Market Update

Stock-Exchange Veteran Chris Concannon Moves to Bond Platform

A pioneer of electronic stock trading is moving to the bond market.

Chris Concannon is joining bond-trading venue MarketAxess Holdings Inc. as president and chief operating officer, the company said. He comes from Cboe Global Markets Inc., CBOE which operates stock, options and futures exchanges, where he held the same positions.

A spokeswoman for Cboe declined to comment.

An advocate of electronic trading since the 1990s, Mr. Concannon, 51, is making the move in the relatively early days of the corporate bond market’s transition to automation.

While stock trading has become nearly automatic, taking place primarily in central online markets, corporate-bond trading remains a largely manual process. Bond traders still negotiate deals over the phone or via electronic messages.

Yet the market is changing quickly, driven by regulation, upstart platforms and new technology. A recent survey by Greenwich Associates, an industry consulting firm, found that 26% of corporate bond volume was traded electronically in the third quarter of 2018, up from 19% in the first quarter.

“I see the corporate-bond market evolving, and it’s following a pattern I’ve seen before in my career,” Mr. Concannon said in an interview.

A lawyer by training, Mr. Concannon joined Cboe in 2017 after it acquired electronic stock exchange firm Bats Global Markets Inc., where he was chief executive. Mr. Concannon also served as president and COO of Virtu Financial Inc., a high-frequency market-making firm that trades stocks, currencies and other assets.

Mr. Concannon said he expects the move to electronic trading to accelerate as rising interest rates continue to roil the markets. “We’re approaching the end of a 10-year bull market,” he said. “There will be active trading in fixed income while the volatility of the transition occurs.”

About 85% of electronic corporate-bond trading by institutions in the third quarter was on MarketAxess, Greenwich’s survey found.

MAS to double individual limit on Singapore Savings Bonds, allow purchases via SRS funds

THE Monetary Authority of Singapore (MAS) will double the individual limit for holding Singapore Savings Bonds (SSB) and allow investors to buy the instruments using their Supplementary Retirement Scheme (SRS) funds, the financial sector agency announced on Monday.

The maximum amount of SSB that an individual can hold will be raised to S$200,000 from the current S$100,000, MAS said. Both changes will take effect from Feb 1, 2019.

The SSB programme has garnered about S$3.7 billion of investments from close to 100,000 individual investors since its launch in October 2015, MAS said. During this time, the authority has received requests from the public to allow the purchases of the bonds using SRS funds, which are voluntary retirement savings contributed by Singapore workers above the national CPF scheme.

"Taking into account public feedback, MAS has worked with the banks to enable SRS funds to be invested in SSB. This will expand the range of products available to SRS members and help them save and plan for retirement," MAS said in a press statement.

To apply for SSB using SRS funds, investors may apply through the internet banking portals of their respective SRS operators, which are the local banks – DBS, POSB, OCBC Bank and United Overseas Bank. As with cash applications, the minimum application amount is S$500, and a S$2 transaction fee deducted from the SRS account for each application.

The new increased individual limit on SSB holdings will apply to SSB purchased with cash and with SRS funds.

MAS will also launch a "My Savings Bonds" portal in March for investors to view their consolidated SSB holdings via the SSB website.

Temasek to offer first retail bonds with planned issue of 5-year notes for up to $400m

Temasek is planning to offer new five-year bonds with a first-time public offer tranche for mom-and-pop investors, the state investment firm announced on Tuesday (Oct 16).

Indonesia weighs tax cut for bond investors after rupiah falls to 20-year low

Indonesia is weighing proposals to cut the levy on gains from its sovereign bonds and extend tax breaks to exporters who will park their dollar earnings in local banks for a longer period as part of measures to shore up a weakening currency.

SGX invests in corporate bond trading platform Trumid

THE Singapore Exchange (SGX) has led a US$53 million growth equity financing round in Trumid, a New York-based startup that runs an electronic corporate bond trading platform.

DBS Aims to Save 10,000 Manhours Through Whatsapp and WeChat Banking Service

DBS announced the launch of DBS Wealth Chat, a service that will allow DBS’ wealth clients to interact, exchange ideas and transact with their relationship managers via popular instant messaging platforms WhatsApp and WeChat.

The bank claims to be the first in Southeast Asia to enable this service for its clients. Developed in partnership with regulatory technology (regtech) start-up FinChat, it enables DBS’ clients to use their existing instant messaging platforms to access DBS’ wealth services while meeting rigorous compliance standards.


The Process

To access the service, relationship managers can register interested clients in a private chat group with the bank. Upon confirmation, DBS will set up a unique chat group administered by the bank between the client and his/her relationship manager

Once the chat group between the relationship manager and client is initiated, conversations and file exchanges that occur within the chat group will be archived by the bank without any intervention required from the relationship manager. The entire process is fully automated.

Why is DBS Enabling Their Banking Services via Popular Messaging Apps

At present, relationship managers need to ensure key client conversations take place via the bank’s phone lines, where they can be recorded. DBS Wealth Chat allows RMs to communicate with clients on the go, on their clients’ preferred instant messaging platform. This, in turn, allows for speedier service delivery to clients.

The introduction of DBS Wealth Chat is estimated to save some 10,000 manhours on a yearly basis, while enhancing the ease and quality of relationship manager and client interaction.

“We recognise that customers today are inundated with different apps and services and decided to go where our customers already are – WhatsApp has upwards of 1.5 billion users, while WeChat has close to one billion users. Our aim is to provide banking services that are embedded in our customers’ everyday lives, while maintaining client privacy and keeping to our rigorous security requirements,”

said Tan Su Shan, Group Head of Consumer Banking & Wealth Management of DBS.

In the first phase, DBS will begin to register and onboard interested wealth clients in Singapore on the service, where content such as DBS Chief Investment Office reports, research insights and ideas, and exclusive invitations will be shared. Additional investment-related transactions (such as trade placement) will be introduced progressively in 2019.

MAS proposes legally-binding cyber security measures for all Singapore financial institutions

THE Monetary Authority of Singapore (MAS) has moved to tighten the rules on cyber security for financial institutions (FIs) in Singapore by proposing to make legally binding a set of six essential cyber security measures to protect their IT systems.

UBS trials Netflix-style algorithms for trading suggestions

Picking an investment may soon start to be more like choosing a TV show on Netflix or finding new music on Spotify.

UBS is looking at applying recommendation algorithms to suggest trades to its asset management and hedge fund clients, similar to those used by a host of consumer technology companies.

The move is in its early stages of development, with the task of reliably recommending interesting trades to investors posing very different challenges from suggesting a new indie band to listen to or what fresh comedy show to watch.

Nonetheless, the broad theory behind the initiative is the same, as finance increasingly borrows from the innovations of Silicon Valley’s technology companies. Increasing cost pressure on banks, coupled with the rise of computer-powered market players, has pushed banks to boost investment in their technology and explore new ways to automate some of their core businesses.

“Imagine what the world looked like when you watched television and had to scan through channels, whereas now it is not only on demand, it is presented to you so you easily find what you are looking for,” said Giuseppe Nuti, who heads up data science in UBS’s FX, rates and credit Strategic Development Lab. “That’s what we are trying to do for our clients, presenting them with a choice of likely, interesting trades.”

Just as people once took recommendations for TV shows or new music from friends or industry critics, a bank’s clients have often listened to recommendations from trained salespeople. UBS is hoping to make this process more automated, taking inputs of a client’s previous trading behaviour to assess whether they might be interested in a specific transaction. And it’s not just for clients.

The technology should help pinpoint investors that will want to buy something UBS is trying to sell, and vice versa. “A good sales person calls his or her client and goes over what they think will be interesting for the day,” said Mr Nuti. “We are trying to automate that.

It means the job of a sales person, which in many ways has remained immune to the technology revolution, will likely change.” The algorithm is currently being trialled in the bank’s corporate bond trading business but there are hopes to roll it out to other asset classes as well.

At the moment, recommendations produced by the technology are sent to salespeople to decide whether or not they should be passed on to clients, but over time the plan is to eliminate the middle man. The challenge is finding enough data to plug into the recommendation engine for it to produce reliable results, said Mr Nuti.

Each new TV show watched, or song listened to, is indicative of the type of music or television that a person likes. But it is harder to group trades into similar themes, says Mr Nuti, because people execute transactions for very specific reasons.

Other electronic trading experts have also urged caution. “While it sounds intelligent and advanced, a client should definitely ask a lot of questions about the construction of such a recommendation algorithm,” said Christian Hauff, co-founder of Quantitative Brokers, a trading algorithm company. “Creating and managing a financial instrument portfolio is not the same as creating and managing a playlist.”

U.S. SEC panel recommends review of electronic bond trading rules

U.S. SEC panel recommends review of electronic bond trading rules

The U.S. Securities and Exchange Commission should form a working group with two of its regulatory counterparts to review and harmonize the rules they use to police electronic corporate and municipal bond-trading platforms, an SEC subcommittee said on Monday.