By Shanny Basar for Markets Media – first published on April 29, 2016
Algomi, the fintech company that provides a bond information network, is betting that old-fashioned voice broking will continue maintain its hold on trading in the debt market.
This month Algomi announced it is collaborating with IPC Systems, the financial markets technology and service provider, to deliver DealCall. Stu Taylor, chief executive of Algomi, told Markets Media: “Our deal with IPC means the buyside can connect to a salesperson with just one click using DealCall.”
DealCall will be integrated into Honeycomb and use IPC’s Financial Markets Cloud to enable seamless voice communication for the buy-side users of Honeycomb. When Algomi started it built internal networks for banks to connect together staff who could help transact less liquid corporate bonds but the firm has since added asset managers to its Honeycomb network so they can easily and quickly find the best bank to execute large trades.
“The partnership between IPC and Algomi brings voice trading into the 21st century,” Taylor added. “Calls can be tagged directly to trades to meet best execution requirements.”
A recent study by consultancy Greenwich Associates was cited by The Desk’s Trading Intentions Survey 2016 which found that investment on technology for buy-side trading desks fell from 36% in 2014 to 31% last year. The Desk said: “The need to support human traders in assessing the vagaries of the credit market are evident in the level of support that information around liquidity aggregation is providing. As one trader put it, ‘Old fashioned phone broking and trader relationships [are] counting more now than ever as sell-side risk taking slides still further under the burden of regulation, and balance sheet constraints.’ ”
The survey found that the platforms currently most effective at sourcing liquidity were Bloomberg and then MarketAxess as a close second, followed by Tradeweb, Algomi and then Liquidnet. The Desk survey had 70 responses from North American, European and emerging market credit desks spread across 34 investment managers, with an aggregate of €15.4 trillion in assets under management.
Liquidnet, Algomi and Neptune were also first, second and third choice for the second year running as the platforms that traders plan to use. The Desk said: “It is worth noting that many of the most successful models are not those which aggregate actionable liquidity. The services provided by Algomi, Neptune and B2SCAN all focus on the use of information to support where to trade rather than offering a venue to introduce the platforms as with request for quote systems, or any auction or order book.”
Taylor said: “The decrease in liquidity cannot be solved just by introducing new trading protocols. Liquidity can only be introduced through new information or new products such as ETFs. ETF providers have growing information needs in fixed income.”
He added that Algomi will shortly reach 200 buyside customers and is hoping to reach 300 by the end of this year. IPC has approximately 6,000 financial clients, meaning that the DealCall feature of Honeycomb will be available to a significant number of the leading firms in the bond market.
“We are continuing to focus on credit in Europe and looking to make more progress in the US,” added Taylor. “We are installing a new technology backbone which will improve speed, scalability and make it easier to add new asset classes.”
Algomi is continuing to grow despite the downturn in bank results for the first quarter of this year, particularly in fixed income, currency and commodities. Bernstein bank analysts said in a report last month that global FICC revenues have halved during the last five years.
“Banks have two choices. They can rationalise their risk-based businesses, especially in FICC, or they can be smarter and build virtual balance sheets” said Taylor.