As the operations of buy-side traders and their sell-side counterparts increase in complexity, their data needs have surged. Technology that has made it possible to compress the work they do into shorter time scales and with more effective outcomes, requires large volumes of information that is either generated by their own systems or has to be bought.
That’s particularly apparent when it comes to pricing in fixed-income investing.
Institutions are broadening their portfolios to include trades in securities that would once have been considered exotic and were certainly thin. Driven by volatility in the global economy, fee competition and geopolitical unrest, their search for assets with greater returns are also requiring them to hedge new and vulnerable exposures. And to top it all, regulators expect greater transparency and into how organisations are operating and faster reporting and settlement.In the traditionally thinly traded markets that they are entering, including direct lending and derivatives, pricing information is harder to source, making trades harder to execute. That isn’t helped by the relative lack of automation within over-the-counter fixed-income trading processes.
Consequently, data and technology are being leaned on to fill those gaps.
Trusted and Transparent
Their critical importance in pricing was underlined in a recent gathering of market practitioners and vendors organised by Bloomberg in London. Trusted data is the key ingredient to ensuring the transparency that pricing engines need to bring confidence to markets, delegates heard.
“When the paradigm shifts, you need to think about your data infrastructure, you need to think about your validation discipline,” Leila Sadiq, Bloomberg’s global head of enterprise data content, told the Bloomberg Pricing Forum.
“It’s no longer good enough to demonstrate that the price is accurate – you need to demonstrate that it’s prudent, that you can execute on it and that you have the evidence for that.”
From the consolidated bond tape that is due to come online next week to the growing demand for collateralised loan obligations (CLOs) and private equity funds, speakers and experts stressed that trusted data was the most fundamental requirement of transparent markets.Portfolio trading (PT), which accounts for about US$20 billion of daily credit trade, according to MarketAxess data, is an example of a growing trading strategy that is not only reliant in data but is also being reshaped by data.
Bulk Trading
PT sees baskets of bonds traded systematically and simultaneously, bringing execution-cost efficiencies. They can only bring savings if the right pre-trade data is fed into the desks’ central risk books.
According to Gus Vogel, head of EMEA PT at JP Morgan, firms are increasingly leaning on PT for daily liquidity and in Europe it accounts for about 13 per cent of secondary credit market trading volume and a fifth of the American market. Between 2024 and 2025, PT inquiries rose by almost half, he told the forum.
Such bulk trades are priced according to movements in the broader fixed-income markets, including ETFs. Sourcing data from these different strands is challenging but essential.
“Data drives everything we do in the modern trading desk,” said John Tricker, portfolio manager and trader at Vanguard.
Up-front and Ready
That importance has risen as increasingly fast trading execution times have made accurate pre-trade preparations more important. Gathering information on a basket of assets rather than a single security requires greater access to information that can allow managers to construct and refine their portfolios before sending the trade to market.The panel heard that, in this way, data has transformed the role of traders, whose focus had been solely on execution but is increasingly expected to shift towards data analysis based on pre-trade insights as they learn to navigate multiple electronic protocols.
Experts also highlighted the need for good pricing data to help them uncover axes – specific bonds sought by dealers based on their current inventory.
“We are moving away from traders being execution only,” Johan Malcolm, a fixed income trader at Insight Investment Management, said during the panel discussion. “We’re now much more ingrained with the investment strategies, and we are much more involved in understanding what investment strategies the guys want to execute how we’re going to go about doing that – it’s very much a two-way conversation.”
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