Buy Side Faces Mt. Data
Once the stuff big banks kept in-house for proprietary reasons, fixed income data has proliferated in recent years, driven by structural changes in the market, technological advances, and more demanding regulations.
The buy side has no shortage of information and statistics to sort through. On the contrary, now there’s a problem of too much data, which begets the challenge of how to sort through it to find what’s valuable, and how to deploy the data in a way that adds value in an complex and often high-speed electronic market.
“We’re all figuring out how to take the data and figuring out what to do with it,” Greg Heller, Director of Global Fixed Income Trading at MFS Investment Management, said Friday at the WBR Fixed Income Leaders Summit.
For investment managers, data management means tapping data sources to access crucial pre-, execution, and post-trade insights to help make the best investing and trading decisions. Apropos for the fragmented, non-standardized market in which they work, fixed-income firms are handling it in their own ways.
Wellington Management has an internally developed technology system that connects to select pricing providers that add value, and aggregates the data so that traders can click on a given security and see the range of bids and offers.
With this system, “we can affirm to clients that we achieve best execution for each trade, and we arm our traders with as many real-time trading tools as possible,” Masaya Okoshi, Fixed Income Trading Manager at Wellington, said Thursday at the conference.
Wellington uses a ‘wheel’ concept, where outbound trade orders flow into spokes based on criteria such as liquidity, size, age of issuance, bid-ask spread, and market depth. From there, the trade is directed to a protocol, whether it be voice, or electronic request for quote, or electronic dark. “Everything has an electronic component,” Okoshi said.
Pictet Asset Management has built upon an order management system it bought a number of years ago, said Carl James, Global Head of Fixed Income Trading at Pictet. One focus has been to better analyze and filter the data coming in; the asset manager recently turned off a bank that was sending the same quotes every hour.
“We are adding intelligence around the data,” James said on Thursday. “What is it and what does it mean to us?
This complements the previous statement on the use of UK data in MiFID II calculations.
Buy-side firms need more granular analysis across the trade life cycle.
European investors aren't seeing the needle move.
Electronic liquidity providers have gained influence in the new trading landscape.
Now it’s about how traders and portfolio managers are refining their usage.