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Tech Revolution Edging into US Bond Trading, New Study Reveals

A new study reveals an accelerating trend of technology adoption among U.S. bond traders aiming to streamline their processes.

New York Stock Exchange
New York Stock Exchange

Unleashing the Potential of Tech in Bond Trading

US bond investors are gradually recognizing the benefits of technology in trading fixed-income products, aiming to modernize processes that have been traditionally handled manually. This insight is derived from a recent study conducted by financial analytics firm, Coalition Greenwich, and global fintech powerhouse, TS Imagine.

Adoption of EMS: Enhancing Market Execution

According to Audrey Blater, a senior analyst at Greenwich, bond traders are progressively incorporating execution management systems (EMS) into their workflow to enhance market execution. As market dynamics evolve, the efficiency offered by EMS seems more attractive.

At the Tipping Point: Embracing Technology in Trading

The adoption of EMS in the fixed-income market is at a crucial juncture. Even traders who have been hesitant to embrace technology are recognizing that a change in their trading habits is inevitable, says Blater.

A Profusion of Data Sources: Diversifying Trading Inputs

Over the past half-decade, data sources have significantly expanded to encompass execution protocols, dealer prices, evaluated prices, liquidity scores, various communication channels, and enhanced post-trade regulatory reporting, adding more dimensions to trading decisions.

Legacy Trading Methods: A Diminishing Market Share

Legacy trading methods, including order management systems and phone or chat communications, are gradually losing their market share. These traditional processes fail to capture the entire liquidity picture, thus compromising pre-trade transparency, as per the Greenwich analyst.

A Gradual Tech Transition in a Billion-Dollar Market

The transition to technology in a market witnessing billions of dollars in annual trades is still a measured one. Only 39% of the 41 senior fixed-income traders from U.S. asset management firms, hedge funds, and insurance companies surveyed in the study, reported using an EMS.

Reluctance to Tech: Legacy Methods Still Prevail

Despite the emerging tech trends, 34% of the surveyed traders still rely on chat communication for executing trades, with just 27% identifying technology as their primary choice.

Future Outlook: Tech or Bust

"Although we are still in the early stages of EMS adoption, the substantial benefits of utilizing this technology in today's market landscape are unmistakable," Blater highlights. The trend appears to be heading in one direction: outdated methods will soon be untenable.