About Joséphine de Chazournes

Joséphine de Chazournes is a senior analyst with Celent’s Securities & Investments practice. Her research focuses on capital markets innovation and emerging technologies, especially artificial intelligence. She covers the legacy and ecosystem transformation theme across capital markets, including across asset classes, cash and derivatives, listed and OTC, and from pre- to post-trade. Joséphine is a frequent speaker on strategy, regulation, fintech and the impact of technology on market infrastructure. Prior to joining Celent, Joséphine worked with the London Stock Exchange, Borsa Italiana and Goldman Sachs International.

Liquidity and Collateral: getting the blood to flow again

Cash is a dirty word for some cultures, but not for financial services, on the contrary. But I am not talking about the old images of the stingy bankers holding on to their $ bills or about Scrooge McDuck.

Banks, custodians, CCPs, CSDs and exchanges are the financial institutions that enable the exchange of cash for securities, the movement of cash between bank accounts, the securitization of cash, the transformation of cash into collateral. Without these markets players entire economies cannot function: they are the safe and resilient pipes and the pipe operators that enable companies to be financed, investors to invest, prices to be made, etc.

The difference between Liquidity and Collateral is that Liquidity is the money used for overnight funding during the settlement, is the money that is in the treasury of a corporate or a bank to finance short term money needs, whereas collateral is usually a security that is given as a pledge to guarantee that one has enough money for a transaction, to bear the risk of a transaction, to be able to exchange it against cash if need be in a Repo transaction, at a CCP or a broker. Collateral was historically required to be of very high quality: high grade government bonds, sovereign or agencies. However these have become extremely rare as collateral is required for many more purposes now than ever to guarantee the stability and safety of every transaction. Banks have very little of it because keeping collateral on one’s balance sheet is extremely expensive from a regulatory stand-point. But if nobody oils the pipes, they cannot work anymore. 

We have seen in our recent European Post-Trade Infrastructure Evolution: Switching Gears for the Long Run report that where collateral really needed to be optimized today was before settlement, and across assets and for listed and OTC assets. Until today this was not possible as assets were very rarely optimized between equities and fixed income, and that un-cleared derivatives, never making it to a CCP, where always excluded from cross-margining or netting opportunities offered, except after the settlement at the ICSDs but this is sometimes too late in the trade value chain.

This is changing though as Repo platforms and ICSDs have realized they needed to step in to enhance the fluidity of the financial blood. Today we are seeing a myriad of new initiatives that aim at creating some sort of “Collateral Exchange” whereby securities can be upgraded or transformed into more attractive collateral, or even exchanged against another one that is more useful at the time. Elixium with Tradition and Euroclear, Euronext’s Collateral Exchange, BoNY’s DBVX, 360T with Clearstream, the list is already long and is bound to get longer. We are excited to see how these new solutions will pan out and will be watching this space very closely. More in our two upcoming Celent reports about respectively collateral management and post trade technology.

New Year New Tech New Research

In your new year resolutions, did you pledge to understand more the technology that scares you? Or at least the one that some people (aka analysts like me) claim will replace you? If the answer is “No” and you are working in the field of Investment Research, whether producing, consuming or distributing it, then you may want to read our latest report Start Coding Investment Research: How to Implement MiFID II with Robots and AI.

I get paid to write research on fintech so theoretically I am not the tech scared type though I am the first one to control screen time at home. I know we have more and more competition from free research you can all find at your fingertips on the internet, and from cheaper research that leverages outsourced resources crunching a lot of data, but so far we are keeping up probably because our clients think we provide insight that those competitors do not provide yet.

I know however that we have competitors that have technological platforms that distribute their technology in a more user-friendly way with podcasts and fancy databases, that write their research in a more automated way and that you can consume easily because you pull the information with selective search technology that knows what you want and how much you can pay for it.

So before the holiday season, to make sure we were all going to start this new year with the right information in hand, I did look into what artificial intelligence and robotic process automation tools will be doing to research; not exactly my kind of markets fintech research, but more specifically to Investment Research, those written recommendations about equity or bonds or macroeconomic environments to help the buy side make investments.

The result is very honestly scary and exciting at the same time. These new  technologies are maturing at a time of big regulatory change in Europe, MiFID2 is finally kicking in and that means the unbundling of investment research cost from the execution costs the brokers and banks charge their buy side clients. Some buy side will keep using them and be happy to pay that fee, some clearly will start looking at other solutions that will have to propose a different business model provided by banks or by new market players, based on technology.

In our recent report we do look exactly at that: new business models and live case studies that have already been implemented in investment research production, distribution and consumption. Enjoy.

Proof of artificial intelligence exponentiality

I have been studying Artificial Intelligence (AI) for Capital Markets for ten months now and I am shocked everyday by the speed of evolution of this technology. When I started researching this last year I was looking for the Holy Grail trading tools and could not find them, hence I settled for other parts of the trade lifecycle where AI solutions already existed.

Yesterday, as I was preparing for a speech on AI at a conference, one of my colleagues in Tokyo forwarded me an Asian newswire mentioning that Nomura securities, after two years of research, would be launching an AI enabled HFT equity tool for its brokerage institutional clients in May –  here it is: the Holy Grail exists, and not only at Nomura. Other brokers have been shyly speaking about their customizable smart brokerage, e.g. how to use technology so that tier5 clients feel they are being served like a tier1. Some IBs are working on that, they just don’t publicly talk about it.

Talking to Eurekahedge last week I realized that they are tracking 15 funds that use AI in their strategy, I would argue there are even more than that because none of those were based in Japan (or Korea where apparently Fintech is exploding as we speak).

All this to reiterate that AI is an exponential technology, ten months ago there were no HFT trading solutions using AI, and we thought they were a few years away but no, here they are NOW. And the same with sentiment analysis, ten months ago they were just a marketing tool, now they are working on millions of documents every day at GSAM. Did I forget to mention smart TCA that’s coming to an EMS near you soon?

Stay tuned for more in my upcoming buy side AI tools report.

Being smart with artificial intelligence in capital markets

Artificial Intelligence (AI) is the new buzzword to talk about on the street. Financial institutions need to embrace AI, as we have explained in our January report, or else they risk to lose competitiveness or be coded by the regulators more than they can do it themselves.

I am in NYC next week to share Celent’s view on AI for capital markets. A little preview for your here.

Today we are at a crossroad where data scientists have the computing power, the alternative mind-sets to search and the willingness to look for narrow AI solutions, not the wide AI brain that we should get to in 2030 according to experts. This enables vendors to come up with amazing solutions from Research Scaling with Natural Language Generation to Market Surveillance/Insider Trading with Machine Learning Natural Language Processing or even Virtual Traders via Deep Learning of technical analysis graphics traders look at to take decisions.

The amount of data available is another big driver for the rebirth of AI, and regulators are looking at ways of accessing that data and using it. This is borderline what my colleagues would call RegTech, and it’s coming.

Our Q2 agenda reflects our understanding that you want to know more about AI: we will share ideas on solutions for the buy side, for exchanges and for the sell side. But in the meantime I hope to bring back some cool ideas from the big apple, hopefully also from the secretive quants working in the dark Silicon Alleys.

Most of the vendors I have profiled are specialists’ boutiques, but the cost of such research is however so enormous that generalists are trying to productize their fundamental research for various sectors, from health to homeland security, including financial services in partnership with financial institutions.

This morning I woke up to great news that Microsoft is at the forefront of Deep Learning on voice, imagine what this could bring to Anti-Money Laundering or Insider Trading products.  The other news was that some top quants of Two Sigma just solved an MRI algo to predict heart disease, and I hope other great minds will, as most of them usually do, also give back to society by applying their amazing knowledge to such grand challenges.

Symphony messaging: WhatsApp to business’ ears?

It’s official, what many financial institutions have been saying for quite a while is becoming reality: they don’t want Bloomberg (or any third party?) to have access to all of their messaging, trading or not related, anymore and hence have decided to team up as equal partners, in a top-notch technology utility that serves the needs of its members, a key to its potential success, to fund a competitor messaging system called Symphony. The network, the link between the bankers and their clients and between their clients and their competitors is what enables them to be and stay in business: A third party cannot be invited around that table. Not only, Symphony could be offered to other business sectors as a professional WhatsApp. Follow me here: financial institutions don’t trust anymore a third party to manage their messaging data, but think other business sectors will trust financial institutions to manage their messaging data. Although I personally got annoyed when my bank asked me why I was spending some of my savings‎ on our family farm when I asked for a mortgage, I know they probably know my financial situation better than I do, and that I am not a potentially “good” client for them: I trade myself, have little savings, do everything online, so I guess it’s only fair for them to ask. Of course Big Brother is watching me – and so should he. But I am not sure if I would send all my WhatsApp messages on a bank-owned competitor system, would you run the risk that your bank could potentially see all your messages? In the case of corporations and businesses though, things are slightly different: their relationship with their banks are usually extremely deep, their bank helped them get their first line of credit, maybe introduced them to private investors or helped them IPO. And when they wanted to take part in a big project with a new foreign client they bridged the financing of the project, they helped them offset their FX risk, invest their liquidity and manage their treasury… so if they started potentially seeing their employee’s messages to their clients or suppliers, would it really make a difference to them? Probably not. Of course I am extremely simplifying the potentially extreme risk such a system could have; It has been created on the back of a highly secure encrypted internal system Goldman Sachs had developed and has been enhanced with the best of the best (it is said) technology, in an open source environment. We’ll be make sure to test it as soon as it is offered to the public later this year and am waiting for the next Instagram for finance.

RegTech: is there an artificially intelligent Big Brother watching you?

I just came back from sabbatical (it was great, but you knew that already). I’ve come back charged up and with stars in my eyes from what some of my colleagues call a sect, Singularity University. Well true that the founders want to make the world a better place, and that some of them could become god-wannabes when they will have artificial intelligence implanted in their brains and will have been able to fight ageing through DNA nano-modification and thousands of top notch anti-oxidant pills but to me right now they are just great crazy people who hope to make a difference through the exponential power technology has – and I am proud to be one of their alumni. So… what’s in it for you? Well FinTech, I guess. I am currently trying to look at what Artificial Intelligence (AI) will change in capital markets. The good news is: you already all know what AI is, even though some of you may be scared by it. But here I am not going to look at what AI will do in your bodies, just in your day-to-day jobs (not that scary, or so you may think). What many of our clients (buy side, sell side, exchanges, info providers, tech providers) have been trying to figure out in the past few years is what are they going to do with all the data they have. They have built or bought Big data softwares that parse, recognize, organize data and create products thanks to this data, whether algorithms that find trading opportunities through structured and unstructured data or corporate investor relations service that highlights where in the world is there a bad news about a specific company and what to do about it live via a data push, or even just create trade pairs when there are no matches in illiquid markets. So far, so good. What our clients are facing now at an increasing (did I say exponential?) pace is something bigger than this, what we call RegTech. Think of the current regulatory environment where you all have to adapt to MiFID II and EMIR and T2S and CSDR etc. at the same time. You all have to create new business models, technology or operations systems that will enable your company to abide by these new regulations. But RegTech is more than that: it is also the technology that you have to use to force change within your organization so that you can prove your bankers are acting in the best interest of their clients, say even in FX, where there are no real regulatory changes, but a lot of regulatory willingness to change things right now. These could be artificial intelligence machine learning algorithms that know how a typical FX trader acts and how the computer should block the non-compliant tentative trades or even just do the trades in a compliant way instead of the trader itself? You can’t really fire all your FX traders in one go and replace them all with AI computers, but you get my point. Even further than that, and I think where it gets scary, regulators, governments and supranational watchdogs are building (or have built already? Brownie points for who knows the answer to this one) big machine learning type AI to monitor what all the buy side, sell side, exchanges, trading platforms and hedge funds do on the markets, and off the markets through BIC accounts, every day, every minute, every second. When these smart systems see that somebody out there is not doing what he/she is supposed to be doing, even just from a simple compliance stand-point, his/her company will be in deep trouble. Of course I don’t expect the SEC or FCA or Consob telling us that they are building them, but there is more than meets the eye, get ready for this change to arrive at a watchdog near you.

Buy side insight for Fixed Income platforms

Time keeps becoming scarcer and we all become more selective on what conference we will attend or speak at. But yesterday, as I was by chance in Paris, I dropped by one of the potentially nth conference on fixed income, and was presently surprised by the value of its content. Congrats to Trading Screen for pulling it off. Let me share with you a few takeaways, mainly from a great buy side panel: 1) One of the buy sides (whom we all know are the ones calling the shots nowadays) summarized his selection process for choosing a new trading platform as follows: i) Who owns the platform? A bank (negative points) or a vendor (positive points if strong balance sheet). I would add exchanges (they are neutral) and interdealer brokers (for whom it is one of the only options to remain in business) to that list, but the latter will have a challenge at connecting all the buy side. I have an open question here: why wouldn’t the big buy side invest together in a platform they believe in with Equity so that they can reap the benefits of the success they will bring to it as the banks did with Tradeweb?Aren’t they in the business of investing? ii) Buy side is not an option: if the buy side doesn’t all connect together in an automated way, the success rate of the platform will be low. (c.f. who’s calling the shots). iii) The need for an independent clearing agent from ownership and/or for the functionality to choose one’s own clearing agent. Here I actually pushed the question further as a big custodian is currently rumored to be the clearing agent of a MD2C platform’s new product: should custodians be involved, should they become agent brokers since they have the assets of the AMs (and a clean balance sheet, may I add?), or be a platform? Some people in the audience laughed at that one, pretty sad considering what some of the big global custodians have in pipe, let’s assume these were brokers who have never taken the time to understand what happens “post” trade… thankfully at least two of the big buy sides in the panel actually got my point: there could be room for some innovative matching engine to team up with custodians (Algomi?). See last year’s Celent report: Innovation in Focus: The Analytics Powering Fixed Income Matching for a comparison of the functionalities of the new matching vendors. iv) Flexibility of interactivity: the buy side has to be able to choose to interact only with each other, to exclude toxic flow, to include some banks, etc. Everyday potentially in different ways. So just a switch functionality for the other side of the trade. Some new platforms thankfully already have that in their rule book/functionalities such as Bondcube or TradeCross (Trading Screen’s 2.0 version of Galaxy). In our report we actually had mentioned the “selective multicast” capability of Baymarkets for banks to select what prices to send to what client in cascades; this is an interesting adaptation for the buy side to select who to send what interest or order or request for quote to whom in cascade or not. 2) Another point that was made was that there is no first mover advantage, this is taking time to pick up as AMs are adapting to change and regulations on transparency is not final: I could not agree more as we have been having these discussions for the past 3-4 years non-stop, and the number of professionals buy and sell side interested keeps increasing. Still, at some point the big AMs will have to jump on one ship as the cost of illiquidity is becoming too expensive for their funds’ performance (nice presentation on that from an AM quant). 3) Last but not least is the cost of connectivity to all of these platforms‎, apart from the time spent to connect to them (and to convince senior management to connect to them?). This has to be corroborated also by the lack of screen space available for new entrants, the need to come in via other or incumbent screens maybe? Or via a web browser? 4) Last interesting point which is an idea we have been pushing out at Celent for a while: the buy-side could go directly to the issuers: yes, and they already do actually, for big infrastructure projects or issues whereby they already have a relationship with the issue. A platform with both and no brokers, banks to build the book and syndicate and sustain the price? CSDs and iCSDs have a role to play here: such a platform could work with Dutch auctions or even normal auction process, but it would work more in the interest of the smaller buy side than the big ones obviously, creating a level playing field… hence hard to make it pick up… SMEs and small institutions could meet on P2P lending platforms through aggregators of interest such as Orchard though. More in an upcoming report on these… As for TradeCross‎, I still need to get a demo but we already know that it will be All-to-All (but in the flexible way mentioned above, not our old definition with CLOB and level playing field), anonymous, an MTF, trading with all-in price (commission), interest and orders, multiple trading models (did they mean protocols?), spread or price or yield trading and with a web browser if need be. No go live date as of yet.

Fixed Income vendors: Ready, Steady, Go!

Celent has been following Fintech innovation in the Fixed Income trading space for a few years now. If you didn’t know (sic!) please check out the following reports: http://celent.com/reports/innovation-focus-analytics-powering-fixed-income-matching or http://celent.com/reports/technology-european-fixed-income-time-open-pandoras-box and listen to our Webinars, come to our Innovation roundtables, or just ask for a briefing with us 😉 But like most of you, I was starting to have the feeling that I kept hearing or writing (worse!) about the same things and that nothing was really changing in Fixed Income trading.  That was until probably the beginning of 4Q13, when we heard some exchanges were starting to make bold moves, some platforms gaining traction with new functionalities (Tradeweb with Sweep) and some specialized vendors expanding globally (Algomi). Then we all spent the latter part of 4Q13 writing business plans, end of year reviews, new year objectives (if not resolutions!), hiring plans, strategy implementation plans, etc. In the meantime however the European Commission, Parliament and Council finally agreed on MiFID II at the last hour, triggering sudden interest in all of the vendors that had been trying to evangelize the market about Fixed Income pre-trade transparency tools, price aggregation and/or distribution, Best execution algorithms and Smart Order Routing (SOR). Think List Group, GATElab, SoftSolutions!, SmartTrade or Axe Trading. The last nail in the coffin of change came in last week when UBS announced it was outsourcing its Fixed Income trading platform to Murex and Ion Trading, two long-established vendors. Here we are talking their institutional voice and electronic trading business, lots of real sales with real traders, not UBS-PIN-FI. This is big news for Fintech. Tier 1 Fixed Income Investment Banks (IBs) historically developed all their technology in-house. Some of them had started since the crisis to integrate small parts of vendor solutions in their in-house systems (e.g. Broadway Technology for GS in Rates), but the outsourcing the entire trading platform: that never used to take place.  Think all these personalized valuation models the big fancy trades used to need – that had to be proprietary and developed by a team of in-house quants. UBS is a great first because it obviously has 1) lost more of its shirt in the crisis, 2) publicly made a strategic decision to move its fixed income focus away from the big fancy (and risky) trades and towards less risky and more standard client business (that can have more standard booking, affirmation and valuation systems obviously). It should therefore come as no surprise that they would be the first big IB to make this move. But I don’t think this is the last one. Just looking at the 2013 FICC revenues estimates of my Oliver Wyman colleagues made for the 6 big IBs that have reported earnings so far (JPM, BoAML, GS, C, MS, DB), down more than 12% year on year, one can easily see that the pressure on cost will keep sending IBs to the innovative vendors. After Ready and Steady, time to Go for fixed income vendors!

Chat, Instant Messaging, Blogs and Trading

This morning I read an article in my favorite financial (serious) paper about how the FX price manipulation scandal that is unfolding may make banks ban traders from using trading chat rooms. And that some were looking at ways to replace these trader conversations to bilateral phone conversations. I did check and today is not April fool’s day. Maybe I am out of my mind, could be, please do let me know if so, this is a blog, not a serious article. But in the meantime, please let me try to provide you with a little trading perspective here. Electronification is THE secular trend that trading is going through, I don’t see who and how one could stop this. Seriously, even when I write about fixed income trading, notably the most voice-traded assets in financial services, I have to write about electronification. Ok I did work for an exchange once upon a time, but I also did work for a notable dealer known for making heaps of money on voice trades. But even outside of trading, my retail banking colleagues keep writing about electronic transactions, handheld, cloud and the likes. And outside of finance, well guess who uses the internet to chat, talk, socialize, buy consumer goods, nearly everyone we all know. What would you say about banning teenagers from using facebook because they could meet dangerous people on it or expose their personal lifes unnecessarily? Sounds like a just cause but you can’t, facebook is here to stay, like linkedin is here to stay for us analysts, and like electronic chat groups for traders. A trader’s job is to make the best price for his bank/broker on an asset and reap a profit from it by buying and selling these assets. To make the best price for his banks he needs as much (relevant) information he can have to make his own mind/models like I need to read what my competitors and clients think to make my opinion on something, and so do traders. If you remove such multi-dealer chat rooms as Bloomberg’s, there will always be other chat rooms popping up like mushrooms, only this time they will be less legal than the ones traders use now, and they will really cause insider trading concerns. At least when a chat takes place on Bloomberg, the surveillance department of each trader’s bank could have access to the message exchange via Bloomberg and Orange’s Vault services. Etrali is another important player working with Bloomberg and Google Glass could well become a way to capture traders’ voice, chat, instant messages, etc. and put into the Vault too. This way the surveillance department can also look via key words in those message exchanges live, as they happen. Last time I asked a telco service provider if he was able to provide a reliable search facility through conversations taking place on the turrets (phones of the traders), they told me they could not because traders use strange words nobody outside of a trading floor understands and that conversations take place in an awkward sequence: 2 sec with someone and then 1min with someone else and then back to the first one, etc. But with a chat messages exchange then you see the historical trail visually, and yes, they surely use strange words but with time surely one can build a “trader dictionary” to translate these conversations in Oxford’s English and it surely would be easier to read the word written by the trader rather than having to read its transcript done by a none-trader inside a conversation with loud shouts from a trading floor in the background. Ok, I have waited a few hours before posting this to check with my editorial board if I was out of my mind, and they say they agree with me: next time a bank tries to make amends via such a press release, wait a few hours to give them such an outrageous headline please.

Singledealer vs. Multidealer platforms in Credit, is that the question?

Summer holidays offer for some of us time to break away from our daily routine, newswires, and analyst reports! For some others it is actually a great time to catch up on what was not read in the past few months. As I am in the first category, I had the pleasure of reading a very interesting piece of research on Credit e-trading as I got back to my computer. This was especially insightful for me as my US colleague, David Easthope, and I follow this topic amongst other themes, and because I am currently updating our yearly European fixed income market sizing report (here is the 2012 sizing report: Fixed Income in Europe: Ready for the Tornado?). What I found most interesting in that report was that it highlighted the fact that, though much innovation is taking place to try to curb the lack of liquidity in secondary corporate bond trading both in Europe and in the US, whether through Order Books (OB) or auctions or hybrid systems, cf also Dave’s recent report: Innovation in Focus: Electronic Trading Platforms in US Corporate Bonds, the general feeling of investors is that the incumbent Request for Quote (RFQ)  Multidealer-to-Client (MD2C) trading platforms will keep their high share of the corporate bond market, and that they are skeptical about Singledealer-to-client (SD2C) platforms. Though I have no doubt that MD2C Bloomberg, Tradeweb and MarketAxess, amongst others, are working on improving their offering to impede the newbies from taking market share away from them, I do think they are going to have to fight hard to stay ahead in Europe in a levelling to tightening corporate bond market (vs. European govies volumes which have seen a staggering growth in 2013 vs. 2012). Why is that? Transparency requirements and Feer of near-Duopoloy. Transparency requirements in Europe will come in corporate bonds through the MiFID review, mentioned in our recent MiFID II Pre- and Post-Trade Transparency: Is There Light at the End of the Three-Year Tunnel? report, which could in the end greatly be influenced by EMIR, i.e. OTC voice trading could very well be banned in liquid corporate bonds. When investors will realize that some  dealers can actually provide them with best execution through smart order routing to RFQ, OB and hybrid systems (cf the 2012 Technology in European Fixed Income: Time to Open Pandora’s Box report), or better, when investors themselves will have invested in such capabilities, I think competition will truly heat up between SD2C and MD2C platforms in the most liquid corporate bonds and/or small size trades (50-100,000Euro trades), not fogerting the retail OB platforms. Feer of near-Duopoly comes from the fact that dealers do not like to leave too much control of their trading activities to one or two entities, hence their currently trying to decide on which new hybrid model to bet (and invest in as a consortium?) for the larger sizes and/or most illiquid bonds, hoping to solve their liquidity issue. Last but not least, I get a lot of inspiration for fixed income in FX. It generally provides me with better inspiration for the rates business which, like FX, tends to have continuous liquidity and be a homogeneous market vs. credit which tends to have episodic liquidity and be a heterogenous market. However, the aggregation theme has become hugely important in FX, between wholesale and institutional platforms, between retails and institutional flow, at SD2C platforms, from technology providers, etc. That part of FX for me shows how SD2C platforms can have an aggregation edge between wholesale and institutional business, between institutional odd-lot and retail trades and between various platforms. Simplistically: think SEF aggregator for corporate bonds. Thinking of the desktop space optmization issue that investors often mentioned, I would like to share two scenarios:
  1. Scenario for the SD2C to keep a slot on the desktop is a combination of extremely modernized chinese walled and balance sheet optimized platform that aggregates, routes and matches as much investor flow as possible (some of it coming from MD2C RFQ platforms, some of it not) but also takes part in a Multidealer (not to client) consortium-like platform for their unmatched inventory and/or for the large size enquiries/indications of interest of their clients? It could be that some clients prefer to have 2-3 really good relationships with 2-3 dealers that have SD2C platforms that serve their particular needs (algos, primary issues, inventory, etc), and use their desktop space for these 2-3 venues rather than having to link up to the many MD2C platforms.
  2. Scenario for the MD2C to keep their currently extremely robust slot in the desktop of investors, before all investors get extremely robust OMS and EMS technology to buypass the MD2C (not soon!) or go for the SD2C-only route, could be to enable wholesale, institutional and retail flows to interact. In CDS indices (which are liquid) we have seen how Tradeweb has gained more than the majority of market share by doing that (and not only): enabling investors to stream wholesale liquidity. Could it be done in corporate bonds? There is currently no interdealerbroker (IDB) e-trading taking place in corporate bonds but could a MD2C platform add that IDB2C functionality? You can read more about IDB2C in The Blurring of the IDB Vs. D2C Models in Fixed Income and FX report. The alternative would be for the MD2C to offer the credit OMS/EMS technology to investors, and some are already working on this.
  More colour to come in September when we publish the 2013 European fixed income sizing report, and in October when we discuss the latest technology vendors we have recently met.