The Future of Electronic Trading in Corporate Bonds
25 September 2012:
Rick McVey, CEO of MarketAxess, says new issuance will only stave off liquidity problems in the corporate bond market for so long. Where will new liquidity come from? What type of trading platform will win out? Is the central limit order book model feasible? TABB's Will Rhode gets answers to these questions and more from this long time participant in the corporate bond market.
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3 Comments to "The Future of Electronic Trading in Corporate Bonds":
Anonymous
13 September 2012
What happened to the Exchange Trading Corp Bonds video?
Anonymous
13 September 2012
Maybe the fact only 18 out of 55k bonds trade both sides more than 10 times per day (on MA) says it all about an Exchange's effectiveness in the corp bond world.
Anonymous
28 September 2012
The underlying discussion around the corporate bond market is not whether electronic trading will take on a greater role (that is a certainty), but whether the structure of the market will change significantly to warrant to growth of a more complex execution services ecosystem. Firms like MarketAxess and Tradeweb are inherently tied to the maintenance of market structure, since their models are predominantly RFQ, and their market places are closed networks which rely heavily not only on their liquidity pools, but their point to point technology connectivity. Definitive catalysts, such as regulation, may completely alter market structure and give rise to the need for more diverse forms of risk transference mechanisms...this is the singular point where some market visionaries lose their way, believing that electronifcation, or more specifically the promotion of a particular trading protocol, will lead to market structure change. In fact, it is market structure change that leads to the development of trading protocols appropriate for that change. Large, incumbent ENCs have invested tens of millions of dollars building plumbing that specifically serves the voice-mimiced RFQ model...getting away from this model will take a Herculean effort and further investment of both time and money. Even retail ECNs, who purport to have live prices, in fact publish "live quotes", prices that maintain some aspect of a last look to the liquidity provider quality. The easiest answer undoubtedly lies in the matching engine, anonymous model, but neither the product of the market place demographic are conducive to an exchange-like model. The answer will not be binary, which is why firms like GS and MS are pursuing other types of facilities in an effort to test the waters...doing is achieving, while debating is promoting the same status quo mired environment that has precipitated the markets for the past 12 years.