DCM bankers battle the rise of the machines
Primary debt capital markets have been remarkably slow to embrace technology. Vested interests are at play: lucrative underwriting fees will not be wrested from the banks without a fight. But automation is coming, partly driven by regulators looking into dysfunctional allocation.
|Illustration: David Manion|
"Bonds are sold, not bought.” This capital market folklore is the foundation upon which many lucrative debt franchises are built. It also wreathes primary market allocation in a mysterious alchemy.
Mark Bamford, head of leveraged finance and capital markets at GMP Securities in New York, made this point to Euromoney over lunch in New York in October as he explained why debt capital markets have lagged other markets in technical evolution.
Bamford was global head of fixed income syndicate at Barclays for 10 years until the UK bank folded its syndicate business into the banking division in February 2016 – he knows what he is talking about.
“The algorithm is in the head of the syndicate manager running the transaction,” he explains. “This will remain a human capital business. The job is to flatten demand curves in the corporate bond market in ways that an algorithm can’t.”
But today, with rapid technological innovation and regulatory change sweeping across the bond markets, banks worry that not even primary issuance can withstand the march of the robots.