Optimising the buy-side workflow for primary markets

Published on 8 March 2019

The trader/portfolio manager workflow is crucial to effective issuance management. We see how it is handled within the IHS Markit platform, with Herb Werth on Trader TV, in our second video of the Primary Market series.

Dan Barnes Welcome to Trader TV, talking with IHS Market about optimizing trading in the primary markets. I’m Dan Barnes. With me today is Herb Werth of IHS Market. Herb, welcome to Trader TV.

Herb Werth Thanks, Dan.

Dan Barnes So, Herb, in last week’s show, we looked at the enormous pressure that traders are under. We focus primarily there upon the interaction between the trading desk and the syndication banks, and the way your solution offers them efficiency. How can the entire investment team benefit from that efficiency?

Herb Werth Well, Dan, our buy-side platform is designed for all members of the investment team to be able to look at a real-time deal monitor, see the most up to date terms and conditions, and drill down into the deals that they care about. So a portfolio manager, or a trader, or a credit analyst could look at that information in an easy to use way on our deal detail screen. It includes all the messages that have come from the banks. It includes the deal terms and conditions. It also can include deal documents and any internal commentary that that buy-side firm would like to make on that deal.

Dan Barnes So traditionally, how would a portfolio manager consume that information and how does your solution change that?

Herb Werth Well, the interaction between the portfolio manager and the traders is largely manual, as we’ve discussed. And so that information could be passed via chat or email or a conversation. With our platform, the portfolio manager is able to indicate their interest at the subaccount level and pass that information over to the trading desk, allowing the trader to make sense of it.

Dan Barnes So that’s what the portfolio manager is doing. What’s the trader looking for in terms of internal workflow?

Herb Werth The trader wants to see that portfolio managers want to participate in a deal, and they can do that on the deal monitor by seeing their internal orders reflected in realtime. Once they see that, they generally want to understand where those orders came from, it could have come from multiple PMs, it could be from any sub-accounts. And they need to figure out the aggregation so that they can submit a single order for their firm. And so our aggregation worksheet allows the trader to make sense of that internal order flow, and to see what their aggregated order looks like.

Dan Barnes So the trader sees internal demand. How do they then place the order with the syndicate?

Herb Werth Well, everything that I’ve shown you so far, Dan, is integrated with our electronic, order-placement function for investor access. That allows the trader to take all the information that was on the internal aggregation worksheet, reflect it in the order form and send it along to syndicate. When they send that electronic order, they can instantly see the status of that order on the deal monitor. They can see it in on our deal details. And so you can see that the order status has been delivered. The book states are open and the trader will then receive any additional updates through the deal monitor as well.

Dan Barnes The trade has gone out into the market, but they need feedback. What sort of updates are they looking for?

Herb Werth Well, naturally, they’re looking for things like price guidance changes. They also care quite a bit of when their order gets allocated. So they’re able to see the book state of the deal and their allocation directly on our screen, which is contributed from syndicate directly to the investor. Once they get that allocation, they then have to figure out how to distribute it, assuming that they didn’t get a full fill in their order. Our allocation worksheet takes all the eligible PM-orders and allows the trader to simply distribute the allocation that they’ve been given by syndicate.

Dan Barnes So as that deal progresses and prices, how is that information conveyed back within the firm?

Herb Werth Well, as pricing happens, we then get all the information on the deal that we need to book a trade. Since the portfolio manager came in and entered those orders at the fund level, it’s very easy for the trader to be able to extract a final trade report that includes the quantity, ISINs,  and the other trade details that are necessary to book the trade. In addition to the information you see on the final trade report, we actually audit everything that’s happened along this process. So there’s a full consolidated audit trail behind this system that gives the trader, the portfolio manager, and any other relevant parties, visibility into what happened during the new issue process.

Dan Barnes Thank you. So if you were to summarize where the traders and portfolio managers have gone from and to, how would you?

Herb Werth I think if you look at the workflow that existed before our platform, it was highly manual. It was subject to risk in terms of missing an update, either from the syndicate banks, or from the internal investment teams. And I think that was very inefficient and it caused traders to actually spend most of their time doing primary markets activities on busy new issue days. With this platform, we think we create efficiency for the entire investment team, first and foremost, a trader, but also the portfolio manager, an analyst. And we reduce operational risk by having a consistent, auditable process that makes the process of participating in new issues easier to do.

So Herb, that’s great. Thank you. I think we understand how the processes work. We understand the efficiency gains, and can this be integrated into the processes that firms already have today?

Herb Werth Yes, we have a series of integration points for both terms and conditions data, as well as for order and allocation connectivity that we can offer to our clients, so that they can take what you’ve seen today, and integrate into the processes, into the systems that they’ve invested in already.

Dan Barnes That sounds great and I think we should discuss that in a further show.

Herb Werth I’d love to do that, thank you, Dan.

Dan Barnes Herb, thank you very much.