Turnleaf Analytics’ Saeed Amen reported on the Fixed Income Leaders Summit (FISL) in Europe, which brought together a large number of market participants, from the sell side, buy side and vendor space.
The sessions were spread across a multitude of different areas. Some focused mostly around the execution part of the puzzle in fixed income, discussing subjects like the relationship between buy/sell side, market structure etc. whilst other subjects were more related to the overall macro picture and views for the near term around inflation, central banks and of course the US election.
The first session of the main day was centered around the relationship between the buy side and sell side, in the context of the evolving tech landscape. Moderating the discussion was Henri Mills (UBS), with panelists Jatin Yara (BlackRock), Yannig Loyer (AXA) and Peter Welsby (Manulife).
The key point was that the relationship was not purely a question of execution, even if that was an important part of the jigsaw. The sell side provides other services, ranging from idea generation, syndicates, prime services, research etc. It is possible to monitor a bank’s ideas, and if they are profitable a value can be attributed to them.
The theme of consistency came up repeatedly many times during the conference. Whilst a bank could provide liquidity during the calm times, what about during times of market stress? On the subject of execution, best execution was obviously key, the ability to offload risk being part of that. Banks needed to be able to identify where they were best. Broker reviews could help as part of that.
Ultimately the relationship needs to be a two-way street, so buy side also needed to say what they were doing. The environment is becoming more challenging, in terms of regulation, alpha generation etc. Whilst technology was changing things, relationships are still very important especially during times of market stress. New entrants are welcome (eg. non-bank market makers), and encourage innovation, helping the buy side get better pricing, and also causing banks to rethink how they show liquidity.