Andy Aitkenhead

1. Accelerating the Growth of Electronic Trading Systems to Gain a Greater Share of Fixed Income Trading Activity Andy Aitkenhead

2. Business & technology • Global perspective • Business and technology issue • Technology has and will continue to drive the future of the fixed income market in order to effectively and efficiently handle the increasing volume of trade activity

3. Greater Share … More Liquidity? • Three main themes: • Connectivity • Content • Business Models

4. How are we doing? “Collectively the world’s leading commercial and investment banks are making rather a mess of transferring parts of their business to the internet. Many are committing fundamental mistakes they would never allow to get through in their traditional operations. Leadership of internet initiatives is often confused, as are their objectives. A few banks may have built good sites for specific businesses but none has come close to putting together a complete set of internet offerings.” Euromoney internet awards, November 2000.

5. Strategic or Tactical Approach? • Most banks are struggling to develop a coherent, consistent e-commerce strategy. • Many e-commerce initiatives are taking financial markets business backwards.

6. Themes • Connectivity • External - proliferation of systems • Internal – moving from new to legacy technology • Numerous protocols, different protocols dominant in different markets • Data model issue • Content • Difficulty of combining content & applications • Relevance • Business Models • Will continue to develop Technology can be frustrating

7. Connectivity – Internal & External • Internal • Most e-commerce projects in fixed income have been front end web based trade capture • Firms have substantial legacy infrastructure for trade processing • External • Proliferation of ECNs, ATSs, portals, etc. • In the main each initiative has determined the connectivity

8. Proliferation of Electronic Trading Systems

9. Proliferation of Electronic Trading Systems

10. Connectivity - Protocols • Proliferation of protocols developed for different markets • FIX – equities, now FIXML, FIX for Fixed Income • FpML – interest rate derivatives, some extension, FX & MM (also TOF for FX) • MDML, ResearchML – market data, research • Proprietary XML – NTM, FINXML • If we’re combining multiple types of content and applications we need to deal with numerous protocols

11. Content • 2-3 years ago … • Should we go online? • 1-2 years ago • Execution • 0-1 year ago • Execution & content

12. Content • How relevant is the available content? • Role based, combined with applications • Importance increases with more credit intensive business • Two levels • Desktop productivity • Client added value • Cover any area • Origination, distribution, trading • Issuer, sell-side, buy-side

13. Role Based Content • Co-mingling of Content & Applications • Need framework for providing this • Desktop real-estate is still an issue • Content & transaction capability combined • Webstation • Web-based content • Window on content and applications • E.g. market data, news, research, analytics, trade capture, chat, video, position keeping

14. Webstation for … • Fixed Income Fund Manager • Corporate Bond Trader, Salesman • Emerging Markets Syndicate • Asset Backed Trader • Analysts • Etc, etc, etc

19. Business Models • e-trading has taken markets backwards! • Most initiatives are single asset class • In the last decade there has been an increase in integration of business lines with more structured business taking place. • So far not many firms have co-ordinated initiatives across the separate trading businesses.

20. Combining Business Streams on the Web • Need for: • Strategic view • Interoperable technology • Synchronous pricing engine • Ability to provide interaction for the client/user across the business

21. Several of These? Client Trading Portal Market Data Analytics Trading System Research Firewall Trading Portal Market Data Analytics Trading System Research Liquidity Provider Server Integration Market Data Server Analytics Servers Transaction Server Research Servers Firewall

22. Or This? Trading Portal Client Market Data Analytics Trading System Research Firewall Equity Portal Market Data Analytics Trading System Research Fixed Income Portal Market Data Analytics Trading System Research Treasury Portal Market Data Analytics Trading System Research Synchronous Pricing Engine Liquidity Provider Server Integration Market Data Server Analytics Servers Transaction Server Research Servers Firewall Market Data Providers Consensus Estimates Share Price Data News Brokers Research

23. Changing Business Models… • Internet changing the market like never before? • What about the telephone? • Markets will change … • shouldn’t just be automating the existing model

24. Integrating Retail Business into Wholesale Investor Bank Satellite Satellite Wholesale Trading Hub Wholesale Trading Hub Fund Manager Retail Client Satellite Wholesale Trading Hub Satellite Fund Manager Bank Satellite Satellite Retail Client Retail Client Investor

25. Is it Still a Relationship Business? • How might it change? • Democratisation of the market? • Characteristics of the organisation • Maintaining the Relationship

26. Liquidity Constraints • “Investors slam dealers for not providing liquidity and for high costs”– Forrester Report • Electronic systems increasingly targeting credit markets • Can systems help to enhance liquidity?

27. Connectivity, Content & New Business Models! • Combined they provide greater traction • New liquidity models will emerge • Potential for convergence of wholesale & retail business in some markets • Back to more structured products electronically? • Platforms for trading multiple products will take time

28. Combining Transaction Capability with Content • Increased value-add • Increased flows, increased market share • Increased liquidity • Potential to tighten spreads/increase revenue

29. Thank You andy@on-court.com