JP Morgan is building out its liquidity analytics and multi-asset trading capabilities as buy-side firms seek greater visibility, faster execution and lower trading costs across fixed-income assets.
Speaking to Trader TV at FILS Boston, Matt Farrell VP for e-FICC Sales at JP Morgan, discusses the bank’s liquidity ladder, designed to provide real-time pricing across thousands of bonds, customisable order-book views and price-target alerts.
And Jessica Hamilton, head of Execute and fixed income electronic trading product, shares her views on where the bank is leveraging its FX and rates infrastructure and new approach to tech builds to accelerate credit trading functions, with a growing focus on credit futures, derivatives and cross-asset execution.
Interview
Josephine Gallagher – Welcome to Trader TV. We’re here at the Fixed Income Leaders’ Summit in Boston, and I’m joined by Jessica Hamilton, fixed income execution product, and Matt Farrell, VP for e-FICC Sales. Jessica, Matt, welcome.
Matt and Jessica – Thanks for having us.
Josephine Gallagher – Lovely to catch up with you, folks. So, like to start off. Matt, I might start with you. So we are seeing a lot of progress in terms of the electronification of credit markets over the last few years, but there is still some, you know, pain points or sticking points when it comes to data standardization. And can you tell me what you’re hearing from buy-side firms in terms of those kind of pain points and what needs to happen in order to like improve the kind of data and liquidity discovery in that sense,
Matt Farrell – Right? So, when you look at fixed income credit, it’s been slower to electronify versus other products such as FX and rates. However, with the addition of third-party platforms, we have definitely seen the growth in e-trading rather than trade via voice, the traditional method. However, since e-trading has grown. We’ve also seen an increase in fees and transaction costs across both clients and dealers, which clients have become highly conscious of. Another situation we’ve seen is that clients now want to access real-time data to make better transaction costs and dealer decisions. JP Morgan has decided to roll out Execute, which gives clients the ability to see without the third-party vendor fees, as well as trade with the liquidity ladder, which gives clients the ability to see everything without delay.
Josephine Gallagher – Okay, you mentioned liquidity ladder there, so can you tell me a little bit about how that works in practice and how you see that fitting into buy-side strategies?
Matt Farrell – Right. So the liquidity ladders are ATS (alternative trading systems) actionable streams, which provide real-time pricing and data for up to 10,000 bonds in NA investment grade for 10 million size in Notional, and then 2 million in North America high yield with around 2,000 Cusips. So the liquidity ladder actually gives clients the ability to fully customize whatever order size they like to see within the order book, whether it be 700,000 or 1 million. They can see what JP Morgan is streaming to those clients. Another added benefit of the liquidity ladder is clients actually are able to set price targets within that ladder. So what this means if client wants to set a target for a specific span, if JP Morgan meets that target, they can receive a notification in real time, and upon receiving that notification, they can actually execute on that level and receive post-trade details immediately.
Josephine Gallagher – Okay, understood, Jessica. I might bring you in now. So we’re also seeing like a growing appetite for cross-asset trading, as well as the use and uptick of more complex products such as credit index derivatives, credit futures. How are you seeing buy sides adopt those kinds of products, and what needs to happen in order to improve liquidity and price discovery in those.
Jessica Hamilton – Yeah. So I think what has been particularly interesting for us is that the demand is not only growing cross-asset, but also you know people are demanding to trade these asset classes in a smarter way. So with more visibility, more coordination, and less friction between counterparties and systems, and we’re seeing that across the board, especially as volatility has gone up this year. For credit, it’s been slower to electronify, as Matt mentioned, than its peers in FX and rates. But we’re that’s not because these products are inherently more complex. It’s just historically how they have traded. But what we’re starting to see is a real shift here: credit futures, credit derivatives. We’re seeing a real momentum shift. For the remaining challenges, you know, one of the big ones, as Matt alluded to, is removing this friction and having clients want visibility. They want low friction, and they want low cost. And it’s that tension around access, cost, and speed that is really driving our technology strategy and to be able to provide these products.
Josephine Gallagher – I understand as well. Your firm is also changing up its tech strategy in terms of being more reactive to test builds and development. So could you tell me a little bit about that and how you also tend to expand on your multi-asset capabilities and data capabilities?
Jessica Hamilton – Yeah, absolutely. So for us, what’s really enabled us to be more reactive, is we are now designing for multi-asset from the start. So what that means in practice is we have shifted over the past few years to a more blueprint technology structure, meaning infrastructure that supports multiple asset classes and what that means in practice for credit is really exciting because we’ve been able to leverage our FX and rates infrastructure, so you know, like the streaming, the click-to-trade, the analytics layer, and apply it to credit bonds. So yeah, as Matt mentions, you can now see visibility of 10,000 bonds in a couple of seconds. You can execute on it in a couple of clicks, and that’s a real like shift in efficiency for our buy-side clients. I think going forward, what our focus is really deepening that cross-asset capability and shifting from the more vanilla to the complex products, and that’s where your credit futures and your credit derivatives really come into that space, which is focused on making sure that as we increase the products, the execution experience keeps pace because our clients shouldn’t have to care about what our internal infrastructure is actually like. They just care that it works first-time every time.
Josephine Gallagher – Right. I’d like to thank Matt and Jessica for their insight, and of course, you’re watching. This has been Trader TV af FILS.
