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The complex secondary market in corporate bonds is characterised by strict regulatory requirements and by a high degree of fragmentation in terms of liquidity. As a result, market participants place numerous, sometimes contradictory, demands on a trading venue that has over 13,000 listed bonds. Boerse Stuttgart has introduced a new technical access that not only facilitates connections to the hybrid market model but also allows sell-side customers to define their own parameters over the entire life cycle of a bond. Thanks to an innovative multi-access interface, they can now communicate proactively and autonomously using different parameters for the same bond. On request, they can also submit orders to the order book of the electronic trading system Xitaro. The interface also ensures that Boerse Stuttgart receives a continuous stream of price information. To ensure that it remains future-proof, the interface was developed with FIX technology, the open, universally compatible standard protocol used in the financial sector. FIX version 5.0 is the most up-to-date market standard in bond trading.
‘From now on, with this new connection, sell-side customers can adapt their price and trading parameters completely to meet the specific requirements of their products and therefore reduce the level of complexity involved. This additional flexibility will help our customers to meet increasingly strict regulatory demands and complement our successful hybrid market model superbly. What’s more, our system partnership with the IT service provider icubic will reduce the amount of integration work and the associated costs by a considerable margin and ensure that the system remains fully functional well into the future. Going forward, we will be able to connect new sell-side customers quickly and easily thanks to an efficient onboarding process,’ says Michael Görgens, Head of Bond and ETF Trading at Boerse Stuttgart.
Boerse Stuttgart opted for the FIX 5.0 interface in order to offer its customers a future-proof access that complies with the market standard. This approach was chosen in response to requests from trading participants. At the same time, however, its benefits in bond trading are confirmed in a survey conducted in February 2017 by the International Organization of Securities Commissions (IOSCO) that highlights the prospect of substantial efficiency gains for market makers from the use of standardised interfaces in response to the fragmented nature of the bond market. Another goal of the new technology is to resolve the problem of the varying quality of market data.
Landesbank Baden-Württemberg (LBBW) is already piloting the new access. ‘Our objectives in introducing this innovative direct connection from our bond trading desk at Landesbank Baden-Württemberg to Boerse Stuttgart are to strengthen exchange-based trading for bonds, deliver improvements for our customers and retail investors and prepare ourselves now to meet future regulatory demands,’ observes Jürgen Motzer, Head of Bond Trading at LBBW.
Boerse Stuttgart has teamed up with IT service provider icubic for the supply of the innovative dual gateway on the customer side. icubic develops software to facilitate pricing, quoting and trading in financial products on electronic markets. ‘Over the years, we have developed a very strong relationship with Boerse Stuttgart based on mutual trust. Of course, that is due in no small part to the timely integration of our innovative software solutions,’ points out Dietmar Jakal, Chief Executive Officer of icubic AG.
Boerse Stuttgart leads the market in exchange-based trading of corporate bonds in Germany. Its hybrid market model, which integrates trading experts into electronic trading, allows Boerse Stuttgart to offer outstanding levels of liquidity and a reliable order execution. In bond trading, retail investors and semi-professionals benefit from a price and trading quality that is otherwise only available to institutional investors.
