Banks responding to changing debt market - expert

Banks have responded to their changing status in the fixed income markets by adopting a more flexible approach to the technology they use to trade those assets, an expert has said.

Steve Toland, the founder of TransFICC, a trading tech firm, said the world’s top banks are adapting to draconian regulation and a dynamic market structure by relying more on third-party technology firms.

Toland, who founded TransFICC in 2016, said: “The fixed income world is changing and banks have responded by looking to outsource more than they build. The fixed income market is becoming more electronic and automated but it still lags the foreign exchange and equity markets for example.”

Toland, who was European head of FX sales at ICAP after a decade as head of sales at Thomson Reuters, added: “These changes have been driven by regulation on banks and changes in the market structure. Historically, the buy-side would trade via the banks but the banks aren’t able to do warehouse risk anymore so we have seen the rise of the all-to-all platforms.”

The comments came as the London-based firm announced a partnership with SoftSolutions, an Italian fintech firm, to deliver the TransFICC interest rate swaps functionality to one of SoftSolutions’ bank clients.

Toland said: “We have two customers live for interest rate swaps using our services directly while SoftSolutions is using our functionality for one of its regional clients."

The TransFICC founder said: “Banks use our normalised API as part of their trading solutions, but some banks are simply not in a position to build their own systems, so they might need a desktop GUI, pricing engine or algorithmic trading functionality from a third party.”

Toland said his firm was keen to replicate this approach with other firms. “We can’t sell everything directly so we would look to partner with other potential vendors where appropriate,” he said.

SoftSolutions has agreed with TransFICC to use its One API for eTrading platform to offer SoftSolutions clients the ability trade interest rate swaps electronically.

The interest rate derivative trading platform Trad-X, operated by inter-dealer broker Tradition, launched in January the first dealer-to-client electronic central limit order book.