Making sense of trading signals in a noisy market

Published on 4 April 2022

Buy-side trading desks can struggled to process and analyse data in the fragmented corporate bond market. Analytics tools need to connect with trading venues and direct dealer sources if they are to aggregate this information. They must understand different types of data and from different sources – in a timely manner – to build an accurate picture that can guide trading and support portfolio management.

Ammar Sibtain and Paul Mutter outline how Lucera LumeALFA can combine pre-trade order routing information and execution management to deliver substantially more effective analytics, directly into the trading workflow, allowing traders to use their own and third party data, in order to see how and where to execute more easily.

Dan Barnes: Welcome to Trader TV – your insights into trading for professional investors. I’m Dan Barnes. Bond traders have multiply breached access liquidity, but how do they choose the right one? Joining me today are Ammar Sibtain and Paul Mutter of Lucera LumeALFA, to tell us how to deliver more efficient, pre-trade decision making.

Ammar, Paul, welcome to the show.

Ammar Sibtain: Thanks for having us.

Paul Mutter: It’s great to be here with you, Dan.

Dan Barnes: How does LumeALFA streamline execution in what could be a very complex asset class like credit?

Paul Mutter: Our super users begin all of their trading inquiries in the LumeALFA environment. That’s where we’re capturing all of the disparate data sources and then partnering them with our analytic capability to inform that trader where they should go for that particular inquiry. It could be voice, it could be electronic, it doesn’t matter. It’s the starting place.

Ammar Sibtain: Finding pre-trade clarity on liquidity is crucial, because we have so many different venues to trade over, the data which comes in then becomes very difficult for one person to be able to sort of determine where the right liquidity is. So LumeALFA brings all that information in one place, so a trader has access to all the information out there in the market for that particular trader looking to do. And then based on that, they can actually identify the right venue they should be going to, and the right dealer they should be going to for that.

Along with that, we help out in a sort of post-trade scenario and doing a bit of historical analysis. Traders can come back later on to also see how a particular venue or a dealer has performed historically and all that data is available to them now. Previously, it was very difficult to capture all that information, and since we were the first movers on the cloud side, we have been able to sort of offer tools, data storage tools, which are very cost effective. They can also create their views based on the historical data available to them, which is literally at the click of a button. They can trawl through all that history, which they’ve been saving in the data store.

Paul Mutter: We really are expanding beyond that best in class, pre-trade analytics platform to a full service EMS provider.

Dan Barnes: And what is your philosophy on integration with other providers in the market?

Ammar Sibtain: We are completely agnostic. Inter-operability is sort of central to our strategy of building the product. We want people to access LumeALFA easily. We’ve already integrated with all the main data providers in the market. Along with that, you know, the traditional, access inventory kind of information is there, but we’re also looking at other kinds of data sets where people can actually make sense of the liquidity indicators, momentum indicators, things like best execution tools. So from our point of view, clients should have complete independence on, you know, what they’re looking to sort of achieve with the data.

Dan Barnes: That’s fantastic. I mean, in an over-the-counter market which is inherently fragmented, having that connectivity is really key to the traders, isn’t it?

Paul Mutter: We really do go where our clients want us to go. And so we count among our clients some of the largest asset managers in the world, and they typically are looking to be connected to all of the major execution venues, all of the leading data providers. And so we are fully integrated with most of those, and we’re always looking for new partners to ensure LumeALFA is connected to the world.

Dan Barnes: Do you typically talk to people about data strategy on the trading team? Or is it people from the data team? Or is it a mix of both?

Ammar Sibtain: It’s a mix of both. We feel that sometimes it’s driven by the technology side more than the traders. Traders do talk to the technology people, but technology is also taking some kind of, you know, a leadership role in this space where they’re trying to create the data strategy for the traders, because they can see the problem the traders are facing.

Every buy-side is trying to use more data and they want to incorporate all the data into their day to day processes. And what LumeALFA can help them do is sort of jumpstart that strategy. They can have all that information available to them in a nice, cleaned out format, immediately available to them as soon as they open up the books, to start using the data and putting their own stamp on that data immediately, rather than trying to hire the right people, get the right team in, get the right infrastructure set up done, get the right technology setup done. We’ve done all that hard work for them already.

Paul Mutter: Typically, trader clients will use our GUI PMs to some extent as well. Typically, the data teams will use our API offering, and so we try to exist across the buy-side ecosystem.

Dan Barnes: One of the big trends that we’ve seen in the buy-side is connecting to trading venues, but also connecting directly to dealers. Whereabouts does your platform sit in terms of direct execution vs multilateral execution?

Ammar Sibtain: We are not trying to compete with any of the execution venues. They provide a great service to the clients. What we do want to provide is an alternative, another protocol rather than trying to build the same thing over and over again, which is being done very well by other venues. We want to offer some alternative way of getting liquidity directly from the dealers. That is a tool which is already available in LumeALFA to help the buy-side trader with another channel where they can probably find liquidity in the times when it’s not easily available on the other channels.

Dan Barnes: If you look at the investment that Lucera has made in the former Alchemy product, what advantages has that created?

Ammar Sibtain: The experience they’ve gained there, sharing that knowledge with us from the high frequency, high volume, rates in the FX space, and we’re incorporating all that within LumeALFA.

Dan Barnes: So what does the future hold for Lucera LumeALFA?

Ammar Sibtain: We are adding more asset classes. We are adding more data sets. We have credit. You know, that’s our main focus. But now we have come to a point where because of the clients demand, we are actually moving into loans, structured products, we’ve added rates data into ALFA as well. And along with that, you know, different types of data sets rather than just the liquidity based information; there are tools, analytical tools which will actually help the traders determine the quality of the liquidity as well. So we are adding more of those kind of analytical tools to the product.

Paul Mutter: Given that we are helping traders make smarter trading decisions that leads to traders asking us to increasingly integrate upstream into their OMS, to capture their order book and their order flow, so that it is seamlessly integrated with their LumeALFA environment. And they can quickly match what their orders are with where the best liquidity provider is. And then from that comes execution and downstream integration. So it’s really us building out the fulsome products of an EMS provider without losing our core focus on being a best in class, credit aggregation and analytics tool.

Dan Barnes: Paul, Ammar, thank you. That’s been fantastic.

Ammar Sibtain: Thanks.

Paul Mutter: Thanks, Dan. It’s been great to be with you.

Dan Barnes: I’d like to thank Ammar and Paul for their insights today, and of course, you for watching. To catch up on our other shows or to subscribe to our newsletter, go to TRADERTV.NET.