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Fixed income: from trading-centric to data-centric

Our Vice-President of Fixed Income Corporate Development Michele Nicoletta discusses the latest industry trends

In fixed income, we’ve seen industry focus shift from being trading-centric to data-centric. How has that evolved more recently?

I’ve noticed a consistent thread this year running through fixed income conferences like the Fixed Income Leaders Summit or the ICE Fixed Income Forum that just happened this week. While data and technology do not create liquidity, it can be used to more efficiently source liquidity and power trading workflows to improve execution quality

Also, the market is analyzing high touch vs low touch trades, and increasingly considering how to employ data to facilitate “no touch” trades, freeing up traders to focus on more value-add activities

And lastly, market participants are shifting from a buy vs build strategic approach to technology a buy and build and integrate approach.

How has the influx of data and new technology changed the market structure for fixed income?

The market has spent the last 5-7 years investing in connectivity to source fixed income data in a digitized format.

But now, the question is what to do with all the data. Data fragmentation is the key problem that the market is trying to solve for. And since data fragmentation is the key problem, then data aggregation becomes the first step into unlocking the value of this data through technology. But just aggregating data is not enough in and of itself. The market is now asking for contextualization of this aggregated data in a pre-trade capacity.

So long term data strategies are being planned and implemented across both the buy and sell-side to achieve their electronification and automation goals.

What does this market structure mean for the skill sets that fixed income managers seek?

We are increasingly seeing the addition of data scientists and quants being recruited directly into portfolio management teams and execution desks

The idea is to complement the skill sets of these more traditional roles so as to really preserve the importance of the human element in the decision making process, while harnessing the power of data-driven actionable insights, especially in volatile markets like we’ve seen this year.