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Gurinder Ahluwalia
280 CapMarkets CEO Gurinder Ahluwalia

Tech Firms Vie to Become the “Amazon” of Fixed Income

Fintech firms are finally cracking into the fixed income scene, aiming to provide advisors with market data, transparency and a better deal for their clients.

For independent advisors, getting an accurate sense of the fixed income marketplace can be a challenge, let alone coming up with enough data to make confident trading decisions. But with a rising interest rate environment and large numbers of clients reaching retirement age, expectations are high for advisors’ fixed income strategies. Tech companies with powerful computing capacities and varied strategies are attempting to bridge the gap, bringing better fixed income data to registered independent advisors and financial advisors who lack the resources of large institutions.

The latest entry to the fixed income tech space is New York-based CBXmarket, which announced today it is offering market data and a portfolio management platform for advisors needing access to fixed income offerings. The tool, which works across an advisor’s entire account portfolio, provides performance metrics and is not specific to a single custodian or dealer. Advisors can set up alerts to notify them of imbalances caused by market events and explore bond offerings across a variety of dealers.

Investing in an opaque, decentralized marketplace can be fraught with risks for advisors, said Erik Zoega, CEO of CBXmarket, so shedding light on the process can be very reassuring. “They actually get more confidence in their own decisions and apply that confidence to their own clients,” he said of advisors using the platform. The portfolio component of the tool allows advisors to conduct comparative analysis on client portfolios before executing a trade to explore hypothetical outcomes.

On the other side the country, San Francisco-based 280 CapMarkets has taken a different approach to the bond market. Having made its first trade slightly more than a year ago, 280 CapMarkets sees software as a vital component to making the market accessible and transparent—and has a robust data aggregator and display—but it also employs a trading desk through its BondNav platform.

Advisors using the platform have bond traders negotiating the best price behind the screen, CEO Gurinder Ahluwalia said.

“This is Amazon for bonds,” he said.

280 CapMarkets has the ability to add liquidity to the market by making a purchase from a dealer and selling a tranche of that to an advisor, or simply serving as the marketplace for the transaction. “We believe that bringing the institutional market to the RIA is something powerful for the RIA," Ahluwalia said. “We want to hustle for them and show them that they can win.” 

But while advisors may be reaping the rewards of greater transparency and better market data, tech might not be the panacea hoped for. The problem may be the market itself. Institutions and bond dealers today can make a lot of money, said Ahluwalia, so in their eyes, nothing’s broken. Add to that the decentralized nature of bonds and the data that accompanies them, mix in some gaps in timely buying and selling, and throw in illiquidity for good measure and it creates a complex problem.

Tech companies serving advisors working in fixed income are “still subject to the sample problems that the entire market is subject to,” said Audrey Blater, senior analyst at Aite Group. “Platforms have different eyes—in that what you see is what the dealer on the other side is allowing you to see.” There is no comprehensive “consolidated tape” for fixed income.

With a return to higher interest rates and “the tech revolution catching up with some pretty sleepy tools” like Bloomberg or BondEdge, fixed income is ripe, or at least ripening, for disruption on behalf of advisors, said Doug Fritz, CEO of F2 Strategy. “Firms that have historically been out of the fixed income spotlight now see an opportunity to capture market share and provide a better (and cheaper) option to firms wanting to be more specific with their fixed income investments,” he added. Advisors needing to differentiate themselves and show value to their clients will be paying close attention to fixed income’s new kids on the block: whether flair is backed by substance remains to be seen.

TAGS: Fixed Income
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