In October 2015—almost four years before the London Stock Exchange Group (LSEG) announced its intention to buy Refinitiv—it was the Intercontinental Exchange (ICE) shaking up the exchange-data world with its purchase of Interactive Data Corporation (IDC). This deal would set off a string of acquisitions that would help the Atlanta-based derivatives exchange—which also owns the New York Stock Exchange—to significantly grow its presence in a new area: fixed income.  

The following October, ICE completed its acquisitions of S&P Global’s Standard & Poor’s Securities Evaluations business, which provides fixed-income evaluated pricing, and Credit Market Analysis, a provider of data for the over-the-counter (OTC) markets, including credit derivatives and bonds.

In October 2017, it completed the addition of Bank of America’s Global Research division’s fixed-income index platform. That same month, ICE announced its intention to acquire BondPoint from Virtu Financial. Finally, in July 2018, it closed its deal for TMC Bonds.

The acquisitive exchange has since gone silent in the fixed-income M&A space. Rather, the last two years have been focused on unifying these data, index, and execution platforms under the ICE Data Services umbrella. Lynn Martin, president of fixed income and data services at ICE, spoke with WatersTechnology about the company’s growth in the fixed-income space and what it has planned going forward.

Much like many of the other major acquisitions the industry has seen in recent years, these moves have been all about creating a data behemoth that provides front-to-back services, in this case specific to the fixed-income market. As evidenced by the LSEG–Refinitiv, State Street–Charles River, S&P Global–IHS Markit, Ion–Broadway, TP Icap–Liquidnet, and Confluence–StatPro deals—and the list goes on and on and on—data is God. And in the fixed-income space, finding religion can be a difficult task.

“The way we’ve always thought of our businesses at ICE is that they’re ecosystems. If you looked at the fixed-income ecosystem, data is an incredibly important component because it’s a complex market; it’s not as simple as the securities market where a stock of ICE is the stock at the single instrument,” Martin says. “If you look at the fixed-income market, you really need data to understand what the risk is of each of those single instruments; it’s not as simple as looking at earnings or things of that nature.”

Though ICE’s current focus is on combining its fixed-income assets, its end-game may be a much broader vision … as ICE represents the source of the data—and owning the origins of that data is potentially even more valuable than the data itself.

Brad Bailey, a research director in consultancy Celent’s capital markets group, who recently wrote a report on the future of fixed-income technology, says it’s this drive to build out its data assets that led to these acquisitions by ICE, and says others in the industry have been following suit.

“Fixed-income data is extremely valuable because it’s very hard to come by,” he says. “It is a complicated market that is changing rapidly, and the data is such a key part of it—the data insight, knowing where something actually traded, and collecting that data. Maybe exchanges haven’t always looked at it like this, but they’re in the data business, and ICE has made big, big bets in fixed income to make sure they have that data.”

Select Hubs

This year, ICE has worked to combine its fixed-income execution business with its fixed-income data line to help drive the continued electrification of the market. After all, the more that fixed income becomes electronified, the more data that becomes available to price this illiquid market, therefore creating more opportunities to sell unique data and analytics to traders.

While not ruling out future deals, Martin says the exchange refrained from making additional purchases in order to focus on integration projects and building operability between various internal and acquired components.

The result of this effort is ICE Fixed Income Select (FI Select), which was launched in April. The workflow platform provides connectivity to the entire ICE fixed-income ecosystem, including the ICE Bonds execution platforms and ICE Data Services evaluated pricing and analytics. It has also been integrated with major order management systems in the space.

Through FI Select, users will no longer need separate execution connections to BondPoint, TMC, and Creditex, which was acquired in 2008. Additionally, users can also access all of the pre-trade data products that ICE has around services like evaluated pricing, market research, terms-and-conditions data, liquidity metrics, best-execution scores, and transaction-cost analysis (TCA) metrics, Martin says. Previously, a trader would largely have to piece these components together themselves.

We have all of these metrics in-house; it’s about uniting them together and then being able to, at the click of a button, execute on the transaction. That’s where the magic really starts to happen.

Lynn Martin, ICE

Also connected to FI Select is ICE ETF Hub, a service that aims to bring further automation to the creation-and-redemption process in the primary US-listed domestic equity and fixed-income ETF markets. The service, which was rolled out in October 2019, was built in partnership with BlackRock after the issuer and exchange found that it was a challenge to efficiently execute creation and redemption messages in the ETF space.

In order for BlackRock to scale up, it would have needed to hire a lot of people to match the forecasted growth in the market, Martin says, which was consistent with what ICE had heard from other issuers. Additionally, the Securities and Exchange Commission’s (SEC’s) introduction of the ETF Rule in 2019 made custom creation-and-redemption baskets available for all ETFs, creating both opportunities and challenges for the issuer community that technology could help solve.

The ETF Hub utilizes an API to exchange messages between issuers and clients, rather than sending spreadsheets via email and communicating via phone. Again, automation helps to bring in more assets under management—and thus liquidity—which leads to more data and transparency in the fixed-income market.

“The way we view Fixed Income Select is it’s an integrated technology solution that services the entirety of the fixed income ecosystem,” she says. “We have all of these metrics in-house; it’s about uniting them together and then being able to, at the click of a button, execute on the transaction. That’s where the magic really starts to happen.”

As the exchange acquires additional assets in the fixed-income space, Martin adds that ICE can plug those data sources and tools into FI Select and have them more easily interoperate with previously acquired and internally built offerings.

The Interop Movement

ICE is not unique in looking to build out its fixed-income suite of data and tools, creating a full front-to-back workflow: This movement extends to different types of firms in the capital markets. For example, investment banking giant Goldman Sachs is embracing cloud, open-source tools, and APIs to build out its Marquee platform—which provides institutional investors with market views, hedging tools, and trade execution across multiple asset classes—to create a one-stop-shop managed-services offering. “Most of our content, historically, in Global Markets was distributed via email,” Anne Marie Darling, a partner at Goldman Sachs, told WatersTechnology in October. “We need to move that into a much more digital format, where you can search, sign up for alerts, tag certain items, and make it much more user-friendly, similar to what we see in the consumer market. That will be a key driver as we head into 2021.”

On the vendor front, Refinitiv will eventually sunset its legacy Eikon and Thomson One platforms to focus on Workspace, its next-generation data platform that provides distinct content and capabilities tailored to the needs of different types of users via a front-end display and APIs. “Workspace is our response to a transforming industry—we’re clearly at the beginning of a new era,” Mitko Yankov, global head of platform at Refinitiv, told WatersTechnology in September. “Asset managers and banks are responding to margin compression, and are looking to drive greater productivity across their workforce, and their tools and capabilities.”

Goldman’s move is consistent with other moves in the trading platform space, while Refinitiv’s is in line with others in the collaboration space.

Martin says creating interoperability between the various ICE assets will help to drive automation, but will also create a more efficient ecosystem for traders, no longer forcing them to hunt around for information that resides under the ICE umbrella.

“As you get into the weeds of the market structure, the complexity really comes through. Making sure that for each of the protocols that allows the market to trade in the way that it wants to trade is the most challenging aspect of integrating all of our components together,” she says.

And as ICE acquires new companies, it will need to make sure that it is also future-proofing the exchange so as to be able to incorporate new technologies, which makes the creation of FI Select all the more important.

Gone are the days of the installed heavy terminal, heavy workstation. Whenever you acquire a business, there’s generally some technical debt that you’re acquiring, so there’s a modernization piece that you need to go down.

Lynn Martin

“We are continuing to evolve our legacy technologies—which is no small lift—to the more modern technologies. Gone are the days of the installed heavy terminal, heavy workstation. Whenever you acquire a business, there’s generally some technical debt that you’re acquiring, so there’s a modernization piece that you need to go down,” Martin says.

Additionally, as ICE’s work with BlackRock on the open-architecture ETF Hub shows, the exchange has also been open to unbundling data, and thus making new API-connected solutions easier, says one vendor executive who asked not to be named for competitive reasons.

“Even though ICE does have its own platform, they also have a business model to unbundle their data and their products—in a way, a lot of the assets they bought were unbundled already,” the vendor executive says. “So ICE is trying to create a consolidated offering, but they also have a business model that seems open to making different sets of data and content available a la carte. I think people for the most part realize they have to do that.”

After making inroads in corporates, sovereigns, and US government bonds—ICE also owns and operates the NYSE bonds fixed-income platform, part of its acquisition of the New York Stock Exchange—these initiatives in ESG and munis are all part of ICE’s broader push toward building its own data assets while creating interoperability with execution tools.

“Fixed income has an opaque market structure, but if you put a lot of good tech and data around that, you can turn that into an electronic marketplace that is much more transparent and liquid,” Martin says.

Though ICE’s current focus is on combining its fixed-income assets, its end-game may be a much broader vision: With its equities and derivatives markets, and now its fixed-income data and analytics, ICE as a whole now has a unique insight into every aspect of an issuer’s financial performance. Data aggregators may also capture and aggregate this data, but ICE represents the source of the data—and owning the origins of that data is potentially even more valuable than the data itself.