10 Oct

FILS - The View from Barcelona

Steve has just returned from FILS in Barcelona, a great conference where attendance was higher than ever, and there was a good mix of buy-side, sell-side and technology vendors. Thanks to Lauren Harrison and David Bullen for running the event.

Our key takeaways -

1) Direct Connectivity -
There was a great deal of discussion about Direct to Bank connectivity. Interesting to see how the market is evolving, as this was not on the agenda a year ago - it feels like Fixed Income is heading the way of the FX market.

These ideas are being driven by a combination of factors, like a concern about axes not being real or ‘two way’, a demand for Request for Market or Stream protocols, information loss and the cost of execution.

See the article from the team at The Desk for more information:

We particularly like the quote from Mauricio Sada-Paz, global head of eFICC distribution and product at Barclays, “We need a utility in the middle where you can connect and distribute prices to others.”

That’s exactly what we are building at TransFICC - we call it “one API for eTrading” and we prefer the platform term, rather that utility. Platform seems to be more aligned to VC-speak!

However we think that Fixed Income is very different from FX, because of fragmentation by asset type, huge amounts of instrument data, the dominance of Request for Quote workflow, complexity of List Instrument Structures, PLUS more regulatory change to come (see below). In our opinion Direct Connectivity will not be big bang, but instead will evolve in stages, e.g. Pricing/Axes and Rates instruments sooner, and Request for Quote/Stream and Credit instruments later.

2) We Need to Discuss Regulation (again) -
There was little discussion this year about Regulation/MiFID II/Best Execution - and everyone seemed happier as a result.

However the next two new regulatory pressures are coming:

SFTR : Securities Financing Regulatory Reporting, a Trade Reporting obligation for Repo, has a phased implementation, with Banks first up, starting in Q2 2020. Up to 110 fields need to be completed for each trade including Unique Trade Identifier, Timestamps, and lifecycle events relating to Collateral need to be reported. Oliver Clark and the team at MTS BondVision, gave a great overview.

CSDR : Central Securities Depositories Regulation is scheduled for Q3 2020. The mandatory buy-in regime will impose incremental fines on firms that cannot resolve settlement fails within a strict timeframe of 7 days. Expect a lot of talk of this subject over the next year.

3) And Finally -
Always interesting to hear about new FinTechs, so congratulations to Steve Hunter at 9Fin for winning the Dragon’s Den.