Though interoperability has become the norm in equities trading technology, it’s been slower to make headway in fixed-income markets. While a higher percentage of bond trades are executed electronically these days—credit, in large part, to the Covid-19 pandemic and remote work setups—technology providers will go to exhaustive lengths to develop new fixed-income platforms, touting machine learning, innovative protocols, and other unique capabilities to entice users.

Whether niche vendors and new entrants—such as LTX, operated by Broadridge; the Project Octopus consortium, a bank-led platform for trading collateralized loan obligations; Trumid, which secured a $50 million funding round earlier this year; Broadway Technology, a newly independent company following a partially failed takeover by Ion Group; or Ion Group itself, a looming giant in fixed-income technology that has grown through numerous acquisitions—can push the bespoke, fragmented world of fixed-income trading fully into the digital age, remains to be seen. Likewise, industry stalwarts Bloomberg, Tradeweb, and MarketAxess have their own horses in the race.

Despite efforts to “electronify” workflows, most fixed-income traders seem to choose their old-school phones and messaging apps over disruptive products to make their trades. Perhaps then, some industry participants reason, existing platforms, and technologies can work smarter, not harder, by allowing integration with one another, as opposed to searching for the elusive unicorn.

If you can’t beat ’em, join ’em

Meet Valantic FSA, the financial services automation arm of European consulting and solutions company Valantic, which, over the last 18 months, has been expanding its customer base outside its primary region of Switzerland, Germany, and Austria. The unit, which combines fixed-income trading components with mesh technology to deliver solutions via HTML, offers two main automation platforms—one for front-office trading across asset classes, and another for post-trade functions—and low-code tools for building custom workflows.

Throughout its continued expansion—the FSA group counts 100 clients in 15 countries—the company has decided to place all bets on “choice” as its operating philosophy, says Joachim Lauterbach, CEO of Valantic FSA. For him, choice means two things: fewer and less demanding terms and conditions that lead to lock-in, and interoperability, including not just open APIs and the desktop application breed supported by FDC3, but pre-built modules and frameworks, which clients can stitch together to create their own user experience.

“[We are] deploying IP where a financial institution might not have the option of building it themselves, and combining it with the ability to interoperate with other systems. And on top of it is a framework that allows them to build something new—build their own applications—on top of the data mesh that we provide,” Lauterbach says.

Clients have another choice. Because Valantic has partnered with some of the major desktop application interop vendors, including OpenFin, Glue42, and Cosaic’s Finsemble, clients can plug in either of Valantic’s standardized platforms to their interop vendor’s environment, or use Valantic’s framework to build their own HTML5 front-ends, which can also be supported by these vendors’ containers. In other words, the front-end interop is already a given. The back end is at the core of Valantic’s pitch to the industry.

Steve Grob, founder of fintech consultancy Vision57, has been working with Valantic FSA for the past year, as part of a handful of his wider industry interoperability projects such as with Glue42 on legacy order management systems, an example of server-side, or back-end, interop. The server-side interop play aims to build off what the web- and browser-based brand of interop has accomplished—getting legacy, monolithic platforms like order management systems and terminals to talk to one another at the discretion of the user, not the operator.

“The Cosaic-Glue42-OpenFin world is clearly in this world of desktop interop. And that is the beginning of something even bigger, I believe, that’s going to be about data interop,” Grob says. “And the idea is you’ve got these vertical stovepipes of tech, typically by asset class, or by business line, or what have you. And what you want to be able to do is build and recreate different business units out of them in order to do the right job for customers, but you can’t because the data is stuck in system A, and it won’t get into system B or system D. The magic is when you separate the data from the applications, suddenly you can re-combine that data in any way you want.”

The result, Valantic bets, is a vast reduction in the technical debt that financial firms manage. Indeed, Valantic has had to make bilateral agreements with other providers, including Bloomberg, Fidessa (now owned by Ion Group), FlexTrade, Overbond, and others, to enable some of this data interoperability, but the main intent of Valantic’s platform is another variation on choice—not simply choosing parts, but choosing how those pieces used once they’re brought into one’s own organization.

Valantic surely has lofty aspirations, and Lauterbach is aware he runs the risk of positioning his company as being all things to all men. But, he contends, that is simply where the market’s needs have pushed them.

“It wasn’t the case that we were sitting in front of a white sheet of paper, drawing things, and said, ‘So how can we be Mr. Superhero or Mrs. Superhero for solving every single problem that’s out there?’ It is more of an evolution for us,” he says.

Elephant in the room

It would be remiss to discuss the fixed-income trading software scene without acknowledging the elephant in the room: Ion Group, the biggest vendor in the space by a long shot, and the target of much ire from users. Its MarketView product is said by one rival to be in use at 75% of the world’s top 50 sell-side banks, and dealers, from smallest to largest is estimated to spend anywhere from $2 million to $12 million per year licensing Ion’s software.

As well as trader screens, pricing, and risk analytics, Ion packages also include the Ion messaging bus—used to ship data and orders between different systems—and connectivity to scores of trading venues around the world. It’s this offering that Tommaso Di Grazia, head of fixed-income product development at Ion Markets, says allows the interoperability and choice that Lauterbach and Grob say are lacking in the market.  

Di Grazia says that on the front end, there’s the Ion desktop, where APIs unite the many applications Ion has acquired over the years. Users can glue and stitch modules together as well, so that if customers change the theme of the UI, for example, in one app, all others will follow suit. If a user wants to source data from their own repository, they can join it with Ion’s data without going to the back end, using the Ion bus, a middleware component through which users can create C\# plug-ins and represent corresponding data in the UI.

Di Grazia says that when it comes to interoperability with third-party systems and tools, Ion’s allowance of openness is more hands-off.

“So far, we’ve seen customers taking [on] that piece of work. In general, the expertise is built in-house and not outsourced and not offered to a third party,” he says. “If you open up [the desktop] of a large client, there’s a huge amount of custom components. We don’t even know what they’re doing.”

The path to interoperability is nearly seamless now in the mainstream commercial tech industry, as the average smartphone can contain an individual’s entire life. Financial technology’s pursuit of it has paved bumpier roads, even in equities, where it’s more established. In fixed income, modern technology may still take years to entrench itself, or it may never change—because, other than a pandemic, not much else has worked so far.