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As
asset managers raced to implement straight-through-processing
to comply with T+1, there was a wide-spread under-investment
in fixed income technology infrastructure. With pressure
on margins, growing transaction volumes, and the introduction
of more complex instruments, many firms are striving to
catch up.
It's About the Data
Too often, pricing, security master, corporate action and
other data exist in silos across many fixed income asset
classes. Different portfolio managers are paying for duplicate
data or worse yet, using different sources of data for the
same instruments. The result is inconsistent pricing and
decision making. Many times data goes up to front office
applications and never finds its way back to a centralized
data repository.
To address these issues, firms are porting or replicating
the data-centric architecture that was created for their
equity business to support fixed income analytics, trading
and portfolio management.
Automation and Scalability
As asset managers seek to reduce costs and achieve the scalability
to support growing businesses, they are taking the first
steps toward fixed income straight-through processing. This
means developing a systems architecture that supports the
integration of front-end analytics, with order management
and compliance, trade processing, accounting, settlement
and reconciliation. In this environment manual spreadsheet-based
processes will be replaced with more automated solutions.
To comply with fiduciary and regulatory requirements
for best execution, increasingly asset managers will be
extending this automation by routing orders directly to
trading platforms such as TradeWeb, Bloomberg and Market
Axess.
Consistent Analytics Standards and Risk Management
Increasingly firms are seeking to standardize enterprise-wide
methodologies for bond selection, portfolio management and
risk measurement. This is a huge undertaking, because no
single vendor adequately handles the data intensity and
analytic requirements of all fixed income asset classes.
Such standardization requires the integration of a wide
range of analytic and risk management systems.
In summary, the integration of systems to support the
fixed income world lags the equity world. While fixed income
infrastructure is a major focus of many large asset management
firms, true straight-through-processing is a goal and not
a reality. A first step will be the centralization of fixed
income investment data. Next will be the elimination of
manual processes through better systems integration. With
the large number of securities, security types and derivatives,
the standardization and consolidation of analytics and risk
measurement is more daunting.
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