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is short-sighted. If the buy-side helps
liquidity it is good but they won’t
replace the role of the dealers.”
In any case, ALFA is soon to be dis-
tributed more widely. AllianceBern-
stein sold it to Algomi in May which is
building and commercialising it with
a target date of year-end for roll out.
The company has already spoken to
30 to 40 asset managers about buying
ALFA and has got interest from across
the board, including via heads of
trading, quants, compliance officers,
portfolio managers and technology
heads.
Times are changing
This drive to technology is going
hand-in-hand with a broader move
towards trade electronification. Swit-
zer says AllianceBernstein is looking
to move to a purely electronic trade
“Until we solved the efficiency
issue we weren’t going to be
able to solve the liquidity
issue.”
pricing and execution process by the
end of the year.
“We don’t want to write a paper
ticket—we want everything to be elec-
tronic,” he says.
But there remains a big place for the
phone in the market. Around 75% of
tickets AllianceBernstein writes are
done electronically but that represents
only 20% of the volume—the bulk is
still conducted on the phone.
Switzer says the main issue prevent-
ing full electronic trading is the lack
of pre-trade transparency in the fixed
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Summer 2017
S W I T Z E R ]
income markets. It is something that
has prevented more efficiency in the
business and the sell-side can take
part of the blame for this.
“I think in my entire career nothing
had changed but now, very recently,
it seems things are,” says Switzer.
“There is more of an acceptance
on the sell-side that things have to
change and more willingness by them
to transmit price and other informa-
tion in a more user-friendly format
which enables buyers to slice-and-
dice that data in custom ways such as
in utilities like ALFA.”
While there have been more
electronic platforms introduced into
the market—and more ways to find
liquidity—overall this has not yet
pushed spreads down. The cost to
trade remains high, particularly in the
illiquid segments of the market where
most help is needed.
“Reports say that bid/offers are back
to pre-crisis levels,” he says. “I dis-
agree. Observable bid/offers are back
to pre-crisis levels but that’s more a
function of riskless order-taking in
parts of the corporate bond market
than to do with efficiency. The reality
is that if an investor needs something
immediate or in size we haven’t seen
bid-offers go down there. It is going to
take full pre-trade transparency across
the board for all types of trades to
really bring in spreads.”
Things are changing. And they must.
Where once the buy-side was used
to being shepherded through the
process by the sell-side, it is time for it
to modify its behaviour and embrace
new ways of doing business. Switzer
is all for it.