The Bloomberg–DirectBooks partnership for primary fixed income markets, announced on June 8, aims to lay new tracks for greater efficiency by reducing manual workflows and enabling market participants to manage orders and allocations electronically.
The collaboration integrates DirectBooks with TSOX, Bloomberg’s fixed income execution management system, allowing allocation messages and pricing information to flow electronically between market participants and their trading systems.
Speaking at the Fixed Income Leaders’ Summit in Boston, Bloomberg’s Blair Hurn compared today’s primary market process to “hacking your way through a jungle without a compass,” highlighting the industry’s reliance on manual communication between buy-side desks, bank sales teams and syndicate desks.
The integrated workflow, he said, functions more like a “railroad,” providing a standardised pathway for managing orders, interest updates, pricing and allocations across the market. Early client implementations have reduced manual workflows by as much as 80%, according to Hurn.
Looking ahead, Hurn said further automation could streamline repetitive tasks such as hedging instructions, accelerate allocations and pricing, and expand standardised workflows into additional asset classes, including equities, municipals and structured products.
Interview
Josephine Gallagher – Welcome to Trader TV. We’re here at the Fixed Income Leader’s Summit in Boston, and I’m joined by Blair Hurn, product manager, fixed income execution management. Blair, lovely to have you.
Blair Hurn – Happy to be here.
Josephine Gallagher – Excellent. So, primary markets is one of the most inefficient and manually driven workflows across fixed income, so describe for us what does that process and workflow look like for a trader today?
Blair Hurn – Sure, I actually always describe it as hacking your way through a jungle without a compass, and eventually you get where you need to go, maybe winding through, but you’re exhausted at the end of it, and tomorrow, or even later on in the day, when another tranche comes out, you’re going to have to do the exact same thing again. You can think about a buy-side trade desk that’s trying to manage all of their internal interests from all of their strategies, communicate that to sales at the banks, and then sales has to take all of their client interest, pass it along to the syndicates, and the syndicate desks are all trying to reconcile one big book across the banks. And then if there’s a change in interest, all of that communication has to be done again, and then when it’s time to allocate and price the book, all that communication flows back manually, and in fact, the buy-side trade desks and the sales desks are booking these all out manually late in the afternoon, or sometimes even the next day.
Josephine Gallagher – Wow, that process just sounds stressful, hearing it back. And so we’ve had a lot of people on Trader TV talking about this issue for a very, very long time. So standardizing processes and also modernizing primary markets, and you know that closer collaboration between desks, syndicate banks, platforms, and issuers has been, you know, it’s a big target area. So, tell us, like, what does this DirectBooks integration, what role does it play in improving and modernizing this space?
Blair Hurn – Sure, so what we’ve been looking to do, essentially, instead of hacking through the jungle every single day, we’ve built out a railroad, so you know exactly where you’re starting, you know exactly where you’re going to end up, and you can move much more efficiently along the rails back and forth when you want to change interest or limit levels, etc. And the other thing that this enables is not just efficient communication, but now you’ve got a way to transmit those allocations and pricing information back electronically, so that the buy side can book these trades out, not manual anymore, but using a straight through process that they’re used to using for all of their other trading, and in fact we’ve seen some of our clients who are using these workflows with an up to 80% reduction of the manual workflows that they have involved across primary markets.
Josephine Gallagher – And looking at these issues, like some of the big areas of friction is the data and the technical standpoint. So, what can big-picture collaborative projects or partnerships like these actually mean in trying to improve those technical and data areas.
Blair Hurn – Sure. So when a deal is announced, we’re dealing with very unstructured data, and by its very definition, unstructured data means a human is going to have to read and/or send and interpret that data, and both sides have to agree on exactly what they’re trying to communicate interest on. That inherently introduces risk and it lowers velocity, so now if we think about the railroad going back and forth, we’ve actually been live with the S&P Investor Access platform for the last three years and seen a lot of positive feedback from that. Now that DirectBooks is online as well, we’re seeing the market coalesce around a set of workflows using the same blotters that they use all the time anyway, and a more normalized way to do things that takes away some of that risk and that timing, so that everyone is working from the same starting point, and so instead of having to rebuild everything and re-engineer everything each time, you’re adding cars to the train, you’re adding a station, but you’re still doing it all from the same pathway.
Josephine Gallagher – Okay, I really want to steal your analogy here, where you talked about railroads and trains and cars. So we’re talking about here in terms of railroads, like this electronification, the standardization of primary markets. What about putting another engine on top of that, and you know, moving towards automating these processes? Where do you see, you know, what parts of the primary markets industry becoming automated or having real-time processing?
Blair Hurn – There’s still a lot to do in the nearer term. We can certainly do things around hedging instructions and taking away those repetitive tasks that today a trader has to do manually and putting that in the hands of a machine to do those repetitive tasks, so that they’re freed up. For actual alpha generation, where their skills are really useful, and we’ll start to see allocation and pricing more quickly in the market, because the market can more quickly analyze the demand if things are moving along a faster pathway, and I also think that we’ll see an expanded breadth of assets with the workflows that we’ve built out here, there’s already been a lot of interest in the equities world with accelerated book builds and IPOs, and also in the fixed income world with municipals and structured products, the pathways are there, the rail is there, it’s expanding upon that as we move forward.
Josephine Gallagher – Fascinating. I would like to thank Blair for his insight, and of course, you for watching. This has been Trader TV at FILS in Boston.
