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Implementation Guide

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8. Fixed income dealer systems

Vision

The sell-side of fixed income community has invested considerable time meeting with clients and considering strategic position in the arena of direct client connectivity for fixed income orders, trade execution, and post trade reporting. As part of this assessment, the community has identified an opportunity in the availability and functionality offered to clients in functional areas such as order management, price transparency, and efficient processing of tickets through direct connectivity via FIX Protocol. As such, the challenge of connecting directly to clients becomes more significant.

The opportunity is to provide desktop transparency both internally and to clients for offerings (multi-channel), order entry, order tracking, trade tracking, trade history, and reporting, as well as to improve the efficiencies of our current trade processing by providing real-time order tracking, easy order entry, and allocations, all in one desktop solution. The goal is to provide quality information to the client desktop as the e-component of fixed income trading becomes more significant. Connectivity allows sales personal to know if a client has submitted an order electronically, if a client has executed a trade electronically, and what levels are being distributed to the offering channel that a particular client is viewing (web based, direct, B2B, etc). Dealer systems provide real-time status of an order, direct connectivity to downstream systems for submission of allocations, and tracking of trade status from execution to settlement.

Product perspective

Single dealer systems can be a desktop application for debt-securities personnel, offering improved access to trader and operations data that is directly related to covered clients. They will provide views of offerings, track orders and trades, and provide order entry features. Single dealer solutions must be geared toward a multi-product, scaleable platform whereby other products would be accessible (other fixed income products on multiple trading systems in multiple back office and settlement systems). As such, these solutions need to be integrated into the debt technology architecture across several systems.

Key business processes

At a high level, single dealer systems would be used by institutional and middle markets debt sales people in three stages of the trade life cycle: Pre-Trade, Execution and Post-Trade. The functions would include:
  • View offerings to various channels
  • Enter orders
  • Track orders, including status and notification of Fill or Reject by trader
  • Track trades from execution to settlement
  • Allocations
  • Reporting (trades, orders, etc by client or by date)
  • Query trade history for clients covered

Product features

Single dealer systems will provide a rich variety of productivity functions to fixed income personnel. Among these functions are:

Monitor/Blotter - contains list of securities that currently have open orders placed by either a trader or a client and displays best bid and offer for each.

Offerings - deliver both bid and ask prices to each specified 'channel' of distribution. Offering levels may be specified at a security specific level or applied for an entire channel.

Order Entry & Routing - the routing supported by fixed income would send the order directly to either a trading desk or even a specific named trader.

Allocation and Confirmation - Middle office client allocations system providing full management for the Electronic Trade Confirmation (ETC) business cycle for block and allocation level clients and full process support for manual allocation clients including FAX. Monitor cancels and corrects.

Notification/Alert Monitor - displays a list of notifications pertinent to the clients covered by that salesperson. Notifications are given for trade fills, open trade, counter-orders, no-interest responses from trader, order cancellations, news events; credit upgrades/downgrades, as well as recommendations.

Reporting - generate customizable and flexible reports on historical trade database available to fixed income personnel.

Compliance Monitor - ability for Compliance to review all bids, offers, trade executions, bids wanted, and orders. Reporting to regulatory authority including MSRB, NASD, FIPS, ACTS etc.

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