases, those deals become harder to electronify. To move the needle, dealers have to rely more on automating the way they distribute market data and make the process of getting a trade done seamless for the liquidity takers.

MN: AI and machine learning aren't just tools; they're transforming the backbone of how we approach bond trading. These technologies allow us to predict market trends and provide tailored solutions that meet the dynamic needs of our clients. Our focus isn't just on technology, but on the people who use our tools. We're dedicated to creating a user experience that is not only powerful but also customisable to fit the unique strategies and preferences of each trader.

With access to a wide range of trading protocols, how are workflows improving lately?

JQ: A growing electronic trading community is seeking tech-driven solutions to help optimise the decision-making process and trading experience. We are developing tools that build off traditional trading methods, where relationships are a must, while helping to push the market forward by providing clients with real-time data, analytics, and execution tools, which are easy to use and within a single UI (User Interface). Trumid Fair Value Model Price (FVMP ™) is just one example of the integrated data and analytics tools available in the Trumid application.

MN: With more than half of all active clients on Trumid, trading in multiple Trumid trading protocols, our focus is on developing solutions and data products that will guide traders in optimising what, how, when, and with whom to trade. The future of bond trading lies in our ability to seamlessly integrate real-time analytics with electronic execution. We're not just following market trends; we're setting them, ensuring our clients are equipped to thrive in a rapidly evolving marketplace.

The Challenge

The convergence of technology and corporate bond trading is driving remarkable progress in addressing client challenges.  Corporate bond platforms, each with their unique benefits, are rapidly evolving to meet the demands of market participants. While technology innovation has made strides in tackling these challenges, it is essential to recognise that early adopters and the establishment of a community are equally pivotal to enduring progress. Paired with the advancements for lower barriers to integration, technology serves to deepen trading relationships. How quickly we move from concept to production will be our race against the AI bullet train as we await the next workflow optimisation – shouldn’t be long.

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