IBS Journal December 2017
45
This year we have also started partnerships with Euronext and AllianceBernstein, which gives Algomi an ongoing source of revenue to license our data to leading market participants.
What are the major pain points for buy and sell- side customers in fixed income today?
The entire fixed income market is looking for ways to simplify and integrate their fixed income operations. Falling margins and increased regulatory costs mean traders must do more with less. The market also realizes that there is going to be a continuing role for voice trading, but it needs to integrate into the overall trading infrastructure.
What sets you apart from the competition?
There are two things. Algomi is not a fixed income trading platform, so we do not actually execute trades. This gives us the flexibility to help buy and sell side institutions find the best platform that makes sense for each transaction. We’ve also devoted substantial resources to the voice trading side of the market, one that I think was foolishly ignored by many other technology startups. Electronic trading has a place in the market, but we believe there is always going to be a place for secure, one- on-one trading for low-volume securities. But that doesn’t mean the process has to be stuck in the 1980s with suspenders and smoke-filled trading floors. We are enabling transactions to trade more efficiently than ever before.
What was your smartest move?
Our smartest move was remaining focused on the customer. This may sound obvious, but too many people start with the technology and then try to sell into the market. I worked at a major bank – I know what trading desks need. As I have worked with the board and senior leadership to develop Algomi, I have always tried to keep the end-user – no matter where they sit – in mind and innovate around them.
Where did things get tough – what was your biggest setback?
Right from the beginning, we saw an incredible interest in our solutions. In many ways, I was not surprised about that, but it also meant that we had to expand very quickly. We were adding headcount to meet client demand and perhaps not spending as much time on the overall strategic infrastructure of the firm.
It has only been over the last 24 months where we have been able to ensure our product is totally aligned with the needs of the market. The product announcements we have made this year are a result of all of that thinking.
We have also created additional relationships that help bring together the entire fixed income desk into one comprehensive suite. I think we now have the best corporate story we’ve ever had.
Tell us more about your HSBC and BNY Mellon deal to use their custody data to help spur overall market liquidity.
We are allowing custody clients of BNY Mellon and HSBC to receive alerts when members of Algomi’s Honeycomb network want to trade bonds they own. This increases client access to liquidity and improves overall market infrastructure. This is a huge opportunity, as the total corporate bond market is $80 trillion in size and these two banks have a combined $25 trillion in custody. We are starting with HSBC and BNY Mellon because of their reach and expect to roll out to additional custodians over the next couple of years
How have you been able to avoid traditional blocks on using custody data?
Banks are not allowed to sell or share custody data in a public forum, due to the sensitive nature of that information. What we are doing is allowing custodians to share potential matches with clients, giving them control over about how this data is used.
What’s the biggest thing bond investors need to look out for in the year ahead?
Investors need to understand that the market will continue to change. Although many parts of the world are generally seeing favorable economic conditions, this is not a return to before the financial crisis. Liquidity concerns remain and the market continues to get more complex. Smart investors are developing plans that give them the flexibility and certainty to respond to changes in the market.
Where do you want to be in five years’ time?
We want Algomi to be the center of a strong, diversified global bond market. This may mean we have expanded beyond the traditional corporate bond market, perhaps moving into even more definitively into the high-yield, treasuries and municipals. I could also see us expanding geographically – we’ve already had discussions with exchanges on five continents – and I believe the next half-decade will see a remarkable amount of market structure development in emerging and frontier markets. I am sure that five years from now there is still going to be plenty of change, but by then Algomi will be truly imbedded in helping all market participants find the data that need to trade smarter.
The market continues to get more complex
www.ibsintelligence.com
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