Fixed Income Electronic Trading 2013

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How Banks Can Prepare for Changes in the Market Structure

A new piece of research from GreySpark Partners examines the state of fixed income electronic trading for bonds, CDS and IRS. The report analyses how the traditional roles of investment banks and trading venues for these products are changing. These changes are being driven by a combination of macroeconomic forces and incoming capital markets regulations, bringing to an end the practice of debt warehousing by market-making dealers.

The report is one of four reports GreySpark are set to publish in 2013 that build on the success of the Trends in E-Commerce and Electronic Trading annual report.

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The global financial crisis has caused liquidity in the fixed income market to stall and fragment across a number of trading venues. New capital markets regulations are changing the fixed income market’s structure, forcing established trading venue operators to prepare for changes that will incentivise the emergence of new competitors.

The report finds that leading banks must adapt to this changing landscape by differentiating themselves from competitors and become specialist providers of liquidity in the fixed income markets. In order to achieve this, enhancements to existing sales and trading tools that emphasise cost-effective access to bonds liquidity and IRD liquidity as well as enhancements to various areas of post-trade functionality, must be made.

Achieving specialist status as a fixed income liquidity provider means banks must first understand how they are positioned in the market. To aid in this effort, the report creates a business and technology maturity model that banks can use to prepare for changes to the market structure for bonds and IRD dealing. This maturity model can be used to assess the adaptability of a bank’s fixed income dealing business and drive decisions in the development or adaption of technology solutions that will allow that business to grow in an increasingly competitive future landscape.

Published on: 17 May, 2013

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Fixed Income Electronic Trading 2013 – Table of Contents

  • 1.0 The Evolution of Debt Markets
    • 1.1. The Great Deleveraging
    • 1.2 Growth of IRS in EUR, USD and GBP
    • 1.3 The Search for an Efficient Market Structure
  • 2.0 The Fixed Income Markets in 2013
    • 2.1 Electronification of Bonds Trading
    • 2.2. Electronification of Swaps Trading
  • 3.0 Regulations Reshaping the Fixed Income Industry
    • 3.1. Basel III – Changing the Cost of Doing Business
    • 3.2. The Dodd-Frank Act – Electronic Execution of Swaps
    • 3.3. EMIR – Central Derivatives Clearing/MiFIR – Pre-Trade Transparency
  • 4.0 Transforming the Business Model
    • 4.1. Market Infrastructure and Trading Platform Operators
  • 5.0 The Platform Battleground
    • 5.1. Swaps Trading Platforms
  • 6.0 The Competitive Landscape
    • 6.1. Three Levels of Maturity to Benchmark the E-Trading Offering
    • 6.2. Factors for Differentiation
  • 7.0 Mapping Technology Choices into the Maturity Model
  • 8.0 Maturity in the Street
  • 9.0 Adapting to the Changing Market Structure