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IHS Markit's thinkFolio and Wave Labs partner to deliver insights and operating efficiencies to fixed income managers
07 May 2021
Why is fixed income trading still highly manual in 2021?
Portfolio construction processes are generally not tightly
integrated with trading decisions, even though fixed income
investing is considered through both a top-down and bottom-up lens.
Even the most fundamental aspect of trading - price discovery -
remains a tedious and time-consuming activity for most fixed income
market participants.
To help address these challenges, IHS Markit's thinkFolio
is partnering with Wave
Labs; a firm that has created fixed income tools with a twist -
namely, a suite that delivers a functional window through a
trader's perspective. Wave Labs is an example of a new breed of
specialists stepping in to fill the void left by the established
Execution Management System (EMS) vendors who are challenged to
keep up in the technology arms race that has a high bar for success
for each asset class. This pattern is also evident in other areas
of fixed income trading, as alternative liquidity providers
challenge the established players with advanced technology that
offers unique insights, workflows and a variety of flexible and
innovative trading protocols.
According to Wave Labs CEO & Founder, Miles
Kumaresan, "Wave Labs' success lies in the unconventional
way in which we went about gaining an edge in fixed income trading.
It started with defining a workflow that is both liquidity
discovery-centric and uniquely fixed income in focus.
With this at its foundation, Wave Labs set out to create a range of
tools that supported the different pieces of the trading puzzle.
These components collectively form a fluid workflow that assists
traders at every step of the trading lifecycle. A trader decides
when and what he or she wants to use, depending on the task at
hand."
Wave Labs' eLiSA (Electronic Liquidity Seeking Application) is
an EMS that cuts away most tedious tasks. Utilizing cloud-based
APIs to route orders and complete trades, it starts by eliminating
the need for liquidity venue-provided UIs. eLiSA offers a rich set
of both pre- and during trade analytics, as well as multiple order
types, automated liquidity seeking and liquidity provisioning
features.
Another unconventional aspect of eLiSA is the Execution Analysis
module that is crafted specifically for fixed income. Instead of
focusing on trading costs measured to non-tangible quotes that can
make great execution look mediocre, it addresses the documentation
requirements of the high-touch trading process. Kumaresan adds,
"Classical TCA is a dated concept that has not evolved over the
years to meet the expectations of today's best execution committees
or institutional clients."
Commenting on the partnership, Brett Schechterman,
Global Head of thinkFolio at IHS Markit, said, "The
plug-and-play integration of thinkFolio with eLiSA offers our
end-users a smooth workflow between two complementary technologies
that are specialists in their respective fields. While eLiSA is
primarily a trading technology, it also seeks to address portfolio
managers' requirements from a liquidity and price discovery angle.
These intraday market insights go hand-in-hand with thinkFolio's
bottom-up analytics, exposure monitoring flexibility and
sophisticated portfolio modelling capabilities. When married, as
has been our objective with similar alliances focused on other
asset classes, these technologies provide a cohesive workflow that
enhances front-office productivity and perpetually enriches
communication between portfolio managers and the trading desk."
What sort of impact can these types of efficiencies have over
time? A recent report by
Greenwich Associates, 'The Fixed-Income Trading System
Evolution', found that every single basis point in IG spreads
can equal US$1 billion in savings for end investors, and for less
liquid assets the increase is greater.
thinkFolio and eLiSA bring mutual clients innovative and
streamlined workflows by leveraging cloud-based APIs and one
another's functional strengths across the investment lifecycle.
Through the extension of thinkFolio's suite of interoperable
alliances, our clients have access to a suite of best-in-class
options to utilize across their operating models - from portfolio
construction and pre-trade risk analytics to execution and
post-trade performance attribution.
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
