NatWest Markets to Expand Chatbot for IRS Trade Execution

NatWest Markets will update its Scout digital assistant to be able to automate trade execution for interest rate swaps (IRS).

“We will initially focus on sterling, and then follow with euros and US dollars,” says Matt Harvey, head of fixed-income client execution platforms and digital sales at NatWest Markets. The move is in response to client demand, he adds.

Scout already does level checks and execution for cash rates, investment grade credit bonds and asset swaps, but hasn’t yet been able to execute IRS.

The chatbot was launched late last year as a trading workflow automation tool. It is integrated with Symphony’s electronic communications technology, and leverages ChartIQ’s Finsemble to enable it to interoperate with desktop applications using standards like the Financial Desktop Connectivity and Collaboration Consortium.

Harvey says Scout is NatWest’s solution to the problem of how best to automate voice and trading workflows, while maintaining the personalized dealer voice relationships that many traders still value.

“Voice flows at the moment are clearly, at least to some extent, coming under pressure from market structure demographics at clients, people who are used to more digital interaction. So we wanted to make sure that clients had the option to retain a high-touch service by solving some of the workflow challenges that are creeping in as we move forward with Mifid II and other market structure events,” Harvey says.

NatWest has about 12 buy-side clients in production with Scout. These clients are mostly using it for level requests, instances in which clients ask a salesperson for the indicative price level of a particular instrument via a voice channel, whether by chat or phone. NatWest sees about 60,000 annual level requests in rates, and the bank invested in Scout partly because these were considered to be tasks that could be easily digitized, and are boring for humans to perform repeatedly.

“In that crazy week in March, where ticket counts were three times the daily average, if you were going to your voice salesperson and hounding them for non-tradable level requests, some of these would have been dropped in favor of executable levels, and executing trades for clients. But Scout could do 60,000 of these in a day if necessary,” Harvey says.

NatWest would like clients to use Scout for the execution conversation too, however. Harvey says that most potential clients he speaks to on the buy side are convinced of the need for more sophisticated tools to manage workflows in high-touch voice trading, but some have reservations about using a solution like Scout, as they are worried about falling afoul of regulation like the Markets in Financial Instruments Directive (Mifid II).

Harvey says he gets two main questions in this regard. First, clients are concerned that by putting a bot in Symphony, the messaging service becomes an effective electronic trading venue. And secondly, they are concerned that Scout itself is effectively a single dealer platform. 

In response, Harvey has put together some FAQs to help clients understand that these concerns are unfounded.

“The way we position this with clients is this: You are still dealing with your voice salesperson who is representing NatWest Markets, the systematic internalizer and execution venue; the bot is just helping you structure your communications. Scout isn’t a single dealer; it’s a workflow solution. Symphony is no different to any other chat tool in that sense.”

Harvey says current plans are to complete Scout’s new rates capabilities by the time the Symphony Innovate conference takes place in New York in October. The bank was supposed to start a marketing drive for Scout in mid-March, but the coronavirus pandemic has delayed these plans.

But, Harvey adds, despite this setback, the Covid-19 outbreak has increased the urgency around the digital change agenda within the bank. “Internally, there is more interest in investing in and supporting digital initiatives. We are considering digital workflow initiatives and our corresponding investment, and it’s been easier to make our case that it’s important to digitize,” he says.

Part of the reason for this is that the pandemic laid bare potential vulnerabilities.

“If we had not invested in digital initiatives, whether getting Symphony integration through the door, building workflow solutions, our partnership with ipushpull, or any of our other projects that allow clients, sales and trading to communicate more efficiently for price discovery—we would be in a much worse situation than we are now. To have manual workflow when we are completely geographically isolated from each other would be, at best, problematic,” Harvey says.

In October 2019, NatWest selected ipushpull, a live data-sharing and workflow automation platform, to share trade axes in real time with some of its largest buy-side clients.

In Covid-19 times, NatWest primarily uses Zoom and a Facebook-style app for internal information sharing. It is also looking at enabling real-time calls on Symphony that will have appropriate levels of recording enabled by default for regulated end users’ conversations.