The two stories I’ll mention below are certainly market data stories, but for you hardcore MD crazies, check out this deal between market data cost and inventory management software vendor TRG Screen and consultancy Jordan & Jordan. Also, there were many data professionals named as winners in this year’s Women in Technology and Data awards. Click here to see those results.

Ok, let’s get to it.

A proper fit for blockchain?

If you read this column regularly, you already know that I’m not the biggest fan of blockchain technology. (And yes, I’m going to use “blockchain” interchangeably with distributed-ledger technologies…mi dispiace.)

Don’t worry, this isn’t going to be another blockchain-bashing column; you can read those here, here, here, and here, should you like. No, rather today, we’re going to accentuate the positive (as best as I can).

Beyond the realms of digital rights and digital assets, the wholesale capital markets seem to be finding some successful use-cases (at least so I’m told) when it comes to how private equity firms open, manage, and administer funds, and around things like shareholder voting. Also, back in August 2019, Max Bowie wrote an excellent two-part feature on real estate as a tradeable asset class. Part 1 looked at the data challenges holding the space back. Part 2 was an exploration around how blockchain could unlock the value of real estate as an asset class.

And then this past week, Max wrote a story about how blockchain’s immutable ledger could be used as an indisputable record of market data entitlements and consumption, which would help to reduce licensing disputes. Come to think of it, Max also wrote about how blockchain and zero trust architectures could prove a natural fit…maybe Max is the Yin to my anti-blockchain Yang?

Anyway, back to market data entitlements. Last month, TradeX, a blockchain-based data-tracking startup, rolled out the first production release of its platform—which can be deployed on-premise or in the cloud—and began a beta testing program with a handful of pilot firms, including a bank, an exchange, a software vendor, and a hedge fund, all looking to use it to address market data compliance and commercial issues.

It’s a very interesting project and one that (at least in my tiny brain, anyway) makes sense as an area where blockchain could prove useful. The reason is that there aren’t any latency concerns as this would be used for auditing purposes—thus, the data itself never touches the TradeX platform; they simply handle admin functions relating to data licensing.

Now, as best as Max can tell (and he asked a bunch of people), TradeX is the first to the party on this sort of thing when it comes to blockchain adoption. But if this project proves fruitful, it could encourage the market and reference data industries to think about DLT as an ailment for several other back-office, industry pain points.

Some blue-sky thinking here, and I’m stealing HEAVILY from a conversation I had with Max (so if these are way off…I’ll just blame him):

• First, it could also help aid in the monetizing of data—again, as Max wrote about recently—for firms who don’t have a huge “vendor” arm in place dedicated to selling and enforcing data usage.
• Second, as Max (once again!) wrote in his column for the March issue of WatersTechnology magazine, blockchain could be used to manage the function that proprietary identifiers perform, without the need for a proprietary identifier. This could help to support trading in new asset classes by synthesizing them as digital assets.
• And then tangential to that point, it could be used to help drive legal entity identifier (LEI) adoption by using the ledger as a record of a security, replacing proprietary market or vendor codes. Or, perhaps blockchain could be used as a way to create a pseudo-identifier for an individual that could be swapped in for all/any standard to create a single, consistent identifier for that individual firm and for others.
• Somewhat connected to these points, the Global Legal Entity Identifier Foundation (Gleif) and Evernym, a portable credential technology firm, have partnered to pilot a blockchain-based solution that allows companies to create and maintain digital wallets. These wallets store credentials that confirm the identity of a company and its employees, and can be used by financial firms to validate digital business transactions and perform activities like client onboarding and submitting regulatory filings.
• Now, is it possible that we’re just giving a flashy name to something that supposedly anyone could do themselves with a blockchain? You betcha! And you can bet that they’ll charge for it, too. But maybe it will be less costly than some of the established identifiers cost, and it could come without the fear of being locked into a Bloomberg offering. Just like Gleif’s project, it would make sense if the London Stock Exchange Group (with its Sedol offering) and the Association of National Numbering Agencies (with its Isins) also started conducting some exploration in this space, no?
• And one final thought: What happens if/when an exchange or a large vendor or broker adopts TradeX for its intended purpose—once a client becomes subject to entitlements governed by one of those digital keys, then why wouldn’t they use it elsewhere within their own organization? You can envision a domino effect that prompts much wider adoption—which might raise competition concerns, or might evolve into an industry wide standard/utility. Maybe this could lead to much wider precision and compliance across the industry, right? And would that really be such a bad thing?

Wait…am I now endorsing blockchain as the cure for a bunch of major industry needs? I must’ve had too much to drink this weekend while binging WandaVision. Feel free to tell me how insane these ideas (or WandaVision) truly are: anthony.malakian@infopro-digital.com.

Broadridge preps to unveil LTX platform…will it work?

While blockchain in the wholesale capital markets is a theoretical discussion at this point, the electronification of fixed income is very much a “right now” discussion—and the market for bond trading platforms is about to get a bit more crowded.

In June, Broadridge is planning to officially launch its three-years-in-the-works bond trading platform, LTX. Our Reb Natale spoke with Jim Toffey, the head of LTX, and she also spoke with several other industry participants to see if the market really needs another platform. As she reports, there are some who believe that there is no room for another offering.

So to the question of “will it work”—I have no fucking idea…glad to help. Truly, while I’m not the last person to ask about fixed income trading platforms, I’m closer to the bottom of the list than the top. But I would like to “quickly” hit on two points.

First, as I understand it, a big reason—perhaps the biggest reason—that the fixed income market has struggled to embrace automation like its equities and foreign exchange brethren is because the traders in the space kind of prefer it that way. It’s a person-to-person, relationship market. Profanity-laced and highly-inappropriate phone calls and texts have not yet been crushed by HR. It’s old-school Wall Street, where traders and PMs meet at some Stone Street bar (or the White Horse on Bridge Street!!! See you soon, Tommy) and get boozy on the corporate credit card while talking about corporate bonds.  

Sure, there are market structure and data issues that have held FI back, but plenty of people have told me that it’s a laggard by design. It’s a people thing.

So it is that Jim Toffey and other Broadridge and LTX executives will have to hit the market and make the case for a new bond trading platform—a market that includes stalwarts like Bloomberg, MarketAxess, and Tradeweb (more on that last one in a second). Here’s what Toffey told Reb: “The other thing that happens when you launch something new is everybody says, ‘Well, I would never do all my business that way.’ But the reality is, I’m not trying to do all your business that way. I’m very happy with 1–2% because I know 1–2% will lead to 2-4%, which will then lead to 5-7%. It happens incrementally.”

Yes, that’s how adoption in a saturated market works, so the company has time to build—it just needs some early wins. And, as Reb explains, LTX will have an interesting proposition thanks to its connection with Broadridge, and the treasure trove of data that resides within Broadridge’s extensive fixed income business.

And, as Broadridge likes to note very early on in its LTX press releases, Toffey is the cofounder of one of the big-3 fixed income trading platforms. Along with Lee Olesky, Toffey launched Tradeweb Markets in 1996 and the company made its first US Treasury trade in 1998.

So Toffey has been here before. But he’s also been on the wrong end of a fixed income startup. Soon after leaving Tradeweb in 2008, he founded Benchmark Solutions, which was funded by private equity giant Warburg Pincus. Benchmark was to serve the market as a bond pricing data provider. Benchmark Solutions, too, would prominently make note in its press releases that Toffey was the founder of Tradeweb. The company shuttered after about 18 months of operations (or about four years after founding) when it ran out of funding.

A former employee of Benchmark Solutions told Reb that one of the company’s downfalls was a lack of consistent, aggressive client outreach (a people problem, if you will). Toffey told her that the vendor failed because the business was too narrow as a service offering. He also said that LTX is different because it is under the Broadridge roof, and, as mentioned before, has access to Broadridge data, expertise, and connections.

Again—and I feel that this can’t be stressed enough—fixed income is a “people” market. As another source told Reb, the tech can be good, but that doesn’t necessarily mean that it will gain traction in this space.

The second thing that I’d like to hit on relates to something someone different told Reb—when asked who the top fixed income trading platform providers were, they said Bloomberg, MarketAxess, Tradeweb…and Trumid.

For those who don’t know, Trumid is a startup, having launched its electronic corporate bond trading venue on April 29, 2015. After acquiring rival startup Electronifie, which also launched in 2015, Trumid has slowly weeded itself into the market. Over the past 18 months, it has announced partnerships with Goldman Sachs, the Singapore Exchange, and Citi. In August, as the pandemic was raging, it completed a $200 million growth capital investment led by Dragoneer Investment Group, and which included TPG, and funds and accounts managed by BlackRock and T. Rowe Price Associates.

So if Trumid can find a home in the anti-automation world of fixed income, why can’t Broadridge/LTX? Seriously, I’m asking—I’d be interested to hear your thoughts as to whether you think they’ll succeed or fail: anthony.malakian@infopro-digital.com.

The image at the top of the page is “The Great Hammer” by Joseph Pennell, courtesy of the Cleveland Museum of Art’s open-access program.