During lock downs and tiered restrictions, depending on where you live, some of the virtual conferences and collaborative webinars have been a welcome distraction to the day to day. Listening to insight into which Fintech is doing what and more importantly what buy and sell side market participants are looking at, and their views on industry trends, is just enough to keep up but certainly no substitute for being “at work”. By that I mean, in meetings, face to face discussions with our peers, clients and partners.
I posted on our Linkedin page the JP Morgan E-Trading Survey some months ago which for the first time polled not just their own clients but non clients too and I would urge you to take a look at the pace being gathered in automation and electronification highlighted by the results. https://www.linkedin.com/feed/update/urn:li:activity:6721801721762332672
It would seem there are many ambitions, largely driven by the value of the data, that electronification brings and risks mitigated by eliminating human error.
The BIS survey also sighted a large increase in derivatives trading in the past year which is extremely interesting and somewhat paradoxical as many derivatives are still traded bilaterally and manually on “chat” or “voice” with little or no concern of the multiple risks involved. https://www.linkedin.com/feed/update/urn:li:activity:6731572518555017216
Although, that may be a little unfair of me, maybe some derivatives businesses have discovered new technology to mitigate those risks. I say that very tongue in cheek of course!
Understandably it can be frustrating when you hear discussions that suggest electronification and automation is still yet to reach some parts of certain markets, especially when you know the reverse to be true.
People still talk anecdotally of Equites and Futures historical leap and when will it happen in more complex products and packages of OTC instruments. Well, dear reader, it has.
I occasionally hear in the market that OTC derivatives cannot be “standardised”. Both from the “taker” and “maker” side.
That is fundamentally wrong, there is not one OTC derivative that cannot be described and traded based on a series of fields. Yes, there is more information to share than trading a simple equity. But with the right tools it is just as easy! I generally feel that there is a lack of comfort with what trading OTC derivatives entails, between complexity of the products and regulations to name but two.
How can I say that this technology is here already? Let us use an example, such as the upcoming issue in 2021 of switching from IBOR referenced products to Risk-Free Rate referenced instruments. Packaging up multiple types of Swaps cleared or bilateral to transition a portfolio from IBOR to RFR can be as easy as sending an RFQ for one swap. This process will minimise market, operational or regulatory risk with all the best execution, audit trail and STP boxes ticked., It really is that simple.
So why does this disconnect exist? Well, it is not you, it is me. It must be that we have failed to communicate clearly enough to the market that these technologies and workflows already exist.
This has been a challenging year to get innovative Fintech products and solutions in front of those who would benefit most.
The question to you, the reader is, how can we reach you better than we currently do? I will mark myself with a C- for 2020 and with a note that we must try harder in 2021 to reach people in our demographic that currently do not know about OTCX.
Most of all, we bestow Season Greetings and wish you a very Happy New Year from all of us at OTCX.