If you step onto a broking floor today, you’ll hear the familiar buzz of brokers advising clients and executing trades. However, behind their screens, the technology at brokers’ disposal is undergoing a quiet revolution.  

Communication, connectivity, and clients’ trust are the backbone of our business. We need to be agile enough to meet changing client demands for new products, tools, and services, and to adapt to regulatory changes. Our technology must empower us to meet these needs effectively and efficiently. 

Migrating to the cloud is a game-changer for interdealer brokers (IDBs) and OTC markets. It allows us to leverage the latest technological advancements, like AI and machine learning, to enhance trading efficiency and market insights. The cloud also offers scalable resources that can be adjusted based on demand, and better data storage, management, and analytics. 

Given these benefits, it’s almost a given that any interdealer broker with scale and ambition will migrate to the cloud. That’s why, last December, we accelerated our ‘all in on cloud’ strategy by signing a major collaboration with Amazon Web Services. By the end of 2026, TP ICAP’s IT workload on AWS Cloud will nearly double to more than 80%. 

How is technology changing the role of individual OTC brokers? 

The role of the modern-day broker is multi-faceted. From processing information feeds from multiple sources, to providing market colour, and executing complex orders, brokers must add value at every stage of the transaction life cycle to earn clients’ trust. Technology is a key enabler in this process. 

Platforms built on cloud technology allow us to automate various tasks and workflows. For instance, using AI to derive actionable insights from multiple data sources or automating the trade confirmation process. Essentially, technology provides brokers with the tools and time to better understand their clients’ needs and offer value-adding advisory. This ultimately helps deliver superior liquidity solutions.  

What are the strategic implications of cloud adoption for OTC brokers overall and their clients? 

Fundamentally, cloud adoption can transform the operational landscape for OTC brokers, enabling us to serve clients more effectively and efficiently. For example, our flagship digital platform, Fusion, is fully-cloud enabled, and our collaboration with AWS involves 45 highly skilled AWS engineers working alongside our technology teams to co-develop Fusion. 

By utilising data analytics and generative AI, we aim to enhance developers’ productivity, more than halve new product development times, and improve scalability. This means we can respond to brokers’ and clients’ needs more swiftly by rolling out new functionality onto Fusion faster. Strategically, this enhances seat value for brokers – they want to work with the best tech as it helps them to do more business – and it helps institutionalise client relationships, enhancing sustainable revenue growth. 

As markets and clients evolve, so do we. The cloud provides the technology infrastructure necessary to stay ahead, ensuring we continue to deliver superior liquidity solutions and brilliant client service. 

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Nicolas Breteau

A key element of the multifaceted agreement is the acceleration of the development of TP ICAP’s flagship digital platform, Fusion.

The cloud-based platform is designed to improve TP ICAP’s ability to serve clients throughout the transaction lifecycle.

The development will see 45 AWS professional services engineers working alongside TP ICAP’s technology teams to co-develop the Fusion platform.

With the use of data analytics and generative AI to enhance developers’ productivity, the two firms added that this agreement seeks to enhance new product development times, improve scalability, and increase TP ICAP’s IT workload on AWS Cloud to more than 80%.

Read more: In conversation with… AWS’s John Kain

“This strategic collaboration with AWS positions TP ICAP as a leader in digital transformation within our industry. We will be able to develop new functionality, faster, to enhance our electronic platform, Fusion,” said Nicolas Breteau, group CEO at TP ICAP.

“And by equipping our teams with AI expertise and tools, we will further strengthen our ability to develop new solutions, execute at scale, and better serve our clients.”

Read more: TP ICAP bolsters regional operations with new Dubai office

Elsewhere, AWS will help TP ICAP establish an AI and Innovation Lab to accelerate and scale AI-driven solutions.

This lab will complement TP ICAP’s existing projects to date, such as automating regulatory governance reviews with Amazon Bedrock and creating a chatbot to automate client engagement analysis and generate actionable insights.

“TP ICAP’s “All in on Cloud” strategy aims to migrate over 80% of its technology infrastructure to AWS by the end of 2026. This will reduce TP ICAP’s reliance on physical data centres and legacy systems, delivering millions in annual savings and cutting carbon emissions,” said Tanuja Randery, VP and managing director of AWS EMEA.  

“And with the establishment of its AI and Innovation Lab, TP ICAP is also investing in training, equipping its workforce with capabilities and skills in developing advanced AI-driven solutions.”

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The new office, which is three times larger than its existing facility, will bring the company closer to its clients, with the aim to better deliver services across the Middle East and North Africa (MENA) region.

The office is located in Central Park Towers and will act as a strategic hub for TP ICAP’s business operations across the region. In addition, the new location will bring together key brands under the Group umbrella, including ICAP, Tullett Prebon, PVM, Parameta Solutions, and COEX.

The expansion will enable clients to access TP ICAP’s market data and broking solutions, backed by a strong local presence.

The regional hub was developed to address UAE-based client needs and other key marketplaces in region, alongside being positioned to serve important Asian markets.

“At TP ICAP we put our clients first, being closer to them, understanding their needs and the landscape in which they operate, enables us to anticipate how we can best serve them in the future,” said Christophe Moser, managing director and head of Dubai.

“This expansion in the DIFC, one of the world’s premier and fastest growing financial hubs, underscores the Group’s vision of delivering industry-leading liquidity and data solutions, broadening its market reach in a pivotal and high-growth region.”

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As the introduction of digital assets become increasingly common, their influence on traditional finance is becoming more notable, blurring the line between two seemingly separate, and arguably parallel, financial instruments.

Think of exchanges that now have a digital asset offering, banking giants which have dedicated units and the wave of experienced personnel who have made the transition from traditional finance to this burgeoning sector.

From the rise of blockchain technology to the proliferation of tokenisation – as well as the increased, yet still debatable, acceptance of cryptocurrencies as ‘legitimate’ assets – the impact of digital assets is evident across several facets of the financial ecosystem. The industry can now differentiate between ‘crypto’ and ‘digital assets’, while the old ‘Wild West’ comparisons for the former have now been replaced with opinions of ‘bad actors, not bad assets’.

What doesn’t seem up for debate is the potential of blockchain and how tokenisation will shape the markets of the future.

“For us, blockchain really is an enabler – looking from an infrastructure, product and a client facing perspective – to make processes in the long run safer, more efficient, while also reducing costs and enabling us to create accessibility, especially for retail investors, to additional products which are not tradable or fungible today,” says Christoph Hock, head of tokenisation and digital assets at Union Investment.

Blockchain, at the highest level, is about providing additional transparency, and with that, the opportunity for composability and less need for reconciliation, argues David Newns, head of SIX Digital Exchange (SDX). However, Newns also highlights the importance of regulation to improve and ensure investor protection within this specific asset class.

“The role that institutions play in this space is to find ways to enhance investor safety. When it comes to crypto assets, the notion that you have regulated institutions which are transparent and compliant with regulations will mean you trust them as a counterparty to provide services,” asserts Newns.

“That gives you the confidence that your assets are safe and that your activities are being conducted in the most fair and equitable way possible.”

The importance of regulation

In addition to helping foster investor protection, regulation in digital assets can help ensure market integrity and promote stability in an increasingly digitised financial landscape. Without appropriate oversight, digital asset markets can be left susceptible to fraud, manipulation and other illicit activities.

Regulators can also help facilitate mainstream adoption by bridging the gap between traditional financial and digital assets, contributing to the long-term sustainability and legitimacy of the digital asset ecosystem.

“Our key focus, as of now, is on crypto securities and that’s where governance is clearly required,” emphasises Hock. “All the negative issues around crypto, like FTX and Bankman-Fried which came up in the past, are based on human fraud. It’s not malfunction of the blockchain but human misbehaviour, in combination with a lack of regulation, for example in the US. Therefore, governance is key to ensure that the trust our investors have in us as an asset manager can be fulfilled.”

Impacts on infrastructure

Market infrastructure is being reshaped by digital assets through the introduction of new methodologies for ownership, transferability and transparency. Unlike traditional financial assets, digital assets leverage blockchain technology, enabling peer-to-peer transactions without the need for intermediaries.

The continued evolution of digital assets is helping catalyse the transformation of market infrastructure, shaping a way for a more inclusive, efficient and resilient financial landscape. However, there are still limitations as to how much can be gained in terms of infrastructure in the traditional financial landscape – one being the cost of any change.

“Typically, trading a digital asset requires new functionality such as a digital custodian, new post-trade integrations and/or trading connectivity – anytime a traditional financial firm has to put something like that in place, there has to be a really strong commercial case for why they do that because it’s timely, costly and expensive,” explains Duncan Trenholme, global co-head of digital assets at TP ICAP.

“The reality is if you are going to bring liquidity in from the traditional markets then the new digital trading experience has to be dramatically efficient or cheaper for clients to change their infrastructure.”

With developments linked to blockchain and digital assets surging and subsequently presenting various use cases and areas of improvement for the traditional finance landscape, the phrase ‘don’t fix what isn’t broken’ comes into mind. Traditional financial markets have existed for much longer than digital assets and because of that, any major shifts should be carefully considered.

“Looking at the intersection between blockchain and traditional banking, traditional banking has so much efficiently already in it, despite what you might sometimes hear. It’s highly optimised, it’s very efficient, but there are areas that we can certainly bring significant benefits through blockchain technology,” highlights Newns.

“To get the fundamental benefits, it’s hard work and it’s all about building and getting all the various participants comfortable. In crypto you’re taking traditional structures and you’re trying to accommodate a new asset class into them. In tradfi, however, we’re trying to get an existing asset class and then bring it into a new technology, which can be difficult.”

Where parallels meet 

Traditional finance and digital assets typically operate as two parallel and distinct markets at present, but increasingly there is overlap between the two. Settlement, something that tends to be instant within digital assets – particularly when it comes to cryptocurrencies – is something we see influencing the traditional financial landscape.

However, there is still a lot of work to be done on either connecting the two systems or uplifting the traditional financial systems to be able to support digital assets.

“In traditional finance, we’ve moved to shorter and shorter settlement times. Within securities markets we are currently discussing how to move to T+1 settlement from T+2 and make sure we avoid trades failing at scale,” says Trenholme. “Within crypto they’ve started with the premise of moving collateral within minutes or hours. Crypto challenges the way that traditional markets operate and have grown to operate over the years.”

Looking at what can be learned from digital assets, legacy systems and the need for increased modernisation to bolster efficiency comes into play. Limitations linked to message-based architecture is something market participants are fully aware of, and something that the seemingly parallel nature of digital assets emphasises even more.

“You just can’t do the sort of composable transactions and achieve the reduction in requirement for reconciliation when you’re still sending messages from one platform to another platform. We’ve optimised, but at the same time are inherently constrained by the fact that it’s not instantaneous,” says Newns.

Cryptocurrencies, specifically, have been viewed as attractive due to their ability to be traded 24/7, including on weekends and holidays. Unlike traditional financial markets, such as the equities space, cryptocurrencies are not limited by set trading hours and can operate continuously. Given that they are decentralised and traded across a range of global exchanges, they allow participants to buy, sell and trade cryptocurrencies at any time.

Whether traditional finance will mirror the around-the-clock model is yet to be seen, with varying arguments on whether demand for it exists and whether or not the shift is even feasible.

“You do see some discourse in the news about clients wanting to shorten market hours in certain asset classes, so we should challenge the assumption that just because we can operate markets 24/7, as we see with crypto, that we should operate markets 24/7,” argues Trenholme.

“Ultimately, if you think about the notional of assets that have been tokenised today, it’s still a drop in the ocean compared to the size of traditional finance. As such, it is easy to have a certain scepticism about how meaningful and relevant this could be if you are sat within a traditional business. There’s a lot of promise, and the technology could improve the market considerably, but it hasn’t reached a scale yet where it’s forced clients to alter the way that they trade. That tipping point has not yet been reached.”

Moving forward

Despite the current operation of digital assets and traditional finance as two separate parallels, digital assets’ influence is evident in the increasing integration of blockchain technology into financial infrastructure.

Institutions are exploring tokenisation of assets, converting traditional assets into digital tokens to enhance liquidity and improve accessibility. 

Hock tells The TRADE that Union Investment are one of the first asset managers in this area combining the traditional asset world with the tokenised world.

“For us, our view is that within three to five years of tokenisation of assets – not only of traditional assets but also of products which are not tradeable and are not fungible today – this will become a new normal. Important to highlight that we are not only talking about assets on chain, but also cash on chain, i.e. e-money. This consideration will be most powerful.

“Looking five years down the road, I’m sure tokenisation will become a key topic here for the entire ecosystem and has the potential to be a disruptor and a game changer for the financial industry.”

Digital assets are here to stay and their influence on traditional finance is undeniable. Although still a small fraction of the entire financial ecosystem, it’s clear that digital assets, the innovation linked with them, and the lessons learned from the asset class are influencing the way in which future developments within traditional will be approached.

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The integration will provide FalconX access to competitive pricing and liquidity from TP ICAP’s wholesale clients.

FalconX’s institutional crypto native franchise and institutional-grade custodial capabilities provided by Fidelity Digital AssetsSM will also combine with TP ICAP through the integration.

“Collaborating with Fusion Digital Assets is another significant step in our ongoing efforts to bridge traditional financial markets and the growing crypto asset ecosystem,” said Austin Reid, global head of revenue and business at FalconX.

“This will enhance liquidity for our clients and foster an environment that propels growth and innovation in the digital asset industry. It underscores our commitment to providing secure, efficient, and seamless access to the global digital asset market for our clients.”

This integration will help bridge together the native crypto asset ecosystem and traditional financial markets, enabling improved transactions and accelerating growth in the digital asset industry.

“Bringing a player of FalconX’s pedigree onto Fusion Digital Assets is another step forward in the growth of our exchange,” said Tom Flanagan, global head of execution and liquidity management at TP ICAP Digital Assets.

“Our aim is to offer clients a unique liquidity experience in a secure environment. FalconX’s integration and support of Fusion Digital Assets advances our aim. We look forward to extending our diversified liquidity to FalconX and their franchise.”

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Previously, he also served as global head of institutional sales at TP ICAP, and before that worked as head of sales EMEA and Asia Pacific at BGC Partners for two years.

Earlier in his career, Hinxman has also held senior positions a CME Group before departing in 2015, most recently working as head of sales and commercial development for CME Europe.

His experience also encompasses hedge fund related roles, including futures and options trading and work on a fixed income desk.

Read more: TRADE Tales: From battlegrounds to the trading desk

Last September, another individual from TP ICAP, Frédéric Benizri, announced his departure. He joined financing, investment and risk management business CIC Market Solutions as a sales trader.

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We expect 2024 to see the wholesale cryptoasset market professionalise and become increasingly serviced by traditional brands and providers. Spot exchange operating models will continue to unbundle, with the separation of execution and custody becoming the default for institutional market participants; this unbundling will protect investors. We expect a continued shift of trading activity to more traditional, regulated exchanges and venues.  

In November, CME overtook Binance as the leading exchange from an open interest perspective on the bitcoin futures contract. We believe that will be seen as watershed moment for the broader crypto derivatives market. Overall spot volumes, once dominated by offshore exchanges, will begin to migrate toward more regulated providers. Tokenisation has been a key narrative over the last 12 months, and we expect more of the same from banks in 2024. On chain cash, specifically stablecoins will be increasingly recognised as one of the most important use cases for crypto. Despite the performance of bellwether asset bitcoin, crypto as an asset class has remained muted throughout 2023. With the ongoing professionalisation of the industry, alongside the likely approval of spot-based Bitcoin and Ether ETFs in the US, we believe 2024 could be defined by a significant shift in overall sentiment.  

James Butterfill, head of research, CoinShares 

Next year is shaping up to be a pivotal one for digital assets, with several key developments on the horizon. A major highlight is the anticipated launch of spot-based Bitcoin ETFs in the US, a process that has been in the making for nearly a decade since the first application was submitted to the SEC. This launch, coupled with the SEC’s explicit approval, is set to unlock market access for numerous investors, marking a significant milestone in the acceptance of digital assets. While it’s challenging to predict the exact scale of investment inflow post-launch, even a conservative estimate of 10% of the current assets under management (around US$3 billion) could potentially elevate Bitcoin prices to around US$60,000. 
 
Additionally, 2024 will witness a halving in Bitcoin’s supply, reducing the daily production from 900 to 450 bitcoins. This supply cut has historically supported price increases. Monetary policy remains a crucial factor influencing Bitcoin’s valuation. The bursting of the digital asset bubble can be attributed in part to shifting investor preferences towards more attractive stores of value like treasuries, as interest rates rise. While we anticipate interest rate cuts in both the US and Europe in 2024, it’s important to note that prolonged higher rates could temper potential price gains in Bitcoin. 
 
Lastly, the increasing correlation between bonds and equities, now at a record high of 42% excluding the Covid period, is prompting a search for effective diversification among investors. In this context, Bitcoin has proven to offer significantly greater diversification compared to other asset classes. The growing recognition of this fact among investors could further influence Bitcoin’s adoption and valuation in the coming year. 

Rob Wing, head of digital assets, 4OTC 

The adoption of digital assets trading by institutions will continue in 2024. Institutional investors are increasingly diversifying their portfolios with a range of crypto assets, including Bitcoin, Ethereum, and other more established cryptocurrencies. In addition, the SEC is expected to approve a batch of Bitcoin ETFs in January, which will make it significantly easier for large pools of institutional capital to be deployed, pushing Bitcoin prices higher (with some predicting a new all-time high). 

The market will continue to be highly fragmented, which drives the need for institutional-grade infrastructure in the form of robust and low latency connectivity. In addition, crypto exchanges will embrace the separation of custody and execution, with pre-trade inventory and credit checks becoming standard amongst institutional players.  

In FX, the velocity of trading is likely to increase, driven by quantum computing applications which will enable more algorithmic trading, supporting complex calculations at unprecedented speeds. Reduced market data price feed intervals on firm venues will reduce hold times further for FX liquidity providers, leading to a rise in firm pricing, which will overtake last look liquidity provision by volume within 18 months. In addition, with an increased focus on post trade due to T+1 FX settlement, clients will look to diversify risk, increasing the number of their prime broker relationships. 

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His most recent role at the inter-dealer broker was as a cross asset sales trader, having spent seven years with the business.

Benizri also previously worked in convertible bonds and equity derivatives flow sales at Citi for three and a half years, at the time based out of London.

Prior to that, Paris-based Benizri worked for UBS, in a structured products sales role.

Earlier this year, The TRADE revealed that TP ICAP Midcap and Liquidnet had partnered to improve block liquidity in the European small and mid-cap equities space through their combined networks and technology.

Around the same time, TP ICAP picked up a minority stake in real-time data sharing and workflow platform, ipushpull as part of a Series A funding round.

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TP ICAP’s data and analytics division, Parameta Solutions, has launched a new family of interest rate volatility (IRSV) indices in a bid to provide robust and transparent daily indices in interest rates swap markets.

Anand Venkataraman, head of benchmark and indices product management at Parameta Solutions, explained that as IRSV indices are built on a theoretical foundation when measuring interest rate swap volatility, it allows for a model-free measure of spot implied volatility for market participants.

Venkataraman added: “Predictive power of model-free implied volatility estimates have been shown to have superior predictive power over other commonly used volatility forecasting measures. Such an approach to create IRSV indices will be able to assist market participants with accurate interest rate volatility measures, both when making investment decisions and when measuring investment risks.”

In practice, the indices are set to be powered by ICAP data and analytics – which includes a range of interest rate products, such as exotic options and short and long-term interest rate swaps.

Parameta Solutions will administer, calculate and disseminate the IRSV indices. According to the business, “IRSV indices provide market participants with a forward-looking implied volatility measure for some of the most liquid option expiry, swap tenor combinations in the EUR and GBP interest rate swap markets”.

The firm provides users with pre- and post-trade analytics, as well as unbiased OTC content and proprietary data, price discovery insights, and risk management services. Its offering also includes benchmark and indices, and the business was recently recognised as an EU benchmark administrator by ESMA.
 
The post-trade offering helps users control their counterparty and regulatory risks. The tools manage balance-sheet exposure and also provide compression and optimisation services.

Will Ferguson, senior managing director ICAP G10 Rates, said: “Central Banks hiking policy rates rapidly from near zero levels to combat rising inflation, and uncertainty driven by other regional events has created opportunity and volume in our interest rates business. A partnership with Parameta Solutions to develop innovative solutions like the IRSV indices will facilitate new liquidity opportunities and help us enhance our leadership position.”

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Panellists shared their insights as to what more needs to be done for digital assets to experience mass adoption for institutional investors.

 “As an industry it always makes sense to take stock of where we’ve come from and have a think about where we’re heading,” said Simon Forster, global co-head of digital assets at TP ICAP.

“2022 will be seen as a watershed moment for the crypto asset industry and I think you see two very different tails on either side of 2022. The industry was predominantly retail driven, it was speculative that the number would go up and there were hundreds of vertically integrated exchanges, often operating in unfamiliar jurisdictions or lightly regulated jurisdictions. If you fast forward to 2023 and where we are today, you see much more meaningful activity from the buy-side.

“Whether you’re an asset allocator or whether you think about portfolio construction, Bitcoin has been one of the best performing assets over the last few years and it’s part of the conversation for the buy-side.”

Appropriate regulation has been suggested as one of the important developments necessary to help with the adoption of digital assets at an institutional level.

“In Switzerland we have a regulatory framework to help us classify tokens,” said Valerie Noel, head of trading at Syz Group. “From the trading point of view, we have seen some issues with accessing liquidity because you need to go to crypto brokers and for us it was quite difficult to find regulated crypto brokers. We are a regulated bank, so we need to trade with regulated parties and then to find firms that are able to aggregate all this liquidity.

“In the future we need people who can provide infrastructure to put all this liquidity together to have better access for the buy-side. We really need this traditional finance, this liquidity aggregation, for mass adoption.”

Claire Bridel, chief operating officer at Liquidnet noted that the crypto industry has been seen as parallel to the financial world, with standards below those of traditional finance. “As market participants, those standards need to align to those of the traditional markets to see greater adoption,” she suggested.

Panellists also discussed the importance of utilising existing workflows and processes to aid the adoption of digital assets by institutions; arguing that it is impractical to try and reinvent methods in order to cater to this relatively new asset class.

“Crypto is a reasonably insignificant asset class at the moment in terms of size; we think it has the potential to become much more significant, but we also think it’s very unlikely that big buy-side and institutional clients are going to change those workflows that they have established for traditional markets – equities and fixed income as an example. From our perspective, that execution component which is very mature and very well understood will not change,” Foster added.

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