Why Centana Invested in Adroit

Co-Author: Marshall Cao

Why We Feel Now Is the Time for OTC Trading to Embrace the Digital Age

Over-The-Counter (OTC) instruments represent a vast and diverse trading universe — OTC derivatives alone have $715 trillion outstanding¹ and additionally fixed income trades $1.3 trillion daily². But across this product universe, liquidity and trade frequency for any particular asset are scarce. As a result, unlike the equities and futures markets, which have witnessed significant digitization in trade execution over the past few decades, fixed income and OTC derivatives have been laggards in electronification. Traders often find themselves caught between calls, emails, chat, and spreadsheets, trying to locate liquidity and execute transactions, resulting in significant inefficiency.

Today, 44% of buy-side fixed-income traders still rank chat or phone call as their primary interface of trading bonds³. Meanwhile, other issues, including post-Global Financial Crisis regulatory constraints that have exacerbated scarcity and distribution of liquidity, technological advances that have led to a bigger need for computing speed capacity, and regulatory reforms and reporting requirements designed to contain systemic risks have all created an environment ripe for electronic trading in OTC markets.

According to TradeNews⁴, the market has already seen increased adoption of electronic trading, up to 30-40% in 2022 from 15-20% in 2015, and expects it to further expand beyond 60-70% over the next decade driven by continued regulatory requirements, hunt for liquidity and asset managers and hedge funds search for efficiency and differentiation. This has created an opportunity and need for Execution Management Systems (EMS) to aggregate bond and derivatives liquidity and identify new opportunities with speed and efficiency, to the point where, according to a recent survey, 100% of fixed-income trading professionals see the need to take on an EMS³.

How Adroit is Defining the Market

A best-in class EMS built for bonds and OTC derivatives, Adroit provides end-to-end data and workflow automation for buy-side traders to find, aggregate, synthesize and execute on liquidity across all available channels. Adroit has integrated with dozens of upstream and downstream systems to facilitate desks’ full execution workflow, through pre-trade, execution, and post-trade processes. With Adroit, buy-side institutions can save on transactional, operational and opportunity costs.

Adroit was founded in 2016 and bootstrapped to profitability. The company boasts a robust customer base of the top asset managers and hedge funds in the U.S. and Europe. Adroit’s team has decades of experience as technologists and traders from leading capital market institutions, such as Bridgewater and J.P. Morgan, with a track record of solving the industry’s most challenging problems.

Centana’s Network Benefits

Centana has deep experience in capital markets technologies, including investments in Beacon, Quantitative Brokers, as well as a strong network of senior executives within the capital markets space. Centana leverages its strategic and advisory network, in addition to its experiences working with growth stage companies, to help its portfolio companies accelerate their growth. Tom Ascher, one of Centana’s Advisory Board members, a past Vice Chairman of the Board at CBOE, Chief Strategy Officer at the ISE and former Executive Chair at Quantitative Brokers, has been working closely with Centana and Adroit, and is now joining Adroit’s Board. We are excited about Tom’s continued involvement in Adroit, as the company is poised for exponential growth.

Looking Forward to a Digital Future

We are thrilled to work with Adroit, Anil Jaglan (CEO and Co-Founder), and the team to help asset managers and hedge funds to achieve better liquidity and more efficient trading. The Fixed Income & OTC industry is at an inflection point for trading technology adoption. With the addition of growth capital, Adroit can capitalize on the sector tailwind through continued R&D and product enhancement, further investments in go-to-market, and international expansion. We are excited for Adroit as the market leader and spearhead in creating a more automated Fixed Income / OTC market.

[1] As of June 2023, BIS. OTC derivatives statistics at end-June 2023

[2] US Fixed Income Securities Statistics. SIFMA

[3] Coalition Greenwich 2023: Fixed-Income EMSs: The Time is Now

[4] The TradeNews: Growth, automation and regulation – Why 2022 is a pivotal year for fixed income trading.