Axe distribution platform Neptune, has seen a 500% growth in the volume of axes and notional sent from dealers to clients since its inception in 2016. Now averaging US$55billion a day.
We caught up with John ‘Coach’ Robinson, the firm’s new CEO, and COO Byron Cooper-Fogarty about the influx of activity and new trading participants, and asked them why traders are engaging so keenly and what their growth plans are for the next year.
Dan Barnes: Welcome to Trader TV – your insight into trading for professional investors, I’m Dan Barnes. I’m here at the Fixed Income Leaders Summit in Europe, the first live event since 2019. And joining me from Neptune are Byron Cooper-Forgarty, COO, and John ‘Coach’ Robinson, CEO.
Guys, welcome to the show.
John ‘Coach’ Robinson: Thanks for having us, Dan..
Byron Cooper-Fogarty: Thanks, Dan. Good to see you in person.
Dan Barnes: So, guys, it looks like liquidity data on Neptune is booming, is it?
John ‘Coach’ Robinson: It is Dan. We’ve seen an increased amount of volume coming through the system of up to 550 billion per day in gross notional axes, which is up from 450 billion a year ago, 275 billion the year before that, across multiple asset classes.
Dan Barnes: That’s fantastic. In terms of the participants, what sort of growth have you seen there?
John ‘Coach’ Robinson: Neptune started with 19 original banks. We’ve grown out to 30 across Europe and the US. We’ve now actually signed on some non-bank dealers as well, so that is adding to it. And then on the buy-side we’re up to the vicinity of 75 institutions taking in the data. With the addition of me and a couple of relationship managers, we’re focusing heavily on the US and adding some of the larger asset managers located over there to add to our existing platform.
Dan Barnes: That’s all good. And Byron, in terms of the way people are consuming the data, have you seen any changes?
Byron Cooper-Fogarty: Yeah, absolutely, Dan. I mean, when Neptune started in 2016, it was very much the GUI-based, you know, it was all about getting the access to the data through our web portal. But over the course of the pandemic, we’ve found integration with the major OMS, the major EMS and also, more importantly, API access has grown significantly to the extent where now I’d say probably 75-80% of our users take the data into their core workflow tools. And that’s been a huge win for Neptune in terms of usage
Dan Barnes: Growth in users, growth in volumes. ‘Coach’, what do you think is driving this?
John ‘Coach’ Robinson: One is the quality of the data that we have on the system. Since we are dealer-owned and dealer-partnered and dealer-funded, it’s in the best interest of the participating banks to put their highest quality data on Neptune. But another thing is the multiple points of how you can receive the data, whether it’s through direct API or we are integrated with several the OMS and EMS providers. And the fact that we are flexible and not just dependent to one particular venue, makes it easier for clients to come on and get onboarded with us.
Dan Barnes: Clearly, the buy-side has a lot of different ways that they might trade or invest. And so the flexibility is really playing to that range of different needs that they have, I guess?
John ‘Coach’ Robinson: That’s correct. At the moment, we are basically trading platform agnostic. We just want to be the place clients come for their pre-trade data to get a sense of liquidity on a particular sector or bond, and then they can choose where to go, and that’s that’s up to them.
Byron Cooper-Fogarty: No dealer or bank is the same as the next one. And likewise, on the buy-side, we’ve got 75 firms and they manage almost 50 trillion. There’s a big difference between, you know, all of those clients, regardless of where they’re based. And I think that’s the key; you need to give them tools that work within their infrastructure.
Dan Barnes: Yeah, absolutely. That adaptability is quite clearly key. Not only are we seeing the need for adaptability in the way that people operate, but also, of course, people are engaging in lots of different trading protocols at the moment. Can you tell us how does Neptune interact with those?
John ‘Coach’ Robinson: When I started almost a year ago, the average size axe on Neptune was five million. A few months after I started having conversations with several clients saying that they really wanted to see the portfolio trading desk axes, which tend to be smaller in size, kind of million more or less. We went to the dealer community and said, you know, since we’re dealer-owned and dealer-partnered, we’re going to reflect in what the clients want. So we’ve had an influx from the portfolio trading/algo desks, and it has been very well received by the clients. The clients are using the algo axes to apply a little AI to what they’re seeing from the portfolio trading desks, just to kind of judge what the flows are and they’re also using it for our portfolio construction in their own right.
Dan Barnes: Whereabouts do you see growth coming from terms of instruments and geographies?
John ‘Coach’ Robinson: We’re getting involved in EM, again, driven by the buy-side. They want to see more EM credit, you know, hard currency access on the platform so Asia, Simia and LATAM. So we’ve been working with the dealer community to increase the number of axes. We’re also working on ‘munis’ (municipal bonds). Basically our platform is made for ‘munis’. It’s an aggregator of all these axes from a fairly fragmented market. So we have a couple of large dealers already putting ‘munis’ on. But for me, that’s the next frontier for us at Neptune is ‘munis’.
Byron Cooper-Fogarty: One key area of growth in Europe this year has been rates. We’ve always been quite strong in SSAs and to an extent, covered bonds. But this year in particular, we’ve seen a number of our major dealers adding European government bonds onto the platform. And it’s been a great change for us in the sense that, you know, they’re much larger in size. You know, it’s a very different market dynamic to credit, which is historically Neptune’s core strength. Not only have we seen significant growth this year, I think we’ll see more of adding guilds, adding US treasuries in the near future as well.
Dan Barnes: All this growth, these advances, what effect is this actually having on traders themselves?
John ‘Coach’ Robinson: There’s no shortage of data out there, but there’s a shortage of good data and high quality data, which is what we’re all about. We had a conversation with a global head of trading, and he didn’t bring one of his traders, he brought a data scientist that he had working for him. And so that’s when you can tell, well, that’s where it’s going. An ability to analyze the data, consume the data vs just using it for the next trade is to learn more about it.
Dan Barnes: It’s really interesting to understand where the data strategy actually sits within a buy-side firm, isn’t it, whether it’s at the trading desk or somewhere else and how they converge on the trading team?
John ‘Coach’ Robinson: Absolutely. One of the things I’ve noticed is just the array of expertize, particularly on the buy-side when it comes to analyzing data, market structure, those that have invested in technology vs those that haven’t and are playing catch up. It’s a very broad array. It’s not necessarily related to a AUM as well.
Dan Barnes: That’s true. Very interesting, so not just the biggest players?
John ‘Coach’ Robinson: Correct.
Dan Barnes: Byron, how would you characterize some of the advantages that traders are getting from Neptune now?
Byron Cooper-Fogarty: What we’ve found is getting that data into the core workflow tools of the firm, the buy-side firm, means that portfolio managers, analysts, various other people are able to generate ideas. And actually one of the benefits the traders are seeing is that they’re actually getting orders that are more readily executable. And I think that’s been a big benefit of not only traders having that data, but also PMs and other people in the firm.
Dan Barnes: Well, that’s fantastic. Guys, congratulations on the growth. It’s really good to see that success.
John ‘Coach’ Robinson: Thanks for having us, Dan, i’s been a pleasure.
Byron Cooper-Fogarty: Thanks Dan.