Although some areas within capital markets benefit from the efficiencies of electronic trading, the more complex and less liquid instruments still involve a great deal of manual, unstructured pre-trade activity. For example, copying and pasting of term sheets, IOIs, Axes, RFQS or prices between applications is common, often with further steps to remap and enrich data in the process. All time consuming and inefficient for the desk. This creates friction (summarised in this SIFMA report), leading to poor client service and increasing costs for both the buy side and the sell side. It also leads to reduced liquidity and unnecessary operational risk, which can feed into systemic risk at an industry level.Can these issues be addressed by bringing more standardisation and automation to the market, particularly around pre-trade client workflows? This blog will explore the challenges and opportunities of digitising pre-trade workflows, and how data and technology can combine to help create more standardised and automated processes.
The Problems with Manual Trade Workflows
Manual trade workflows have several drawbacks, such as:
Friction: Manual workflows create delays, inconsistencies, and misunderstandings between counterparties, which can affect client service, liquidity, and costs.
Risk: Manual workflows increase the chances of human errors, such as misreading, mistyping, or misinterpreting data, which can have serious consequences for the market, the firm, and the individual.
Siloed data: Manual workflows rely on disparate data sources and formats, which make it difficult to integrate and share information across different businesses, systems, and platforms.
Lack of standardisation: Manual workflows vary widely depending on the product, the counterparty, and the platform. There is no common language or protocol for pre-trade communication and negotiation.
The Benefits of Digitising Trade Workflows
Digitising trade workflows can offer several advantages, such as:
Efficiency: Digitising workflows can reduce manual tasks, streamline processes, and speed up execution. This can save time and money for both the buy-side and the sell-side.
Accuracy: Digitising workflows can eliminate human errors, ensure data quality, and enhance auditability. This can improve risk management and compliance for the firm and the industry.
Collaboration: Digitising workflows can enable better communication and coordination between counterparties, as well as within the firm. This can improve client satisfaction and retention, as well as foster innovation and creativity.
Standardisation: Digitising workflows can create a common framework and format for pre-trade data and messages. This can facilitate interoperability and integration across different products, platforms, and networks.
How ipushpull Digitises Trade Workflows
Digitising trade workflows requires a combination of data and technology solutions, such as:
Data models: Data models are standardised representations of trade data that define the terms, definitions, rules, and lifecycle of different products.
>>> ipushpull can help harmonise data across different sources and formats and validate data quality and consistency.
Data platforms: Data platforms are cloud-based systems that enable data sharing and workflow automation between counterparties.
>>> ipushpull connects data from disparate applications and tools, as well as transforming and enriching data into different standards and protocols.
Data networks: Data networks are secure and compliant collaboration platforms facilitating pre-trade communication and negotiation between counterparties.
>>> ipushpull can help exchange data in real time using chatbots, apps, or APIs, as well as track data history and metadata.
Beneficial Use Cases
Where our customers already have the data and the platform but may lack the distribution into end-user applications, they have successfully used ipushpull either for the first or the last mile of connectivity.
The first mile is where data may be unstructured or sitting in an application or system that generally does not have any external connectivity. By connecting to ipushpull, data can be securely pushed into the Cloud in a standard format and then made available elsewhere.
The last mile is about getting data into the applications or tools that your clients or your teams already use, so nothing new needs to be installed. That data can be coming directly into spreadsheets, into chat, or collaborative apps such as Symphony or Slack, or straight into your internal blotters or platforms that you might be using for that last mile of distribution. Here are some specific examples where ipushpull can help.
Streamlined pre-trade Workflow
The first use case is an investment management firm building an automated data-driven workflow within FICC. The manual workflow they had – again, fairly standard in the industry – was that the trader would receive an instruction from a portfolio manager via their internal system, manually type that into a chat to its dealers and negotiate pricing across multiple different counterparts.
Using ipushpull, this workflow has been streamlined removing any manual processes – and related operational risks – on the buy side.
Distributing Bond Axes
The fixed income division of a leading UK bank has created an automated workflow to send live prices for bond axes to its clients. In this case, the bank’s dealers are able to publish relevant axes with live prices in a Symphony chat window, which the client can execute directly from a chat. That then triggers a full STP process to automatically trade and update the bank’s internal systems.
Previously, this was a much more manual process, involving e-mails being sent back and forth, or copying information from other systems and applications into chat windows. Whereas what the client sees in the chat now is live, executable data that can be acted upon immediately either with a bot or directly with a salesperson.
Real-time Pricing of basket trades
ipushpull is helping leading financial institutions create automated workflows, for both the broker and its clients, around live pricing of basket, portfolio and list trades. Whilst workflows vary across products, the typical process was highly manual and labour-intensive where the client would send (via e-mail) a spreadsheet containing hundreds of lines of items. This would then have to be copy/pasted into the correct format for pricing, with the resulting data being copy/pasted back into the client’s spreadsheet format and e-mailed back to the client.
Although this is a fairly standard workflow in the industry for pricing this type of trade, it is time-consuming, error-prone and totally unscalable – given the manual effort involved, there are only so many of these types of trades that can be priced per day.
Working with ipushpull, our customers are automating a data-driven workflow whereby clients can push their trades directly from their spreadsheets, the line items are recognised and mapped into the correct format so the pricing can be rapidly generated. Pricing can be automatically sent back to the client in Excel, with little or no manual intervention other than oversight of the process. This enables our customers to work much more efficiently, pricing more trades, in a more accurate and timely manner, and gaining new scalable business as a result, as well as eliminating keystroke risk.
The Future of Trade Workflows
The future state of pre-trade technology is a world where instead of having highly paid professionals doing robotic tasks, we can instead combine the human and the machine conversations, the messages and the data, eliminate manual processes and improve efficiency by creating and adopting standardisation.
The ultimate goal for most technology providers is to free up traders and salespeople to do the things that only humans can do, i.e. provide market insight, invite opinions, discuss ideas and create value, using new, live, collaborative, interoperating tools.
The industry now needs to address its legacy silos and re-engineer its manual pre-trade processes, with a mindset of delivering an improved experience, better internal efficiency and, at the same time, a significant reduction in operational risk. If you would like to know more about how ipushpull can help your business, why not contact us.