UBS to outsource fixed income trading platform

UBS has struck two deals to outsource most of its fixed income trading platform in a radical step highlighting the scale of cost pressures in the investment banking sector.

The Swiss bank will replace its patchwork of multiple trading platforms with standardised solutions from technology groups Murex and Ion Trading, people close to the situation said.

Top-tier banks have long outsourced various smaller pieces of trading technology, but UBS's move is seen as the most drastic so far by a larger lender.

Analysts said it would enable UBS to reduce staff levels throughout its rates and credit trading business, and potentially allow the bank to strip out hundreds of millions in costs over a number of years.

UBS decided more than a year ago to pare back substantially its fixed income business. Apart from a continuing strong presence in foreign exchange and precious metals, the bank is concentrating on a much smaller, client-driven rates and credit business.

It has chosen Murex, the French trading software company, to take over large parts of its fixed income platform, including areas such as the booking of trades, their valuation and risk management, people close the situation said.

In addition, the bank has chosen Ion Trading to provide gateways to electronic exchanges and pricing tools.

Bankers said UBS's move underlined how investment banks were starting to tackle a bloated technology infrastructure that was built up during the boom years.

The market leaders spend several billion dollars a year on technology but are desperately looking for ways to cut costs as moves towards electronic trading and severely tighter regulations increase IT expenses.

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Larger banks retain technologies they have developed in house, and initiatives to share costs between rivals have failed.

Some second-tier investment banks have gone further recently, with France's Societe Generale outsourcing its post-trade processing to a partnership between Accenture and Broadridge.

Fixed income trading has been under particular pressure recently with tighter regulatory capital rules, a move towards lower-margin central clearing of derivatives and a severe slump in revenues in the second half of last year.

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