Trends in Fixed Income Trading 2017


Part I: The Capability of e-Trading to Unlock New Liquidity

This report explores the ongoing structural shifts taking place in the corporate and government bonds markets. The report analyses how the historically central role of sellside broker-dealer balance sheets in the intermediation of liquidity flows is being eroded by regulation and is being replaced by new structures outside the confines of the investment bank balance sheet that are increasingly focused on directly incorporating pricing and liquidity depth produced directly by buyside firms. To understand this shift, the report lays out the regulatory and technological incentives driving these changes, as well as market participant responses to these e-trading drivers and changing market conditions.

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For example, the report notes that the sophistication of electronically traded bonds liquidity is increasing, and new non-bank liquidity providers are emerging within the dealer-to-client (D2C) and client-to-client (C2C) corporate credit trading venues launched between 2013 and 2015 in an effort to address the on-going liquidity drought. The report also explores how non-bank market-makers are increasingly providing fixed income liquidity to asset management and institutional investors in place of banks, particularly for G10 government bonds as well as for on-the-run investment grade and high-yield corporate credit liquidity.

As a result of these changes in the traditional structure of bonds liquidity consumption, the report analyses the ways in which sellside fixed income franchises are attempting to remain prominent intermediaries between their clients and potential counterparties in an environment in which regulatory pressure is sapping the ability of banks to utilise their balance sheets for risk warehousing and market-making purposes, even in non-block size issuances.

Published on: 10 Jul, 2017

Trends in Fixed Income Trading 2017 – Table of Contents

  • 1.0 Fixed Income Liquidity: No Longer Broker-Dealer-Centric
    • 1.1 Regulatory Incentives
    • 1.2 Fixed Income E-trading Technology Incentives
  • 2.0 How the Bonds Marketplace has Responded to E-trading Incentives
    • 2.1 The Buyside
    • 2.2 The Sellside
    • 2.3 Dealer-to-Client & Exchange Bonds Trading Venues
    • 2.4 Technology Vendors
  • 3.0 Fixed, Remixed
    • 3.1 Pack It & Ship It
    • 3.2 Group It & Move It
    • 3.3 A Bank-Generated Positive Externality?
  • 4.0 Appendices
    • 4.1 Glossary of Terms
    • 4.2 Table of Figures