Illuminate Invests in TransFICC
Private equity cash underscores the challenge, and opportunity, in solving for fixed-income liquidity.
Illuminate Financial Management has invested in TransFICC, which allows firms to manage connections to an increasing number of electronic fixed income trading venues, after the venture capital firm also invested this year in a platform which aggregates bond liquidity.
TransFICC, a London-based fintech firm, was launched last year and uses open source technology to allow banks to easily connect to the increasing number of electronic fixed income trading venues. At the beginning of this year there were 128 trading platforms for fixed income trading, with approximately 220 different API formats resulting from a wide variety of trade execution protocols, which each require separate connectivity according to the firm.
The provider of low-latency connectivity has secured €1m ($1.2m) in early stage investment from Illuminate Financial and Main Incubator, Commerzbank’s early stage fintech investor.
Christoph Osburg, investment manager at Main Incubator, said in a statement: “TransFICC, our first investment abroad, has developed a simple, fast and flexible API software solution for the fixed income and derivatives markets.”
Steve Toland, founder of TransFICC, told Markets Media that the primary use for the funds will be expand the development team to 10 so that new products can developed more quickly .
“We have a core list of 40 venues across cash bonds, futures, swaps and repos that meet between 75% and 80% of connectivity needs for most banks.” he added. “We are aiming to automate the process as much as possible so banks can connect more quickly and also have lower latency.”
Two banks are currently using TransFICC and another seven banks are testing the API.
Toland continued that TransFICC has had more interest from the buy side due to MiFID II, the new regulations covering European financial markets from the beginning of next year. MiFID II increases both pre-trade and post-trade transparency across asset classes, including in fixed income, and strengthens best execution requirements by requiring evidence of why a trade is executed on a specific venue. TransFICC’s co-location or cloud-based hosting technology also supports microsecond time-stamping of data, helping to provide an audit trail for best execution requirements.
“There is growing demand from the buyside who will trade across more venues under MiFID II, including all-to-all models, and have to meet the best execution requirements,” said Toland.
He said there is also growing demand for TransFICC products outside Europe and pointed to China and Singapore, who are both looking to grow secondary market trading in fixed income. This year TransFICC joined The FinLab accelerator programme in Singapore, which was established by United Overseas Bank Limited and SGInnovate, a private-limited company owned by the Singapore Government.
Mark Whitcroft, founding partner at Illuminate Financial said in a statement : “The TransFICC team have clearly identified an opportunity to help banks and money managers trim trading connectivity costs, while building a more comprehensive picture of market liquidity, via a single API. As MIFID II continues to push bond trading towards more transparent electronic venues and pressure on return on equity builds, tools that can deliver low-latency connectivity while simplifying the trading lifecycle will be well positioned for market growth.”
In June Illuminate Financial also invested AxeTrading, which provides banks, broker-dealers and buyside firms with a complete picture of fixed income liquidity including axes, runs and quotes across electronic venues, messaging platforms and voice channels as well as tools which support best execution and regulatory reporting.
In addition Algomi, the bond information network, this year acquired AllianceBernstein’s Automated Liquidity Filtering & Analytics to provide an aggregated picture of bond liquidity signals across multiple electronic venues, message platforms and direct dealer inventories and provide an audit trail of execution decisions with time-stamped data. Fund manager AllianceBernstein had created and developed ALFA as an in-house liquidity tool to provide aggregated real-time information on liquidity and trade intent.
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