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In 2017, the full implementation of the EU’s MiFID II regime gave buyside and sellside firms of all ilk access to regulatory post-trade data gathered by trade repositories and regulated trading venues. Many took the opportunity to glean new insight into the historically opaque fixed income market by combining this publicly available data with their own proprietary sources of trade data. However, some firms lacked the significant resources required to do so productively. Indeed, many struggled to extract anything very useful from this complex and voluminous data. In this article, GreySpark and Propellant discuss some of the specific issues faced by asset managers that a high quality source of fixed income data could address. 

MiFID data is not immediately complete and timely – or even necessarily accurate, partly as a consequence of the deferrals regime, but also because cleansing, normalising and checking the data takes time and expertise. Enriching and transforming it into a useful, useable data set that can be queried, ingested and analysed requires significant resource and this is something that not all organisations are in a position to fund. In November 2022, ESMA itself was forced to temporarily suspend the publication of the results of its quarterly assessment of bond liquidity and the systematic internaliser regime for bonds due to “data quality issues”, which hints at potential unreliability of the raw data coming from the repositories and regulated venues.

The continued lack of any post-trade consolidated tape for fixed income markets in the EU hampers transparency. Even so, it is not clear to what extent the EU consolidated tape for fixed income will address the data issues. In the US, Finra’s Trade Reporting and Compliance Engine (TRACE) has been in place (in a few iterations) since 2006, but some US asset managers have intimated to GreySpark that it still does not cover all their needs and wants – and it seems likely that the EU solution will have similar limitations. This suggests that there will be as much of a need for additional fixed income data technology solutions for the buy side when the EU consolidated tape comes into play, as in the interim period.

Uses of Fixed Income Data

In preparation for this article, GreySpark spoke to a number of asset managers about the specific problems they faced around the availability, quality and useability of fixed income data and its use cases.

Pre-trade Analysis

The use case that may immediately spring to mind is pre-trade analysis, where traders and portfolio managers use historic data to inform their decisions on how and what they trade in order to achieve their portfolio aims and to ensure best execution for their clients.

This can involve the analysis of historic trades in specific instruments across a whole raft of parameters: the market as a whole; average daily volumes and absolute volumes traded; prices; market sentiment and data on where trades were made; as well as whether they were made electronically or via ‘voice’.

Fragmented availability of data can make even simple data points, such as prices, non-trivial to obtain and analyse, and others, such as volumes, very difficult. Even when all the data is available in a timely manner, being able to extrapolate these metrics could require significant analytical effort.

Several asset managers told GreySpark that obtaining volume data for their fixed income businesses was challenging and that, ultimately, they would hope to have a data solution that could be integrated with their order management systems, so that the data required –and only that data – would be available at their fingertips when making trading decisions.

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