We at Algomi are happy to announce our acquisition of ALFA technology from AllianceBernstein Holding L.P. With this investment Algomi expands our product range and improves our catalogue of great software for both buy-side and sell-side traders.

Both the brand name and the intellectual property behind the ALFA system has been acquired by Algomi Limited. In exchange AllienceBernstein now has a seat at the board of directors over here at Algomi, along with an undisclosed minority stake in the company. There is a lot of interest around Algomi investment, with Euronext investing $10 million to develop a new system in conjunction with Algomi.

Algomi´s financial technology software revolution

Since it´s inception in 2012, we at Algomi have acquired and developed a fantastic catalogue of software that help with modern digital fixed income trading. The key to our success is that our software, from both the buy-side and sell-side, communicate with each other, sharing important information to create a clearer view of the market as a whole. Don’t worry, all of our technologies are hosted on secure clouds and all data shared between platforms is completely anonymous.

Large companies are more attracted to diversify into fintech because many fintech are not just profitable businesses, but they produce software that can help in areas like the trading of stocks and shares.

ALFA technology in a nutshell

Algomi´s latest addition allows the buy-side trader to see a real-time picture of the market as a whole, including high yield, investment grade, government bonds, emerging market, municipal debt, and structured credit. It provides cross-market information on trade intent and liquidity to do this.

The program is designed to be sold to buy-side fund managers, showing relevant and helpful data from messaging platforms, electronic venues and direct dealer inventory feeds. As with all of our Algomi software, ALFA is hosted on a secure cloud with unique instances for individual traders, this allows them to build a relationship with traders via API or the use of a graphical user interface.

Traders need to stay as up-to-date as possible to make efficient and successful trades. ALFA provides real-time information that could dramatically affect the success rates of trades. Further Algomi investment will keep the good news coming for traders everywhere.

Recently we at Algomi, a UK-based financial technology company, secured a $10 million investment from pan-European stock exchange Euronext. Euronext has been going through an acquisition spree, snapping up companies in different sectors like the foreign exchange market with the acquisition of FastMatch.

It´s obvious that Euronext is trying to diversify in an attempt to weather the market instability, but the investment in Algomi was more than just diversification. We make software that can help Euronext in ways other than simply diversification. Euronext´s $10 million Algomi investment bought them a seat at the board of directors over here at Algomi and a 10-year development plan.

Algomi´s revolutionary software

Since Algomi´s inception in 2012, we have won many awards for innovative products that work well and make a big difference in the trading world. Euronext´s Algomi investment may be partly because they knew that with us they could develop a product that would both be profitable when sold and a product that they could implement themselves to make more profitable trades.

We at Algomi offer a range of products for different types of traders, but the system being developed with Euronext is called Euronext Synapse. This new, exciting system is an anonymous centralised inter-dealer marketplace. This product will truly increase liquidity when trading illiquid stocks. The platform is completely anonymous at every stage, preventing any data leakage, and eliminates the key liquidity challenges faced by fixed income markets.

Algomi´s efficiency comes from our whole collection of software working together from both the buy-side and the sell-side to benefit your trades. Our Honeycomb network links to our Synchronicity software and also shares information with Euronext Synapse. This way of sharing huge amounts of information and data anonymously is truly to everyone´s benefit. It allows both parties to make better trades and ones you´re more likely to be happy with.

The future of Algomi investment

In such a short time Algomi has made big waves in the trading industry and has entered into many journalist´s minds as being in the fintech top 50. Who knows what exciting opportunities are coming in the years ahead for us at Algomi.

With countless fixed income initiatives and platforms readily available and growing, industry experts agree new platforms will not be able to compete.

The growth in fixed income platforms will grind to a halt leaving behind only a few in the market, according to industry experts.

As the market is now over-crowded with fixed income initiatives and platforms, industry experts believe any new entrants are unlikely to succeed and many existing platforms will disappear in the coming years.

Stu Taylor, chief executive at Algomi, the fixed income information network provider, highlighted that any new platforms will now face stiff competition.

He said: “Clearly, there is a saturation in the electronic market, but new players will have to compete with firms like Liquidnet, a very well-funded platform, which has the time to further develop.”

Carl James, global head of fixed income at Pictet Asset Management spoke to The Trade at the FIX Trading EMEA conference in London in March, about the issues surrounding fixed income platforms.

James, who is also co-chair of the EMEA investment management subcommittee at FIX Trading Community, explained some of the reasons why some platforms may not survive.

He said: “There approximately 98 fixed income platforms or initiatives in the market with a wide variety of concepts and protocols, such as dark pools, time-based auction processes, synthetic central limit order book, all of which cater for a variety of fixed income instruments.

“It is clear to me that the current 98 will eventually become a much smaller number. This could be for a variety of reasons; the concept did not catch on; not enough customers; poor marketing; running out of money.”

The fixed income market is undergoing dramatic changes as investors are looking to apply a new approach when attempting to enhance returns.

The Trade asked Russell Dinnage, senior consultant at GreySpark Partners, about the forces behind the shift in the fixed income market.

He said: “There are two fundamental forces challenging the structure of trading in the fixed income market for buy-side firms, sell-side banks and non-bank liquidity providers in 2016: the depth of liquidity for government bonds, corporate credit and single-name CDS and the ability to form transparent prices for block-size corporate bonds trades and for block-size trades in off-the-run, non-US or Euro-area government bonds and single-name CDS.”

Regulatory forces

Regulation has also played a part, as Dinnage continued: “Basel III capital constraints are forcing the structure of the fixed income market across all types of instruments to move away from a centralised model focused on the ability of banks to warehouse risk on their balance sheets, and thus provide depth of liquidity and readily-available reference pricing both on an OTC basis and within dealer-to-client voice and electronic execution trading venues, toward a decentralised structure.”

Additional post-financial crisis regulations like the US Dodd-Frank Act and Mifid II in the EU are encouraging an electronification of the fixed income market.

Dinnage explained the ramifications on trading platforms following this electronification: “…the structure of the market will shift toward a more decentralised model in which large buy-side firms can become bonds and swaps liquidity providers in their own right.

“However, in order for this shift to occur, it is also important for large buy-side firms to increase the sophistication of their fixed income liquidity aggregation tools.”

Mark Watters, director at AxeTrading, a fixed income solutions provider, drew similarities from the equities market when he discussed the changes. The equities market also experienced a saturation of platforms post-Mifid I.

Watters said: “In some ways it’s a little bit like the early days of the car industry, as everybody is trying to get ahead of each other. The same thing happened in the equities market – the platform market became saturated – but eventually it condensed.

“The multiplication of electronic trading venues and protocols within the fixed income platform market will continue for some time.”

Dinnage at GreySpark echoed this view, explaining decentralisation of the fixed income market would ultimately lead to more platforms coming on to the market.

He said: “Decentralisation means electronic platforms will have to be present, and thus there will be a continuation of platform saturation further down the line. If the market succeeds in decentralising, then there will eventually be a fight for market share. The fixed income market as a whole — across every region globally — is really only at the beginning of this process.”

Algomi’s CEO, Stu Taylor told The Trade that banks’ withdrawal from the fixed income space has had a big impact on the market.

He said: “The applicability of electronic trading in fixed income is limited to the most liquid parts of the market, and that’s where they have seen success. There is a ultimately a structural issue, with the nature of regulatory charges meaning banks are penalised for holding risky assets.”

He continued: “This is effectively a daily charge and can destroy trade economics if a bond may have to be held for 3-6 months, because it only trades a few times a year. Banks have now largely stopped holding inventory in these less liquid instruments and instead focusing risk and balance sheet in only the most liquid bonds.”

Co-founder at AxeTrading, Dinos Daborn, explained that despite the growth in electronic trading, he expects the more established platforms to survive the market.

Daborn said: “The market is predominantly in the hands of the incumbents, but there are other platforms gaining traction.

“We are platform and market data agnostic and will integrate to all venues, as per our client needs, so that they can access everything via the AxeTrader front end. Ultimately, the more platforms the more fragmented the market becomes – that’s where we can help.”

Deciding which fixed income platform to use can be difficult, but industry participants unanimously agree that there is no single fixed income platform out there to suit all firms.

Pictet’s Carl James said: “Some of the platforms are exclusively buy-side, or all to all. So whether you are buy or sell-side, you have to decide which platform(s) suit your trading style and strategy and fixed income instrument.“

Success story

MarketAxess’ electronic fixed income trading platform is one of the market’s success stories. Its platform is considered a market leader by many, and enables fixed income traders to source competitive and executable bids from over 1,000 global institutional investors and broker-dealers.

The Trade asked Gareth Coltman, head of European product management at MarketAxess, what he thought separates MarketAxess from other fixed income platform providers in the market.

He said “Technological innovation is at the core of our business and we are providing new ways for firms to access the market through data….

“Trax, a subsidiary of MarketAxess, is a leading provider of capital market data, trade matching and regulatory reporting services and estimates that it processes approximately 65% of all fixed income transactions in Europe as part of its post-trade service offering.”

Coltman added: “This level of insight into the European fixed income markets has ultimately helped improve the trading experience on the MarketAxess platform and has allowed firms to engage with the market in new ways.”

When looking at other players in the market, Watters at AxeTrading suggested those platforms with the least administration requirements may trump the market.

He said: “There is no perfect fixed income platform out there, but those with a central counterparty and less administration for onboarding appear to be winning market share.

“Those going towards a central counterparty model are beginning to evolve and are the showing the way forward.”

Bondcube, an electronic trading start up which launched in 2012, is an example of a less successful venture in to the fixed income platform market. The firm filed for liquidation in Summer 2015.

Despite being backed by Deutsche Boerse, Europe’s largest exchanges operator, shareholders decided not to provide further funding to Bondcube when “sufficient business prospects failed to materialise.”

Bondcube suffered a ‘liquidity drought’ and lack of trading activity which ultimately halted its growth. At the time, market observers forecast Bondcube was one of the first of many fixed income platforms set to fail.

GreySpark’s Russell Dinnage highlighted the difficulties facing new fixed income platforms: “There is a high barrier to entry for any new exchange platform operator in any asset class, but especially in fixed income where – up until the last 5-10 years – the concept of partial or fully electronic execution was not standard across the marketplace.”

Algomi’s Taylor echoed Dinnage’s thoughts and added: “It’s tough because fundamentally when a new player enters the market, everybody wants to know what is new and what their edge is.”

More Fintech Investment Reviews here.

Which British fintech companies are making a splash on the global stage? Courtesy of the new Forbes Fintech 50 list, we can provide an answer to that – or at least a partial one.

Forbes reporters spoke to hundreds of startups, CEOs, business founders and industry experts in order to establish which fintech businesses are really getting people excited. To make the list, a business had to have operations in the US – which clearly rules out quite a number of British fintechs – and most were American businesses. However, three London-based companies have made a sufficient impact on the other side of the Atlantic to make the list.

The three British fintech stars, Forbes’ exercise reveals, are:

Algomi

The company’s honeycomb bond-trading information system helps buyers see which banks hold inventory of bonds they want to buy—information that, surprisingly, isn’t now readily available.

 

TransferWise

This company, increasingly well-known in the UK, chops the high fees that individuals and small businesses pay for international money transfers by (invisibly to customers) matching buyers and sellers of each currency.

WorldRemit

A phone app for money transfers to developing world companies, WorldRemit typically charges 2% to 3% on a $200 transfer, compared with the 8% charge typically levied by existing providers in this market

An honourable mention should also go to Adyen, a business that has invented a payment platform to bypass rickety old infrastructure to power global e-commerce across six continents for companies such as Facebook, Uber, Airbnb, Alipay and Spotify. The only other non US company on the list, Adyen hails from Amsterdam.

However, outside of the US, it’s the UK’s fintech sector alone that makes any sort of impression on the Forbes list, reflecting the continuing dominance of the London startup scene in particular in Europe’s fintech sector.

By some estimates, the UK’s fintech sector is now worth £20bn a year to the country’s economy, with around 135,000 people employed in the sector. Innovate Finance, one of the trade bodies that serves the sector, is hoping that it will attract $8bn worth of venture and corporate capital a year by 2020.

That will depend on more big success stories emerging. TransferWise, one of the three Forbes choices, is already acknowledged as a precious “unicorn” company – a fast-growing business worth more than £1bn. In Funding Circle, the UK has another one.

With backing from Government and the regulatory authorities – which have done their best to facilitate innovation – as well as leading banks, including Barclays, Lloyds and HSBC, and other investors, there is every reason to be hopeful more unicorns will spring from the crowd.

 

Read more Fintech Investment Reviews here.

Algomi’s Synchronicity platform to be rolled out as a SaaS, as Honeycomb users are set to link with FIX for pre-trade data.

Algomi’s Honeycomb users will now have access to open source FIX connectivity, as the fixed income initiative rolls out a sell-side onboarding tool.
Honeycomb will become part of the FIX common standard, ensuring confidential pre-trade data exchange between client and dealer is protected, Algomi said.

Banks will also distribute axes, price and data via FIX to buy-side customers who will view the information in the context of their portfolios, facilitated by Algomi.

Co-founder and chief technology officer, Usman Khan, said customers will “now be able to have true bi-directional FIX connectivity in a secure and confidential way that goes beyond the simple point-to-point connection provided by FIX alone.”

The link up with FIX comes as Algomi confirms the launch of a tool aimed at reducing technology onboarding challenges.

Synchronicity – Algomi’s ‘sell-side engine’ – will be rolled out as software as a service (SaaS), allowing banks to adopt the new technology within four weeks without limiting any existing internal technology infrastructure.

Launched in 2012, Synchronicity is described as a platform which matches sell-side data with traders in real-time, ensuring “all relevant information is presented for each execution opportunity.”

CTO Khan added that Algomi’s development of Synchronicity as a SaaS has “compelling operational and financial benefits,” which can also help the banking sector with regulatory requirements.

 

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