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Stay ahead in the digital evolution of Financial Markets

In our latest blog Charlie Gibson, from our Business Development team, discusses how traders can safely explore the world of digital trading and improve competitiveness.

By Charlie Gibson, Head of Buyside Sales, Europe

An evolution in financial markets is occurring, yet some traders are still hesitant to operate increasingly digitally. Fears over data leakages, and technology replacing traders, still run deep. Coalition Greenwich recently reported a 58% increase in corporate bond electronic trading, year on year – a trend which shows no sign of abating. Traders risk being left behind if they don’t embrace the digital evolution in financial markets.

There’s clearly an openness on both buy and sell sides, to use new technology for greater efficiency. But for this to be truly meaningful, technology needs to uncover new and different trading opportunities – liquidity depth. The value is in the new financial plumbing itself, uniquely enhancing what flows through it.

It’s risky to jump in feet first, without understanding how financial tools such as Distributed Ledger Technology (DLT) can work alongside the wider organisation and help traders to thrive. But it’s even riskier to ignore the digital transformation occurring in financial markets. So, let’s go back to basics and uncover how traders can safely evolve to meet modern digital trading practices.

1. Understand how technology can help

With the ongoing turbulence in global markets, organisations are struggling to keep pace with the wild fluctuations in trading. Whilst traditional trading methods are still vital, DLT provides much needed agility to weather future storms. It also helps traders to generate greater alpha for clients and access liquidity opportunities that would otherwise have been latent.

Greater efficiencies can also be achieved with DLT, including the capability to reach atomic settlements. There’s plenty of initiatives and proof of concepts already in place, as people move to shorter settlement cycles too.  This puts an end to lengthy payment processes, minimising the costly risk of trades falling through.

2. Interrogate safety features

As data is considered to be the new oil, organisations are rightfully cautious about how they share theirs. High-profile hacks and data leakages on public blockchains, reported in the retail sector, could serve to deter traders from sharing information.

Many financial institutions recognise the potential of DLT because of the data control and efficiencies it brings. The way to get best price until now has been blunt force, but this causes market impact and information leakage. However, operating on a private blockchain and secured by encrypted keys, DLT ensures that data is only shared once a suitable trading match is found.

Traders remain in control of how much data they share, from meeting the minimal requirements to disclosing further information – giving them access to the best counterparty. Point-to-point architecture within DLT also ensures that only legitimate offers are presented – safeguarding and maximising a traders’ execution.

3. Become an advocate

The future of regulated markets is undoubtedly digital, with the majority of bonds set to be issued on new technology in the future. Becoming an advocate of DLT now, can help future proof traders and organisations – providing access to latent liquidity, creating greater efficiencies and minimising failure risk – all whilst navigating tumultuous market conditions. An openness to connectivity through new technology puts trust into the foundation of the digital economy and will unlock real value.

Traders can safely dip their toe into the digital evolution, but ultimately organisations need to take the plunge and integrate technology seamlessly across all trading desks to remain competitive. So, whilst using technology to manage precious trades and data can seem like a daunting prospect, ignoring the digital evolution in financial markets is much riskier.

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