The Quest to Harmonize Primary Market Connectivity
Managing Director, European Institutional Credit, Tradeweb
Against the backdrop of innovation permeating and transforming fixed income markets over the past several years, the primary market space, for the most part, has not gained meaningful ground in the automation and electronification of workflows. Despite multiple initiatives and products emerging over the last five years trying to tackle challenges in the ecosystem, investors are left to manage new issues orders through laborious workarounds. Even today, investors are still stuck with no reliable data on new issues and lack connectivity with their OMS, leaving them to resort to manual data management and order entry.
These issues were accentuated by the flurry of issuances in 2020/1 as issuers rushed to tap into the ultra-low rate environment, leaving investors overwhelmed with managing multiple manual processes on days where multiple deals would come to market. As a result, significant risk logs occurred including – wrong orders, failed compliance checks, and an inability to take part in a new deal.
Quickly, investors realized that the key to solving these issues would be data – in particular, automating the creation and management of new securities, in an effort to ensure that their internal risk, compliance and OMS would be aware of the new deals investors want to participate in. A few with the resources available to them built complex proprietary solutions fueled by multiple data sources to address this challenge, however, most still remain stuck, with multiple people and teams involved in manually scraping the limited data available to them.
In order to meet the minimum data requirements of today’s electronic order management systems and security master files, primary credit market participants need certain basic reference data about each new security, including: issuer, coupon, currency, country of risk and other unique, security-specific details. However, in between the issue coming to market and the ISIN being made public, market participants are unable to link the reference data to its universally accepted security identifier – the ISIN. To fill in the blanks, they must chase that information down from the individual bookrunners involved with the deal – each of whom may label and categorise that information differently - further feeding into the issue of information fragmentation - and share it across a hodgepodge of instant messages, e-mails and phone calls.
Open collaboration to accelerate and effect change
The process adds a great deal of manual legwork to a workflow that should be much simpler. That’s why Tradeweb, Euroclear and Informa Global Markets have collaborated to streamline, automate and standardize that process. Read the press release here.
By breaking down administrative silos and cutting out inefficiencies in the current process, we believe it will be possible to provide all the critical data that primary credit market participants need the moment a new issue comes to market. To get there, we’re going to connect technologies and data providers in new innovative ways. By taking this market-driven approach that puts transparency and efficiency at the centre of the equation, we see the potential in and intend to dramatically improve primary credit trading workflows.