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Industry roundup: 14 July

US investors embrace new corporate bond trading protocols

Although Europe has long led the U.S. in terms of its share of corporate bond trading volumes executed electronically, e-trading is growing at a much faster rate in the US, according to a new report from Coalition Greenwich. In 2020, European market participants executed nearly half (47%) of corporate bond trading on electronic systems. That topped the 31% of US investment-grade corporate bond trading volume and 21% of high-yield volume executed electronically. However, new data from Coalition Greenwich shows that e-trading is growing at a faster rate in the US. From 2017 to 2020, US investment-grade and high-yield bond e-trading grew by 111% and 145%, respectively, compared to 61% growth in Europe.

"The US is outpacing Europe in growth because US traders have been more willing to try new ideas like anonymous RFQs [request for quotes] and all-to-all trading," said Kevin McPartland, head of Research in the Coalition Greenwich Market Structure and Technology group and author of European Bond Trading Innovation.

In the US, anonymous RFQs and all-to-all trading now account for nearly half of platform-traded volume. Most trading in Europe, on the other hand, is via traditional RFQs to five dealers. Case in point, 64% of the European corporate bond investors that participated in the Coalition Greenwich study said they use an RFQ to five dealers or fewer, compared to only 29% using an anonymous RFQ, with not much change expected in the next two years.

Over the long term, however, Coalition Greenwich expects European trading practices to evolve, and the data shows change is already underway. Real-time evaluated bond prices and available post-trade data have improved, use of all-to-all trading mechanisms is starting to increase by both dealers and the buy side, and automation of the trading process from pre- to post-trade is starting to take hold.

"Changes in market behaviour will come only when traders see new tools improving execution quality, as old habits die hard," McPartland added. "However, with increasing evidence that protocol choice is key to market liquidity, we expect market participants in all regions to transition to the trading strategies, investing strategies and securities profiles that most reliably achieve best execution."


CIBC and Microsoft partner to accelerate the bank's modernisation and cloud-first approach

CIBC and Microsoft have announced a strategic relationship through a multi-year agreement formalising Microsoft Azure as CIBC's primary cloud platform. CIBC's cloud-first approach will be enabled by Microsoft Azure's on-demand computing power, enabling it to scale and modernise its banking platforms, while building in additional resiliency, efficiency and agility.  

"We're building and investing in leading-edge technology to accelerate our bank's transformation - our investment in cloud technology is a cornerstone of these efforts," said Christina Kramer, senior executive vice-president and group head, Technology, Infrastructure and Innovation at CIBC. "With Microsoft's Azure platform, we will be better positioned to help clients achieve their ambitions, through client-facing services such as digital banking and global remittances, as well as furthering innovative work in areas such as AI and machine learning."

Microsoft Azure will help to enable CIBC to support faster, real-time, data-driven decisions, to quickly launch and scale new innovations for an enhanced client experience. In addition to its software-as-a-service (SaaS) and private cloud strategies, CIBC's investment in public cloud technology will also reinforce and expand its critical foundations in data protection and security.

CIBC and Microsoft have a longstanding relationship and this agreement is one way the bank is continuing to execute on its client-focused strategy, using technology and innovation to deliver growth. This agreement builds on a successful collaboration between the two organizations with cloud, enterprise software, and enabling CIBC's workforce with Office 365.

Microsoft Teams served as a platform to leverage advanced AI cloud technologies. CIBC's internal FX Virtual Agent was rolled out nationwide within Teams to help manage the demand of clients' trading requests. Integrated to core banking systems, the FX Virtual Agent is capable of managing a wide range of transactions in seconds, drastically reducing call handling time, while maintaining accuracy. The new strategic relationship announced should further enhance CIBC's capability to deliver more for clients in a rapidly changing global marketplace.


Banks from across the world launch carbon offset platform 

As part of an international joint effort, CIBC, Itaú Unibanco, National Australia Bank and NatWest Group have announced Project Carbon, a Voluntary Carbon Marketplace pilot.

Corporations worldwide are using carbon offsets as a tool to implement their climate action strategies.  Project Carbon aims to support a thriving global marketplace for quality carbon offsets with clear and consistent pricing and standards and will provide a valuable pathway for our clients in their efforts to achieve a net zero goal.

The project aims to facilitate increased delivery of high-quality carbon offset projects, a liquid carbon credit marketplace with price certainty and transparency, the creation of a strong ecosystem to support the offset market, and the development of tools to help clients manage climate risk.

In alignment with the leading Taskforce on Scaling Voluntary Carbon Markets (TSVCM), established by Mark Carney, UN Special Envoy for Climate Action and Finance, the project helps remove current barriers to voluntary carbon offset purchasing. Project Carbon will initially be launched as a pilot in August to demonstrate the operational, legal and technical capability of the platform.


ZSuite Technologies launches digital escrow solution

ZSuite Technologies has launched ZEscrow, a completely digital commercial escrow solution. The solution is a responsive web app for digital commercial escrow and sub-accounting. It is available to a variety of entities and organisations that need a solution that is convenient, compliant and full featured. Implementation is simple, with a minimal need for resources, and the product includes built-in configurations to facilitate compliance with regional and local laws. ZEscrow is secure and provides support for all users, including transaction processing, ID verification, staff training, marketing resources and dedicated support representatives for every institution.

"Financial institutions that manage escrow and other sub-accounts face a number of complications when holding these funds for their clients," said Nathan Baumeister, CEO of ZSuite. "Conventional escrow and sub-accounting processes are manual and extremely resource-intensive for everyone involved. The businesses world desperately needed a digital solution - so we built one."

With community financial institutions in mind, ZSuite developed ZEscrow with a team of five banks: Bank of New Hampshire, Haven Savings Bank, Kearny Bank, Leader Bank and Patriot Bank.

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