Data and analytics are becoming increasingly important to Neptune Networks, the consortium which was launched to reduce costs by allowing institutional investors to access real-time bond pricing from banks in a standard format.
Banks previously sent bond inventory information in multiple formats to investors. In 2014 a group of buy-side and sell-side institutions began discussing how best to distribute real-time axes in a standard open source format and Neptune was incorporated as a non-profit organization in 2016.
Grant Wilson, chief executive of Neptune Networks, told Markets Media: “Regulators are focussed on the cost of data so Neptune will continue to reduce costs for clients as we have done with connectivity, our distribution of axes and streaming prices.”
Neptune today announced the release of their composite product for corporate bond pricing in collaboration with CME Group.
https://twitter.com/NeptuneFI_LDN/status/1154024848051638273
“Data and analytics are increasingly important for Neptune so it is good to have a strong data partner such as the CME,” said Wilson.
He continued that the Neptune composite is different from others in the market.
Grant Wilson, Neptune
“We are transparent about how we create the composite so it is not just a black box and get feedback from both the buy side and sell side on the mechanics,” he said. “In addition, we include our axe and inventory data, rather than just streamed prices, so users get a better idea of how to trade blocks.”
The product is available via the Neptune user interface and live on any bond that fits the liquidity and pricing to create the composite. Data contributors receive the composite for free, on a give to get relationship. Customers can also receive this product via a direct feed from the CME.
Wilson added: "Neptune is a market structure play that aims to be a low cost provider of high quality services. For example, we will be adding bilateral messaging between the buy side and sell side on the platform.”
Value of data
The increasing importance of data is shown by London Stock Exchange Group’s recent £27bn ($33bn) acquisition of Refinitiv. LSEG said in a statement that it had a strong strategic rationale for the deal as digital transformation means that financial markets infrastructure providers must operate globally across asset classes, with data management, analytics and distribution capabilities that can serve customers across asset classes and geographies.
“The recent acquisitions in the data space give us a reason to continue to provide services at a better price point in collaboration with our clients,” said Wilson. “We will focus on what makes sense for our client base and there is interest in best execution and transaction cost analysis - while the incoming Fundamental Review of the Trading Book directive will require data support.”
Trey Berre, global head of data services at CME Group, told Markets Media last month that outside the core of the exchange’s proprietary data, CME has been partnering with third parties to take advantage of its global distribution and give clients a more cost effective way to access data.
Trey Berre, CME Group
“Neptune has a global corporate bond composite consisting of more than 30,000 bonds which reduces the requirement for investors to calculate their own composite price,” said Berre. “The data is distributed through an API so clients do not need a terminal but can simply add a subscription.”
There is a large opportunity to improve the provision of fixed income data. Consultancy Greenwich Associates said in a report last month, Defining Fixed-Income Data, that for a single fixed income security , market participants need to look to several data providers, multiple trading platforms (which each have unique datasets) and regulatory bodies that often collect and disseminate trading and holdings information in different formats.
Kevin McPartland, Greenwich Associates
Kevin McPartland, head of research for market structure and technology at Greenwich Associates, said in the report that buy-side trading desks have access to more data than ever before, with each desk spending on average only $225,000 annually on direct data costs (or roughly 15–20% of their total technology budget) as large broker-dealers in fixed income are subsidizing the cost of data for their clients. Greenwich expects this model to change as data increases in quality and becomes more valuable, requiring the buy side to pay for access.
“Conversations with top-tier hedge funds and asset managers have shown us that those on the cutting edge are in endless pursuit of new data sources, using them to further refine both their investment and execution strategies,’ added McPartland. “The buy side is certainly more informed than ever, but by all accounts, we’ve only scratched the surface with regard to the fixed income market’s transformation.
New CEO
In June Neptune announced that Wilson will step down after three years as chief executive by December 2019 to continue the expansion of Etrading Software where he remains a partner.
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Stephane Malrait, chair of the Neptune board, said in a statement: “I would like to take this opportunity to thank Grant for his commitment, expertise and energy in evolving Neptune from what was initially a buy-side and sell-side collaborative project five years ago, to what is now a successful company. Neptune Networks, who was incorporated three years ago, has shown continued growth and has become dynamic in the data and analytics space in the financial markets with a great deal of opportunities ahead of it.”
Malaria continued that Neptune will continue to work with Etrading Software as a technology provider.
Wilson said Neptune has $210bn (€190bn) in notional on the platform and 28 banks after adding more rates products, such as sovereigns, and munis and mortgages in the US.
“I will be leaving Neptune in a good place and am building out the strategy with the board for the new CEO,” added Wilson.
The Desk’s Trading Intentions Survey 2019 found that the most promising levels of engagement for the future are for Algomi and Neptune.
https://twitter.com/NeptuneFI_LDN/status/1148150409632079873
