FILS Europe 2024 Takeaways

Paris is home to many things, the Eiffel Tower, the Arc de Triomphe, burgers (ok, I made that one up!). In recent years, Paris' financial community has grown, and indeed, every visit to Paris, there are an ever increasing number of firms who are interested in our services in economic forecasting at Turnleaf Analytics. Over the past few days, it was also home to the Fixed Income Leaders Summit in Europe, which brought together a large number of market participants, from the sell side, buy side and vendor space. Turnleaf Analytics was at the event, and I would like to say thanks to everyone who came by our stand to hear more about how we use machine learning and alternative data to do economic forecasting. I'd also like to thank everyone who came to my panel on fixed income and private markets.

In this article, I'll try to give some of my takeaways from a few of the discussions at the event. Many of the panels were under Chatham House rules, so as a result, I'll try to give a general flavour of discussions, as opposed to any direct quotes for those specific discussions. The sessions were spread across a multitude of different areas. Some focused mostly around the execution part of the puzzle in fixed income, discussing subjects like the relationship between buy/sell side, market structure etc. whilst other subjects were more related to the overall macro picture and views for the near term around inflation, central banks and of course the US election.

The first session of the main day was centred around the relationship between the buy side and sell side, in the context of the evolving tech landscape. Moderating the discussion was Henri Mills (UBS), with panellists Jatin Yara (BlackRock), Yannig Loyer (AXA) and Peter Welsby (Manulife). The key point was that the relationship was not purely a question of execution, even if that was an important part of the jigsaw. The sell side provides other services, ranging from idea generation, syndicates, prime services, research etc. It is possible to monitor a bank's ideas, and if they are profitable a value can be attributed to them. The theme of consistency came up repeatedly many times during the conference. Whilst a bank could provide liquidity during the calm times, what about during times of market stress? On the subject of execution, best execution was obviously key, the ability to offload risk being part of that. Banks needed to be able to identify where they were best. Broker reviews could help as part of that. Ultimately the relationship needs to be a 2 way street, so buy side also needed to say what they were doing. The environment is becoming more challenging, in terms of regulation, alpha generation etc. Whilst technology was changing things, relationships are still very important especially during times of market stress. New entrants are welcome (eg. non-bank market makers), and encourage innovation, helping the buy side get better pricing, and also causing banks to rethink how they show liquidity.

A market insights interview saw Enrico Bruni (TradeWeb) interviewing Philip Stafford (FT). Stafford noted that there had been a growth in the buy side and also principal market making firms, specifically citing firms like BlackRock, Citadel and Jane Street. This has resulted in investment banks rethinking their models. Some of the big hedge funds didn't necessarily need "ideas", they wanted liquidity. The big story he noted was a large principal trading firm making 1bn USD on Indian options. Whilst regulations had been a big driver in recent years, with MiFID and the consolidated tape, Stafford, felt other areas were now driving change, such as AI, crypto etc. He noted also that tokenising an asset in isolation didn't really make a difference, but using that token for collateral mobility could be. Whilst solutions like Tether, might not have regulatory approval, tokenised money market funds are close to digital cash.

David Bullen (Longwood) moderated a panel on market structure featuring Carl James (S&P Global), John Showell (Mosaic Smart Data) and Corentine Poilvet-Clédière (LSEG). The panel was kicked off with a poll of the audience...

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