Andy Aitkenhead

ONCOURT Ltd.

Accelerating the Growth of Electronic Trading Systems to Gain a Greater Share of Fixed

Income Trading Activity

Andy Aitkenhead

ONCOURT Ltd.

Business & technology

• Global perspective• Business and technology issue

– Technology has and will continue to drive the future of the fixed income market in order to effectively and efficiently handle the increasing volume of trade activity

ONCOURT Ltd.

Greater Share … More Liquidity?

• Three main themes:– Connectivity– Content– Business Models

ONCOURT Ltd.

How are we doing?

“Collectively the world’s leading commercial and investment banks are making rather a mess of transferring parts of their business to the internet. Many are committing fundamental mistakes they would never allow to get through in their traditional operations. Leadership of internet initiatives is often confused, as are their objectives. A few banks may have built good sites for specific businesses but none has come close to putting together a complete set of internet offerings.”Euromoney internet awards, November 2000.

ONCOURT Ltd.

Strategic or Tactical Approach?

• Most banks are struggling to develop a coherent, consistent e-commerce strategy.

• Many e-commerce initiatives are taking financial markets business backwards.

ONCOURT Ltd.

Themes

• Connectivity– External - proliferation of systems– Internal – moving from new to legacy

technology– Numerous protocols, different protocols

dominant in different markets– Data model issue

• Content – Difficulty of combining content &

applications– Relevance

• Business Models– Will continue to develop

Technology can be frustrating

ONCOURT Ltd.

Connectivity – Internal & External

• Internal– Most e-commerce projects in fixed

income have been front end web based trade capture

– Firms have substantial legacy infrastructure for trade processing

• External– Proliferation of ECNs, ATSs,

portals, etc.– In the main each initiative has

determined the connectivity

ONCOURT Ltd.

Proliferation of Electronic Trading Systems

ONCOURT Ltd.

Proliferation of Electronic Trading Systems

ONCOURT Ltd.

Connectivity - Protocols

• Proliferation of protocols developed for different markets– FIX – equities, now FIXML, FIX for

Fixed Income– FpML – interest rate derivatives, some

extension, FX & MM (also TOF for FX)– MDML, ResearchML – market data,

research– Proprietary XML – NTM, FINXML

• If we’re combining multiple types of content and applications we need to deal with numerous protocols

ONCOURT Ltd.

Content

•2-3 years ago …–Should we go online?

•1-2 years ago–Execution

•0-1 year ago–Execution & content

ONCOURT Ltd.

Content

–How relevant is the available content?•Role based, combined with applications•Importance increases with more credit intensive business

–Two levels•Desktop productivity•Client added value

–Cover any area•Origination, distribution, trading•Issuer, sell-side, buy-side

ONCOURT Ltd.

Role Based Content

• Co-mingling of Content & Applications• Need framework for providing this • Desktop real-estate is still an issue• Content & transaction capability

combined• Webstation

– Web-based content – Window on content and applications– E.g. market data, news, research, analytics,

trade capture, chat, video, position keeping

ONCOURT Ltd.

Webstation for …

• Fixed Income Fund Manager• Corporate Bond Trader, Salesman• Emerging Markets Syndicate• Asset Backed Trader• Analysts• Etc, etc, etc

ONCOURT Ltd.

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Business Models

• e-trading has taken markets backwards!• Most initiatives are single asset class • In the last decade there has been an

increase in integration of business lines with more structured business taking place.

• So far not many firms have co-ordinated initiatives across the separate trading businesses.

ONCOURT Ltd.

Combining Business Streams on the Web

– Need for: • Strategic view• Interoperable technology• Synchronous pricing engine

– Ability to provide interaction for the client/user across the business

ONCOURT Ltd.

Several of These?Trading Portal

Trading Portal 

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Firewall

Server Integration

Transaction Server

Analytics Servers

Research Servers

Market Data Server

Firewall

Client

Liquidity Provider

ONCOURT Ltd.

Treasury PortalEquity Portal

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Or This?Trading Portal

Fixed Income Portal

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Firewall

Server Integration

Transaction Server

Analytics Servers

Research Servers

Market Data Server

Firewall

Consensus Estimates

Share Price Data

News Brokers Research

Client

Liquidity Provider

Synchronous Pricing Engine

Market Data Providers

ONCOURT Ltd.

Changing Business Models…

• Internet changing the market like never before?

• What about the telephone?• Markets will change …

– shouldn’t just be automating the existing model

ONCOURT Ltd.

Wholesale Trading

HubWholesale Trading

Hub

Wholesale Trading

Hub

Satellite

Satellite

Satellite

Satellite

Satellite

Satellite

Bank Fund Manager

Retail Client

Retail Client Investor

Bank

Retail Client

Investor

Fund Manager

Integrating Retail Business into Wholesale

ONCOURT Ltd.

Is it Still a Relationship Business?

• How might it change? • Democratisation of the market?• Characteristics of the organisation• Maintaining the Relationship

ONCOURT Ltd.

Liquidity Constraints

• “Investors slam dealers for not providing liquidity and for high costs” – Forrester Report

• Electronic systems increasingly targeting credit markets

• Can systems help to enhance liquidity?

ONCOURT Ltd.

Connectivity, Content & New Business Models!

• Combined they provide greater traction• New liquidity models will emerge• Potential for convergence of wholesale

& retail business in some markets• Back to more structured products

electronically?• Platforms for trading multiple products

will take time

ONCOURT Ltd.

Combining Transaction Capability with Content

• Increased value-add

• Increased flows, increased market share

• Increased liquidity

• Potential to tighten spreads/increase

revenue

ONCOURT Ltd.

Thank You

andy@on-court.com