Trends in Fixed Income Trading 2017

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.

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.