The fixed income market, like its cousins in equities and banking, has been one of the most avid adopters of technology over the last one hundred years. The most significant of which was probably the adoption of electronic trading platforms in the 1980s when automated computer servers gradually replaced physical trading floors and specialist software took over from manual processing of settlements. This turned mundane tasks into almost error-free, instantaneous and effortless clicks of keyboard buttons. The fast, easy dissemination of information on electronic platforms and portals brought with it an obvious benefit to the market – price discovery. Far more market participants were able to access market information, make trading decisions and execute them quickly. Coupled with reduced transaction costs this has vastly improved market efficiency and reduced mispricing. Risks are more appropriately priced, liquidity is enhanced and the general satisfaction of borrowers and lenders improved. The initial advent of electronic trading was in no doubt a major disruptor to the paper-based market before it, forever changing the way the market operates, for the better. Arguably, a second wave of technological disruption to the fixed income market began to emerge in the middle of the last decade. Automated high-frequency trading based on pre-set algorithms has led to larger trading volumes and faster reaction to price-sensitive news despite some inevitable controversies. New specialist fixed income funds entered the market, armed with sophisticated algorithms and super-fast data cables seeking to gain an advantage from fast technical pattern recognition and execution speed. Whilst some have argued that these high-frequency traders have caused unnecessary and in some cases severe market disturbances, these have mostly been short-lived. It is generally believed that automated trading systems add an extra layer of liquidity and price-discovery capabilities to the market, thus improving its overall efficiency to the benefit of every market participant. Perhaps the third, and latest potential disruption in the fixed income market comes from a more potent source – Artificial Intelligence-enabled “Fintech” firms. These promise to deliver superior sales, marketing and portfolio management services that offer bespoke, tailer-made solutions to meet client’s individual circumstances and goals, instead of the one-size-fits-all approach that has been the norm for almost as long as the market has existed. It is very likely that these innovations will further enhance competition in the fixed income market, force down transactional, management and other fees, improve client services and transparency, and challenge the way traditional fixed income research, trading, funds management and advisory businesses operate. Inevitably, there will be winners and losers, with the winners those that are more likely to embrace change and adapt, offering better services to clients. We are already seeing numerous Fintech firms mushroom in Asia, the US and locally in Australia, as investments into Fintech companies have skyrocketed in recent years (see Figure 1 below), and it probably won’t be long before some of them become household names. Figure 1. Total Global Investment in Fintech Companies Source: BondAdviser, KPMG