- Central limit order books are now the most commonly offered matching methodology for bonds e-trading.
- Buyside price-makers are now present on more than 75% of bonds e-trading venues.
- Venue operators are iterating on established matching methodologies and are developing new matching methodologies to overcome illiquidity in specific corners of the bonds market.
London – Sept. 1, 2017 – A new report by GreySpark Partners, a leading global capital markets consultancy, analyses an identifiable, ongoing shift in dealer-to-client interactions within the corporate and governments bonds markets away from traditional RFQ brokerage trading venues and onto exchange or exchange-like platforms. The report argues that – while this shift is taking place slowly – new platform and venue operators, as well as technology vendors, are nonetheless emerging in 2017 to offer alternatives across both segments of the secondary market.
The report, The Bonds Electronic Trading Landscape 2017, is the second part of this year’s Trends in Fixed Income Trading 2017 report; the first report of the two was published in July. Part 2 of the report undertakes both quantitative and qualitative analysis of bonds e-trading venues, as well as a number of liquidity aggregators that assist in accessing available liquidity.
Specifically, the report samples 30 venues for trading corporate bonds, government bonds or both corporate and government bonds to look at market structure, products for trade, matching methodologies and additional fixed income-related services offered on the venues. The analysis is performed both in aggregate for the sample as a whole and disaggregated by the type of venue operator, and the report found that there is a clear trend emerging within both segments of the secondary bonds market toward exchange or exchange-like, all-to-all trading models for both incumbent as well as new trading venue and platform operators that are attempting to overcome structural deficiencies within existing e-trading protocols, especially for illiquid issuances.
Russell Dinnage, managing consultant & head of the Capital Markets Intelligence practice, said: “The findings in this report make clear that bonds e-trading venues are taking buyside market participant concerns regarding finding liquidity in certain issuances into account. Consequently, venue operators increasingly offer a range of established and innovative matching methodologies to overcome liquidity fragmentation in the market.”
Willis Bruckermann, GreySpark analyst consultant and report co-author, added: “This report quantifies the extent to which venue operators currently accommodate buyside needs in the bonds markets in 2017. From the dataset analysed, it is also clear that the e-trading landscape is far from settled; quite the opposite, bonds e-trading is undergoing a fertile transitional period, providing space for new market entrants and significant innovation on the part of venue operators.”