Within the e-trading world a lot of the emphasis has been on the sell side with different firms and strategies (Liquidity Hub, project fusion and so on). One aspect that does not seem to get as much attention is the buy-side. Typically a big institutional buy-side will have an OMS like Charles River, LatentZero, MacGregor etc.
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On top of that will sit one or more of MarketAxess, Tradeweb, BondVision and so on. The model that these firms impose is one of FIX connectivity into the EMS but no option of end-to-end FIX connectivity from OMS to brokers. As this market place matures it’s difficult to see what the future direction will be. I’d like to propose one model.
Buy-side EMS connects via pure FIX 4.4 to a limited number of brokers. A RFS process starts to request two way quotes in size for a list of instruments that the firm is interested in. These quotes are combined into a synthetic order book – such that the buy-side can see ‘market-depth’ for instruments of interest.
The strength of this solution is that there is no longer a need to look at proprietary systems, the streamed quotes can be used for monitoring, it’s pure FIX, brokers can be plugged in or dropped without much fanfare.
The weakness is that the first buy-side to implement this may have to build the system. Potentially it’s a very resource intensive system, depending on the number of quotes, brokers and instruments.
What are buy-sides doing in this space?