I’m technically on my last day of vacation—though it was spent with my family, so I could use another vacation. As a result, I’ll keep this short and sweet, but hopefully interesting. Let’s see how I do.

Banging the interop drum once more

We know that fixed income is fragmented and complex from both workflow and market structure perspectives, especially when compared to equities and foreign exchange. This has led to the launch of numerous trading platforms and venues, as well as data offerings that are aiming to help automate the space and thus improve liquidity and drive down margins.

For example, a few months ago, we here at WatersTechnology broke the news about a project between Citi, Bank of America and others to build a new execution platform for fixed-income markets, initially focusing on collateralized loan obligations and syndicated loans. If this consortium of major fixed-income players can pull this off, it could prove revolutionary and disruptive. But, as we’ve written about before, consortiums often fall short or get spun off into independent platforms that eventually raise fees—thus angering the banks—and so the banks start thinking about coming together to build a new consortium-led platform. It’s a flat circle.

But what if big-bang projects aren’t the answer? What if the data and technology to improve electronification and liquidity already exist, but it’s simply a matter of connecting disparate systems? What if simple workflow interoperability is the answer to the woes of the fixed-income market, rather than new platforms, venues, and tools?

That is the premise of this here article by Reb Natale—as she writes, what if we got technology to work smarter, not harder, by allowing integration with one another, as opposed to searching for an elusive unicorn?

“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,” said Steve Grob, founder of fintech consultancy Vision57, and someone who is a big believer in interop. “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.”

Now, as Reb explains, there’s a major barrier to interop in the fixed income space: The biggest trading platform provider, Ion Group, has been acquiring vendors in the space seemingly every month and there’s a perception in the industry that the company is not interested in playing nicely with others. And as a result, what happens next? A consortium project!

Tommaso Di Grazia, head of fixed-income product development at Ion Markets, told Reb that while they use APIs to connect systems, when it comes to interoperability, Ion allows this to happen, but the vendor is also not actively pushing these projects—it has to be client-led.

“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 said. “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.”

Now, to be fair, Ion gets painted as the big bad wolf—and there are certainly reasons for that—but they are not alone in the fixed-income space when it comes to being closed off. Bloomberg is a giant, as well, and while it has slowly opened itself up a bit to interop, its bread and butter Terminal is still a mostly closed-off ecosystem. Additionally, there’s still more incentive for the likes of Broadridge, MarketAxess and Tradeweb to protect their respective turfs. And even a company like Broadway Technology, which has been essentially reborn after an acquisition attempt by Ion, has been more closed off with its Toc platform, but it looks like that might be changing with this new iteration of the firm.

There’s good business in platform creation. It’s exciting to see how new tools can help simplify fixed-income workflows. Consortiums can be energizing for the tech teams involved. But at the end of the day, I feel like we can’t see the forest for the trees.

More and more data is coming to market, and there’s rapidly growing hunger for new sources of it. New forms of AI are proliferating the market, and the use of open-source tools is helping to democratize—to a certain extent—machine learning and its cousin, deep learning. And at the same time, trading firms want to diversify their trading strategies and the regions they play in.

To me, interoperability is how you capitalize on those trends—not ambitious new platforms and venues. Think I’m off base? Let me know: anthony.malakian@infopro-digital.com.

The image at the top of the page is “The Miners’ Bridge, on the Llugwy, North Wales,” by Roger Fenton courtesy of the Cleveland Museum of Art’s open-access program.