Charles River Looks to Automate Fixed Income Trade Lifecycle

Charles River Development, a State Street company, wants to further automate the fixed income trade lifecycle from the order creation to the execution of the trade.

Part of this move towards more automation is expanding its collaboration with MarketAxess and providing automated execution for fixed income securities through MarketAxess’ Auto-X functionality, which was first announced last week.

Charles River has worked with MarketAxess previously for access to data, order creation, price discovery and execution services. The extended partnership allows a trader to set up execution rules to automate trading workflows for investment-grade credit, high-yield fixed income assets, emerging-market debt and European bonds based on information such as evaluated pricing and inventory.

Michael Beattie, director of global trading product strategy at Charles River Development, says automated execution provides traders with the ability to focus on trades that require more hand-holding.

“Automated execution is the next step in our collaboration with MarketAxess. The depth of the data traders have access to now [has] changed the need for automating trade execution,” Beattie says. “They now have access to different evaluated pricing, different composite pricing, changes in spreads, and changes in having a bid and an offer out there. As you get more data, you can automate different pieces of the trade. In the past, if there wasn’t a quoted market anywhere, they would have to pick up the phone and call up dealers for that data.”

• READ MORE: To read about how State Street is looking to create a single security master with Charles River, click here.

The goal, Beattie says, is for Charles River to anticipate any execution style its clients want to use, such as a peer-to-peer execution, all-to-all execution, RFQ, or automated execution. He says automated execution augments traders’ workflows so they can focus on more complicated trades.

Charles River sees automating the fixed income lifecycle as a means to help reinforce decisions of the trader. Beattie says this means creating a front-to-back-office solution that creates orders, looks through price-discovery data and, with the addition of the Auto-X function, executing the trade.

The fixed income market, according to Beattie, has gone through major changes in the past few years with more trading venues and potential for liquidity, which lends itself to more automation of the trading workflow to capture that liquidity. The amount of transparent data around pricing and spreads, he says, has also provided more information that traders can parse through.

“The fixed income market has evolved over the last three or four years in a way that really, the other asset classes haven’t. Some of the other asset classes sort of beat us to the punch a little, but now fixed income is catching up and that’s been pushing us, especially in the secondary market,” Beattie says. “Part of what we need to think about isn’t just automated trading, but what are the options within automated trading. What types of trading protocols are important for which asset class?”