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29 March 2016
BNY Mellon is expanding to support demand for fixed income trading in the Asia Pacific, say Howard Field and Paul Solway of BNY Mellon
Image: Shutterstock
This year marks the formal expansion of BNY Mellon鈥檚 global fixed income offering with the addition of dedicated agency trading capabilities out of Hong Kong. The bank is actively committing resources to this capability with a Hong Kong trading desk already in place and operational support scheduled to be rolled out throughout the remainder of 2016.
By the end of the year, BNY Mellon will have a fully functional front-to-back model and be able to trade, support and settle fixed income securities lending trades in the Asia Pacific region. Why venture into fixed income at a time when other institutions are pulling back?
The main reason is client focus鈥攕erving the needs of borrowers and beneficial owners. Fixed income securities play a significant role with today鈥檚 regulatory environment. Regulation is putting pressure on borrowers鈥� balance sheets, creating the need to trade up the credit curve鈥攆rom equities to fixed income and from fixed income into cash. Regulation is also requiring that collateral be posted against more types of transactions.
Therefore, both beneficial owners and borrowers can leverage our Hong Kong fixed income capabilities to source the required eligible collateral as they execute their investment strategies.
With our fixed income trading capabilities, borrowers can obtain in-time inventory offers and pricing and can borrow and execute the trade in region which helps create a more efficient and cost effective trading environment. For beneficial owners, more efficient trading can help increase volumes and drive more potential opportunities for enhancing revenue.
The Hong Kong desk鈥檚 ability to structure term trades, for example, either via bullet or extendable, also helps to enhance a beneficial owner鈥檚 fee earning potential. Borrowers and beneficial owners will now have local access to a global inventory, managed by trading desks operating from a unified technology infrastructure around the world.
Throughout the trading day, beginning in Asia and stretching across the globe to the Americas, our technology delivers information for our entire team to utilise in managing our lending book. Fixed income trading is certainly facing some headwinds in today鈥檚 economic environment, but it鈥檚 still a growing business in the Asia Pacific.
Borrowers in the Asia Pacific have since increased their demand for fixed income securities. At first, this demand was in the form of flow trading, the answering of day to day queries about bonds that the borrowers might need. Then demand moved on to more structured trading and eventually led to sizable financing deals.
How have our Asia Pacific borrowers and beneficial owners responded to our Hong Kong fixed income capability? The response has been positive. There has been a steady stream of trades and a growing book of business. Term trades are increasing in size and locking in revenues. The number of borrowers with which we trade locally in the Asia Pacific has also expanded. Overall, we can offer more assets in the region and the increase in balances and greater diversity of borrowers helps to create an even more robust agency lending programme for our clients.
By the end of the year, BNY Mellon will have a fully functional front-to-back model and be able to trade, support and settle fixed income securities lending trades in the Asia Pacific region. Why venture into fixed income at a time when other institutions are pulling back?
The main reason is client focus鈥攕erving the needs of borrowers and beneficial owners. Fixed income securities play a significant role with today鈥檚 regulatory environment. Regulation is putting pressure on borrowers鈥� balance sheets, creating the need to trade up the credit curve鈥攆rom equities to fixed income and from fixed income into cash. Regulation is also requiring that collateral be posted against more types of transactions.
Therefore, both beneficial owners and borrowers can leverage our Hong Kong fixed income capabilities to source the required eligible collateral as they execute their investment strategies.
With our fixed income trading capabilities, borrowers can obtain in-time inventory offers and pricing and can borrow and execute the trade in region which helps create a more efficient and cost effective trading environment. For beneficial owners, more efficient trading can help increase volumes and drive more potential opportunities for enhancing revenue.
The Hong Kong desk鈥檚 ability to structure term trades, for example, either via bullet or extendable, also helps to enhance a beneficial owner鈥檚 fee earning potential. Borrowers and beneficial owners will now have local access to a global inventory, managed by trading desks operating from a unified technology infrastructure around the world.
Throughout the trading day, beginning in Asia and stretching across the globe to the Americas, our technology delivers information for our entire team to utilise in managing our lending book. Fixed income trading is certainly facing some headwinds in today鈥檚 economic environment, but it鈥檚 still a growing business in the Asia Pacific.
Borrowers in the Asia Pacific have since increased their demand for fixed income securities. At first, this demand was in the form of flow trading, the answering of day to day queries about bonds that the borrowers might need. Then demand moved on to more structured trading and eventually led to sizable financing deals.
How have our Asia Pacific borrowers and beneficial owners responded to our Hong Kong fixed income capability? The response has been positive. There has been a steady stream of trades and a growing book of business. Term trades are increasing in size and locking in revenues. The number of borrowers with which we trade locally in the Asia Pacific has also expanded. Overall, we can offer more assets in the region and the increase in balances and greater diversity of borrowers helps to create an even more robust agency lending programme for our clients.
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