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Q: When you talk about the infrastructure, what are you really talking about - is it servers, networks and databases?
A: It really starts with people. You need people who have the expertise to understand these issues and products, and technology provides the tools to go with it. It's really putting in processes to control and support the business. In some cases, there are obviously legal and regulatory issues. For example, if you expand the business into new markets, there are local regulations that have to be understood.
Q: Is Morgan Stanley leveraging a common infrastructure for equities and fixed income?
A: It is. There are some areas where we certainly work across products, like, for example, listed futures or interest-rate futures or equity futures. But we have a common platform. I know a lot of firms historically have had technology architectures that were product-specific and region-specific. We have always tended to have a common, cross-product global approach for technology infrastructure.
Q: The acquisition of TradeWeb by Thomson Financial was a major industry event. Why did the dealers decide to sell TradeWeb to Thomson?
A: TradeWeb was a very successful business, and continues to be. It started in the Treasury market in '98. It has grown and diversified into other liquid markets. It's growing financially, and the eight dealer-owners realized that ... for TradeWeb to continue to grow and diversify its business, it would benefit from having a strategic partner, in that electronic trading also ... has a strong interplay with market data, analytics and both pre- and post-trade capabilities. So you could either build those capabilities or find a partner who had those capabilities and combine forces. And we felt the best way for TradeWeb to achieve its strategic vision was to combine with a partner who had capabilities in those areas.
Q: As you said, TradeWeb is diversifying and growing. It's entering the corporate-bond market-
A: Yes, in the beginning of May they rolled out a corporate-bond platform.
Q: That has been an area that Market-Axess has specialized in. Are we going to see head-to-head competition between the two industry platforms?
A: I think going forward we will probably see more competition between MarketAxess and TradeWeb. MarketAxess has a very good reputation. I think it has been very successful in its own right in starting in the corporate-bond space. I believe they made an announcement not too long ago of some venture in Treasuries. I think corporates are a natural extension of TradeWeb's capabilities because there are obviously trades that involve spreads off governments. ... Competition is healthy.
Q: Why did you become a member of Omgeo's board?
A: It was somewhat related to the TradeWeb role. Because of my background, I had an interest in straight-through-processing strategies, and I worked with TradeWeb on their straight-through-processing tools and strategy. And now that TradeWeb is part of Thomson and Thomson owns 50 percent of Omgeo, one of the areas that I would like to assist Omgeo with is their strategy for co-existing with TradeWeb's tools and a longer-term strategy to enhance efficiency in fixed-income markets.
Q: Another trend in fixed income is the adoption of the FIX protocol 4.4 including post-trade messaging. How do you see this unfolding?
A: TradeWeb played a major role in the development of FIX for fixed income. Their front ends are FIX-compliant. I've seen very little traction to date for the FIX protocol in fixed income. Morgan Stanley has a successful application of FIX in the foreign-exchange business. But in terms of bonds, there hasn't been anything to my knowledge. I think the presence of the successful multi-dealer execution platforms - TradeWeb and MarketAxess - has probably in some way satisfied the market, at least for the time being. So I think the real question is, does the market need to precipitate using FIX for direct interaction between dealers and the buy side? And so far, it hasn't happened. Will it happen? That's a good question.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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