In 1996, the internet had yet to make significant inroads into financial markets. Trading floors were noisy, energetic places, where traders yelled into phones—and at each other—as they bought and sold securities. Lee Olesky, then at Credit Suisse First Boston, and his colleague Jim Toffey, recognized the potential of this new technology to transform the piece of the financial sector they knew best: the fixed-income market, where bonds and other debt securities are traded.
The company they founded, Tradeweb, became one of the first internet-based platforms for trading fixed-income securities. Fast forward 20-plus years, and Tradeweb averages $1 trillion in trading volume daily, serving banks, insurance companies, brokerage firms, pension funds, and other institutions globally.
“The theme throughout this has been to build new tools,” says Olesky, now Tradeweb’s chief executive officer. “The broad term is innovate, but it’s really down to finding ways of applying technology to the workflow and the trading process in fixed-income markets.”
Tradeweb’s success in developing innovative solutions for this growing corner of the financial sector is one reason the company has earned a spot on Fast Company’s list of the Best Workplaces for Innovators.
THE “SECRET SAUCE”
Trading fixed-income securities isn’t like trading stocks or other financial products. For one thing, products such as bonds change hands much less often, making it more difficult to determine their prices. Tradeweb knows this market and its unique challenges intimately. While one-third of its employees are technologists, many others are former traders and salespeople, and the company makes a point of collaborating with clients to solve problems—an approach Olesky calls the “secret sauce.”
This client-centric approach to innovation has produced numerous digital tools that open new doors for fixed-income trading. Ai-Price, for instance, addresses the challenges of pricing corporate bonds by leveraging machine learning and parsing data to put prices on more than 20,000 bonds. Likewise, trading electronically a portfolio consisting of a large quantity of bonds for a single price wasn’t realistic until Tradeweb’s engineers designed software to price many thousands of individual bonds and aggregate them for trades.
Another major innovation, Tradeweb’s Net Spotting tool, has brought an unprecedented level of efficiency to U.S. corporate bond trading. When trading these bonds, traders often hedge their interest rate risk with U.S. Treasury bonds—a practice called spotting. Spotting of numerous trades, however, can be cumbersome and costly. Tradeweb Net Spotting automates spotting and aggregates trades made throughout the day to determine the net hedging transactions, significantly reducing costs.
Tradeweb knows that its people are the key to innovations like these. Through programs designed to encourage creativity and growth, Tradeweb fosters a culture focused on collaborative innovation. Tradeweb University encourages employees to teach each other about their product offerings and departments. Another example, Tradeweb’s Achievers Program, identifies rising stars and focuses on their personal and professional growth. Initiatives like these, Olesky notes, will help Tradeweb continue redefining what’s possible at the intersection of technology and financial services. “One of the most critical things that I and all the leaders in the company do is try to attract and retain talent, especially people who want to design and build new things,” he says. “Being viewed as an innovator helps attract that kind of talent.”