BoAML Expands Trading Platform
As foreign exchange, fixed income and some derivatives markets move toward equity-like trading, it stands to reason that a trading platform originally built for equities would expand its reach.
Bank of America Merrill Lynch has added FX and equity options to its Trader Instinct platform, and the bank is eyeing rollouts to other asset classes such as bonds and commodities.
“By adding more asset classes onto the platform, we know our clients are getting a holistic answer on where to find liquidity and how to achieve high-quality execution,” said Chris Bae, head of fixed income, currencies and commodities (FICC) electronic trading at BoAML.
Equities have traded mostly electronically since the 2000s; much of the challenge of achieving best execution pertains to market fragmentation and routing a trade to the most suitable exchange or alternative trading venue. More recently, new regulatory regimes such as Dodd-Frank in the U.S. and Emir in Europe are pushing other markets toward a similar framework.
It will take time, and market participants note that fixed income and derivative securities are less standardized than equities, and thus have a lower ceiling for electronic-trading penetration. But non-equity electronic trading platforms are gaining traction, and traders in those markets have to look beyond just the phone to find the ‘other side’ of the trade.
BoAML is porting Trader Instinct’s capabilities to these other asset classes from equities, where “we provide a tremendous amount of liquidity,” said Scott Bacigalupo, head of Americas cash equities trading. “We provide a tremendous amount of knowledge and content around the markets, trading strategies, and high-quality execution. There are multiple channels by which clients can interact with us on a day-to-day basis.”
Based on ongoing regulatory implementations and market-structure changes, there is a high probability that Trader Instinct will be expanded beyond its current capabilities of equities, equity and index options, and FX. A prime candidate is the giant fixed-income market, whose value has been estimated at more than $80 trillion globally.
“A few years ago in equities, the questions were which kind of algorithmic trading tool should I use, which pool of liquidity should I access, and when and how should I access it,” Bae told Markets Media in an Oct. 9 telephone interview. “Those conversations are coming to fixed income.”
“Fixed-income trading in an open format has provided increased price transparency, but also uncertainty around getting your transaction size done,” Bae continued. “For a marketplace that hasn’t done this before, it requires some getting used to the mechanics and the workflow. As we delve into the rates products over time, the Trader Instinct platform will seek to provide clients with a smooth transition from what we could do pre-Dodd-Frank, to today.”
BoAML aims to expanding Trader Instinct across borders as well as across asset classes.
“Bank America Merrill Lynch is a global platform, and this is a global rollout,” Bacigalupo said, also in the Oct. 9 interview. “That said, we need to take regions one at time, because every region has its own complexities in terms of market structure, liquidity, and connectivity to exchanges – the whole dynamic around trading, both electronic and high-touch.”
Featured image via 22 North Gallery/Dollar Photo Club
The increase created a sudden demand for liquid assets that contributed to stress in financial markets.
Initial pricing will generate a net loss for the new exchange on each transaction.
Regulators want to aggregate data across trade repositories.
Bill Street, SSGA's head of EMEA investing, helps clients navigate low rates, negative yields and market volat...
'Big data' can make detecting network breaches simpler, if implemented correctly.