Investment banks replace staff with machines to reduce costs

Tim Wallace
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TROUBLED bond trading desks are increasingly being replaced with electronic trading systems as banks cut costs to shore up profits, according to a report out yesterday from consultancy GreySpark Partners.

In some areas such as corporate bond trading, the sector has as much as 50 per cent more capacity than it needs, which could result in cuts to old-fashioned telephone sales and broking of a similar magnitude.

Investment banks are increasingly seeking to standardise traditionally bespoke, over the counter (OTC) trades with standardised products, again to cut costs, complexity and staff.

“While more electronic dealing venues will emerge in the future to connect buyers with corporate bond liquidity, the sellside must still reorganise itself around corporate bond liquidity pools that allow investors to find inventory wherever possible,” said report author Frederic Ponzo.

“Ultimately, a better connected marketplace is one wherein consolidated, aggregated liquidity is paired with data mining technology that allows the sellside to better communicate to the buyside where that liquidity can be found from a specific seller.”