The Changing Faces of Electronic Fixed-Income Trading

Last week I spoke with TruMid president Mike Sobel about his company's soon-to-be-released, in-house-built trading platform.

For those who don't know, TruMid launched last year using a two-phase process for trading. The first trading session, which TruMid calls a "swarm," is scheduled at specific times, where TruMid sets the starting price and bid/offer range for each security. Participants then enter anonymous offers in the dark pool within the prescribed range. Orders that can be crossed are automatically executed. Then, during phase two, the bids that were not crossed are made available to trade at the average price, which is created based on the crossed orders.

For this next platform iteration, TruMid will allow any user to initiate a swarm on any bond, at any point during the day. 

TruMid was an interesting entrant into the space, along with Electronifie, which combines a lit order book with a dark pool for round lots. These two upstarts join the likes of Tradeweb, Liquidnet and MarketAxess, among others. And on top of that, there's the Neptune initiative, which is backed by 42 buy- and sell-side firms and aims to bring standardized axe and inventory information sharing to the fixed-income market.

As my colleague John Brazier pointed out recently, the buy side is somewhat blessed thanks to the many options that exist aimed at boosting liquidity in the market.

But on the other side of that coin, it's been a challenging market for the vendors. Bondcube, another electronic fixed income trading platform, filed for liquidation last year. And today, Financial News reported that London-based Algomi, with its Honeycomb corporate bond information network, lost £8.8 million ($12.5 million) in the 12 months to the end of June 2015. This news comes on the heels of it cutting almost 10 percent of its workforce last November.

Where To From Here?

Last week it was announced that TruMid was undergoing a shakeup in its senior ranks, according to Business Insider. Sobel was named president and Ravi Singh is taking over as chairman, but co-founder Chris Ruggiero left to join Citigroup and the company's chief marketing officer, Tim Reed, left last month.

After talking with a few contacts and with Sobel, the impression I get is that TruMid is focusing more on being a technology company, much in the same vein that exchanges are increasingly seeing themselves as technology companies. They've hired a bunch of technology professionals, according to reports, and the company's CTO, Anthony Schiavo, has over 20 years of experience, serving stints at Citi, RBC, Merrill Lynch and trueEX, among others.

This focus on bringing the platform in-house, rather than relying on The Beast Apps, should provide greater flexibility to adjust to client demand and to be more responsive in support. It will also feature machine learning techniques, which could make its on-demand trading sessions impressively targeted ... assuming that TruMid's developers have a good understanding of machine learning.

Sobel told me that The Beast Apps was excellent in helping the company launch its offering, but now it's time to break free and become more independent. Will it work? I have no idea. It's not as if the fixed income market is going to solve its liquidity problems overnight. But I think that this is a move in the right direction for TruMid.

And for what it's worth, TruMid has been growing. From my story:

TruMid launched its current platform on April 29, 2015. In that time, it has grown from 63 institutional users to 250 users today. The user-base is roughly 50 percent hedge funds, 30 percent real-money asset managers and 15 percent dealers. Sobel says the company currently has almost 400 potential users in the pipeline, with plans to have 100 of those firms on-boarded by the end of this year.

Since launch, Sobel says $4 billion has been executed on the platform, with an average trade size of over $2 million.

What will be interesting to watch, after the platform goes live next month, is whether or not the on-demand swarms cannibalize TruMid's traditional point-in-time swarms. Or, will users try out the on-demand functionality, but return to the session-based offering? Or, will they coexist in harmony? Sobel, unsurprisingly, says it will be the later. As they say, time will tell.

Do you use TruMid's platform? Or Electronifie's? I'd be interested to hear your thoughts on these startups. Give me a call (646-490-3973) or send me an email.