Optimizing multi-asset trading with single platform solutions

Bloomberg Professional Services

This article was written by David Allright, Global Head of Trader Services and Rohit Tak, Global Product Manager, Cash & Derivative Risk & Risk Compliance, at Bloomberg.

The financial landscape has undergone rapid changes in the past few years, with increased volatility, market uncertainty and geopolitical tensions prompting market participants to review and redraw their business models and revise their investment strategies.

In search of additional revenue streams, many financial firms have diversified their product offerings and now look to offer a broader suite of asset classes than those traditionally offered. This expansion offers opportunities to continue building their business, while helping to maximize returns and optimize risk management.

In addition, clients are looking for a technology partner to support their operating models efficiently to help deliver on this expanded remit. They want to do more within their given infrastructure, from making markets to trade capture to risk analytics and reporting. Fundamental to this is increased automation.

Navigating segregated infrastructures

On paper, these transitions look simple: translate manual processes to ones that are automated and apply them across asset trading teams. Unfortunately, this hasn’t been easy, largely because of the fragmented nature of many firms’ technology stacks 

The software and infrastructure setups of many of the world’s sell-side firms have evolved piecemeal over time, with segregated infrastructures adopted and built to suit specific use cases and regulatory requirements. Firms often manage operations for each asset class separately but require a consolidated view of the entire operation. This requires input data to be formatted for each solution and then the output from each solution to be homogenized for easy aggregation. 

In this scenario, the risk of error is high. Aligning the datasets and individual activities, such as model calculation, trade processing and reporting, can diverge between each separate asset class causing miscommunication. In addition, where execution is required across different asset classes, there is a likelihood of missing orders or failing to take timely action on vital messages between multiple systems. 

In terms of resourcing, fragmented trading setups can be costly. With separate teams overseeing business in each asset class, the probability of skills duplication is high, and the likelihood of data siloization means that information critical to each asset-focused team is unable to flow easily when needed. 

Solutions for risk officers

As a result, chief risk officers must assess the potential for losses from each desk’s positions at regular intervals, usually at the end of each day, but ideally more frequently for compliance. This needs to be seen holistically across the firm.

Reconciling and aggregating risks, transactions, and profit and loss accounts manually is time consuming and prone to operational error. It also raises the potential of missing important reporting deadlines and incurring regulatory penalties.

Consequently, firms are turning to technology and solutions that deliver a harmonized framework to achieve long-term goals of the organization by supporting future growth across asset classes and reducing cost of ownership.

To solve these challenges, sell-side firms are looking to integrate their separate asset-focused desks-based technologic stacks and run them from integrated platforms. This would enable them to execute across more asset classes at a greater scale, reducing costs by streamlining operations through the sharing of common workflows and eliminating the need to adjust data.

Importantly, it would also provide portfolio and risk officers a holistic view across their positions, permitting better-informed decision-making on the management of allocations and risk. And by decreasing the number of teams involved to collate information within the organization, the potential for operational risks would be reduced, ensuring greater workflow and cost efficiency.

Solutions across the trade lifecycle

When exploring this type of change, firms need to remember that there will be some difficulty that comes with ensuring consistency of cross-asset execution across all stages of the trade life cycle. It depends on access to industry-leading data, where Bloomberg is uniquely positioned to help the sell side.

Through the interoperability of its proprietary order and execution management tools, TOMS and ETOMS, Bloomberg empowers sell-side firms to consolidate their trading desk data and reduce overheads with respect to, compliance and reporting. This, combined with its multi-asset risk functionality within MARS, along with extensive instrument coverage and cross-asset data across geographies, achieves synergies in risk management and accurate valuations. This combination of competencies has won Bloomberg the Waters Technology Sell-Side Technology Awards’ Best Sell-Side Front Office Platform for the second consecutive year.

C-suite and desk heads around the world value the network, venue connectivity options, depth of data, analytical tools, and asset and instrument coverage that Bloomberg offers, all of which enable traders and sales professionals to synergize their trading and risk workflows. Additionally, Bloomberg allows users to interface directly with the Terminal and enterprise workflows programmatically via a variety  of APIs. 

Traders can efficiently manage inventory, price simple securities to complex derivatives, distribute quotes across multiple venues, and take advantage of a fully tailored user interface optimized for both price taking and market making. Other features include automated voice and electronic trading workflows, intraday risk, pre- and post-trade limit and compliance checks, real-time intraday P&L, P&L explain, and end-of-day close activities.

For existing Terminal users of Bloomberg OMS and EMS, incremental asset expansion comes at a significantly reduced expenditure. In addition, with a single system, adoption and on-boarding of the technology with respect to the users is significantly reduced.

Integrated efficiency

In an environment that brings higher costs, firms have been looking for ways to manage operational and trading costs. Without unified trading operations across multi-asset products, there are few routes to bring down spending while locked into fragmented trading systems. 

Bloomberg has long served as a technology partner focused on providing clients with solutions that help them achieve consistent trading performances across asset classes within a technology architecture that is fed on robust data – and built for expansion and adaptation.