The Markets ConversatION Podcast

EMS and how to better serve the fixed income market

November 22, 2022 | Duration: 16 minutes

Speaker: Celina Costa


In this episode we take a deep dive at how Execution Management Systems, or EMS, are adapting to meet the evolving demands of their users, and we discuss EMS challenges and trends in the Fixed Income space.

To help us understand all about EMS and its impact in the industry, our guest is Celina Costa from ION’s Fixed Income Product Management Team.


Ali Curi: Markets Conversation is a new ION podcast where we discuss topics of importance to capital markets participants with product owners, subject matter experts, and industry leaders.

Celina Costa: Take risks while you can, while you’re young, and you can afford it. And I don’t mean just financially, but just also having the time and energy to build yourself back up if things don’t go well.

Ali Curi: Hi everyone, and welcome to Markets Conversation. I’m Ali Curi. On today’s episode, we’ll take a deep dive at how execution management systems, or EMS, are adapting to meet the evolving demands of their users, and we’ll discuss EMS challenges and trends in the fixed income space. And to help us understand all about EMS and its impact in the industry is our guest, Celina Costa, from ION’s Fixed Income Product Management team. Let’s get started.

Celina Costa, welcome to the podcast.

Celina Costa: Hi Ali. Thank you for having me.

Ali Curi: So thank you for being here. Before we get to our conversation, let’s learn a little bit more about you. Have you been in FinTech your whole career?

Celina Costa: Not exactly. I started off my career working for an IT distributor, and that’s where I discovered my interest in combining technology and finance. So then I went on to work for a private oil and energy trading firm, where I was looking after their trading systems. And nine years ago, I joined ION in the fixed income division.

Ali Curi: So then tell us about your career at ION.

Celina Costa: I’ve always been quite keen on taking on new opportunities and permanently staying out of my comfort zone, hence being on this podcast. ION is a very innovative company and they encourage people to explore different aspects of the business. So when I joined ION back in 2013, I started off in Support learning about our products, our

clients, and the business. And then I moved on to Implementation, where I spent two years deploying a market-making solution for a bank across multiple occasions globally. And then I eventually found my calling in Product Management.

Ali Curi: Well, let’s start with the basics. Can you share with us a high level intro of EMS?

Celina Costa: I’m going to try and explain what an EMS is without listing out all the features, because that would make a very boring podcast. Imagine you’re a trader with six screens, managing hundreds of instruments, and the prices are ticking across the markets and your client comes to you asking for a price for a particular bond. It’s a pretty tough job, and this is where the EMS comes in because an EMS can aggregate liquidity across the different markets into a single view for the trader, and slice and dice that order for the trader and route it to the appropriate venue to trade out the best price.

Ali Curi: And just so we’re clear, we’re talking about an execution management system, an EMS.

Celina Costa: Correct. Yes.

Ali Curi: What would you consider to be one of the most added value features in an EMS?

Celina Costa: I would say real time market data. So the EMS has the capability to aggregate liquidity, which is fragmented across various trading venues and help the trader achieve best execution. So, you know, in practice, what does that mean? It means that as a trader, instead of having to look at individual market screens to try and find the bond that I’m interested in and try to find the price, the EMS can consolidate all the prices across all the markets into a single view to help the trader make trading decisions and service their clients.

So it’s very important that, you know, that data is then delivered to the trader in a consumable format and at the right place and at the right time to allow them to then focus on more value added activities instead.

Ali Curi: Well, that volume of data always sets us up for a lot of challenges. Let’s discuss some of the challenges in fixed income and in EMS. One issue that keeps coming up is how fragmented data is, especially in FI markets, fixed income, because it doesn’t have a standardized method of data

consolidation. Right. So let’s start with unpacking that first, and can you share other challenges that affect EMS?

Celina Costa: I think data fragmentation is very tightly coupled with market and liquidity fragmentation. So if you look at fixed income, you know, within fixed income, we don’t have a single concentrated source of liquidity. It’s pretty much fragmented across the different trading venues.

So if you go from one market to another, you’ll find that the prices will vary across a given bond. And that doesn’t even include bilateral trading, where the trade is done often. And then, you know, you look at the rate of electronification within fixed income. You know, we have a much lower rate compared to other more liquid asset classes like FX and equity.

And that’s down to primarily market fragmentation, which is made worse by the sheer number of trading venues, protocols, and API. And this is where the EMS can come in and really add value because it can consolidate all that liquidity that’s fragmented across the trading venue or to execute orders on behalf of the traders to achieve that best execution.

Now if you look at the data side specifically, when MIFID II was introduced a few years ago, promoting transparency, we now have a wealth of data that is made available. But utilizing that data intelligently remains to be a challenge. So it’s not just the cost of the data, but it’s also the sourcing, sanitizing, normalizing, enriching, and contextualizing that data and making sure that that’s then packaged in a consumable format and delivered to the trader at the right place and at the right time in order to allow them to make trading decisions and service their clients. That remains to be a challenge.

And then you look at the credit markets, which is even more fragmented with limited transparency and liquidity. The sourcing of the data is even more painful. At ION we talk about equification quite a lot. And that’s where, you know, the fixed income market is trending towards equities. So we’re seeing traditional practices like the TCA and the tape coming into fixed income, but at least for the tape, we’re still at the early stages of defining what that looks like and how that’s going to be delivered to our clients in a meaningful way.

So I think the key takeaway here is having smart and clean data provided to the traders in a digestible format to allow them to make trading decisions and service their clients is key.

Ali Curi: So we talked about, you talked about data transparency. We can’t discuss much in the financial industry without bringing up regulations.

They’re always pros and cons to product regulations. And in the case of EMS, what are some hot regulatory issues we should be aware of?

Celina Costa: There is a topic that keeps surfacing in different forums recently, and that’s where the regulator is proposing to extend the definition of a trading venue to also include EMS amongst other areas.

The proposal, it’s so broad that they’ve had to also add in exemptions to exclude telephone services and chat systems. So what they’re saying is, you know, if a system or a platform matches the trading interest between a buyer and a seller, then it can be classified as a trading venue. Now an EMS provides connectivity to the market. It’s for price discovery. It’s effectively like a workflow orchestrator for orders to help traders manage their orders in a, you know, more intelligent and efficient way.

So just to give you one perspective about this topic, I attended a conference a few weeks ago and this exact topic came up and the guest speaker just turned around and said, it’s all a load of crap. And that was it. That’s all he had to say. And the moderator had to swiftly move on to the next topic.

Ali Curi: So did he elaborate on what he meant?

Celina Costa: No. All he said was “it’s a load of crap” and he just stopped dead. And there was probably like two minutes of awkward silence before the moderator moved on.

Advert: This episode is brought to you by ION. Whether you’re a small or global bond execution desk, or looking to automate hedging when dealing in bonds, ION solution for fixed income execution can transform your complexity into simplicity. To learn how fixed income EMS can simplify your fixed income execution business, visit us at or email us at [email protected].

Ali Curi: Let’s go back to regulations for a minute. Do you think any new regulations that affect EMS will affect its adoption? Does it stifle innovation? Sometimes regulations, well intended as they can be, tend to stifle innovation. What are your thoughts around that?

Celina Costa: Regulations are obviously very important within our business, but if it’s imposed too tightly, then it can hinder innovation and growth. But then if it’s implemented too loosely, then there could be consequences. Like, you know, our investors are not protected. And I think in this particular case, it’s probably the former. So if we were to impose this particular role onto the EMS, I think it could result in negative consequences.

You know, if we were to subject the EMS to expensive and complex regulations, then it may no longer be a viable option for smaller size investors, either because they can’t afford an EMS anymore or the additional, you know, operational and regulatory costs will be passed onto them one way or another. So, yes, so I think in this particular case it could hinder innovation and growth in the EMS space.

Ali Curi: Taking the position that regulations will actually encourage innovation, what are your thoughts around what’s next for EMS? What does the future of EMS look like?

Celina Costa: There’s always new players trying to come into the market, and when they do, they tend to bring new innovations with them to differentiate themselves from other players in EMS. So I think inevitably, you know, we will be seeing new innovations uncovering new areas of growth.

Now, if you think back to 30 years ago, traders are shouting across the pit to try and get a trade done. And then we went through a digitization phase where those workflows are more or less replaced by electronic systems and within, you know, within FinTech we’re always thriving for automation. And I think the extreme end of that would be 100% auto execution. I don’t think we’ll ever get there. I don’t think we necessarily would want to get there, but we’re certainly on the early stages of that journey.

And this is where the EMS, you know, comes in because I think we’re in the early stages of augmenting human instinct with data to then execute business logic. EMS can really add value into this because, as I mentioned earlier, it can, you know, use real-time market data to auto execute business logic. And we’re seeing that, with the market makers now, you know, in their own flavors, they’re adopting a more proactive approach in systematically capturing and enriching data and using that to then auto execute orders.

So I think the future of EMS is effectively plugging in smart and clean data into an algo engine. And then, you know, with the addition of having the traders’ input, you know, the parameters, and then have the orders auto executed.

Ali Curi: Are the innovations for EMS, including any AI in the near future, is that something that you’re seeing or maybe we could expect?

Celina Costa: I think we can certainly expect that, having AI and machine learning incorporated into the EMS. So, you know, as I mentioned, having the data plugged into the algorithm engine and then auto execute orders, you know, traders would rely on ML and AI in the future to do that. And in the future, you know, if we see that a trader will be able to input the parameters and tell the algo machine that, look, I want to get in or out of a position. These are my parameters. And then just let the machine to then decide what is the best level I can achieve that using the liquidity that’s available in the market.

Ali Curi: Ultimately, the goal would be to automate everything. Right? To be able to kind of take out the human error factor out of trading altogether. If a firm is evaluating an EMS for their execution desk, what are some key features that they should consider?

Celina Costa: So there are a lot of vendors out there in the EMS space, each offering their flavor of the EMS, targeting different users, businesses, and budgets. So it’s really dependent on your requirements and your resources. I think there are definitely a few key features that you should look into.

So the first one is probably, you know, how much investment the vendor is putting into their products. Especially, you know, we’ve just spoke about all these innovations that we can expect to happen in the EMS, in the space, in the near future. That’s one thing to consider.

And then whether you want the solution on-prem or hosted. So if I just give some examples: a smaller size investor with limited resources, but needing the full stack of pre-trade execution and post-trade capabilities, will probably want to consider an out-of-the-box solution that’s hosted. Whereas a bigger player with, say, bottomless resources would probably look for an EMS with an extendable framework that will allow their technologists to then build innovations on top of that EMS solution to meet the specific requirements, needs, and vision of their trading desk.

Ali Curi: Celina, let’s change topics for a minute. As a woman in FinTech, what advice do you have for other women either entering FinTech or thinking about switching careers into financial technology?

Celina Costa: I would say never underestimate your worth. Research shows that a woman is less likely to apply for a job unless they meet every single requirement that’s listed in the job spec. Whereas men are more likely to apply for that job even if they don’t tick all the boxes. But I think in most cases, employers are just listing desired features as opposed to mandatory experiences.

And you never know. You could be the perfect candidate, but you’re not going to find out unless you initiate that conversation. So my advice is, never sell yourself short. Apply for that job. Take that step and ask for that pay rise. And just remember, you know, people do say that if you want a job done, give it to a woman.

Ali Curi: That is a great take. What is some advice you wish you had heard earlier in your career?

Celina Costa: I would say take risks while you can, while you’re young, and you can afford it. And I don’t mean just financially, but just also having the time and energy to build yourself back up. If things don’t go well, don’t be swayed by fear and just, you know, make that decision and take that step and just follow your gut.

Ali Curi: I think that’s some great advice. Celina Costa, thank you so much for joining us today. It’s been such a pleasure having you on the podcast. I hope you can come back and visit us again.

Celina Costa: Thanks for having me, Ali.

Ali Curi: And that’s our episode for today. You can follow ION Markets on Twitter and LinkedIn. Thank you for joining us.

I’m Ali Curi. Until next time.