This may be a poorly timed post since the Tabb Forum’s annual fixed-income conference is tomorrow, I’m pretty bearish on meaningful changes in corporate-bond market these days.

There’s been a lot of activity in the electronic-trading space for fixed income over the past year as agency brokerage ITG and Tradeweb launch their respective trading platforms for corporate bonds to compete against MarketAxess’s all-to-all trading model.

Even this week, we saw Lime Brokerage co-founder and former-CEO Alistair Brown announce the February launch of the first phase of OpenBondX, a new electronic fixed-income trading venue.

All of this activity and innovation is reminiscent of all the ECNs that sprung up after the US Securities and Exchange Commission (SEC) changed the order-handling rules in the 1990s and swap-execution -facility(SEF) explosion when the SEC and US Commodity Future Trading Commission (CFTC) began writing the new rules for over-the-counter (OTC) swaps trading mandated by Dodd-Frank.

BlackRock only added gasoline to this fire when it published its white paper calling for a reform of the corporate-bond market’s market structure in September 2014 asking for new and innovative trading models for the market.

However, maybe the buy side should start looking for change internally and not externally.

 

Read the rest of this entry »

Tags: , ,

The industry might have rung out 2014 discussing the “grand compromise” on the US equity market structure led by the Intercontinental Exchange that would lower access fees in exchange for a trade-at rule, but BATS Global Trading wasted no time in the new to offers its market-structure alternative.

In an open letter to the industry, exchange CEO Joe Ratterman and president Chris Concannon argue against the compromise as a bad deal for investors despite it being a win-win for exchange operators and broker-dealers.

“[I]nvestors will likely pay more both in the form of potentially wider spreads as well as fewer and inferior execution choices resulting from restrictions on competition,” they wrote.

The pair suggests that exchanges should determine their access fees, and associated rebates, using a tiered price model based on an issue’s liquidity. For example, the most liquid stocks could have a five cent per 100 share, or $0.0005 per share, and more illiquid a stock is, greater its access fee.

They also recommend that alternative trading system (ATS) operators be required to disclose the operation rules of their platforms, descriptions of available order types, transparent eligibility guidelines, participant pricing tiers, order routing logic, and eligible routing destinations as well as expanding Rule 605 and 606 reports to include execution quality on a dealer-by-dealer basis.

None of these ideas are a real departure from the industry’s ongoing market-transparency and market-structure conversations.

Read the rest of this entry »

Tags: ,

The era of good feelings definitely is over for the over-the-counter (OTC) derivatives market judging by the tone of the conversations at yesterday’s SEFCON V.

“It’s to be expected,” said  a beaming Chris Ferreri, chairman of the Wholesale Brokers’ Association Americas (WBAA) and who hosted the event. “Last year, we all were trying to accomplish the same thing. But with ‘made available to trade’ in place, we are all competitors now. Isn’t great?”

The zingers flew wild and free during the conference’s first panel on what the industry has learned over the first year of swap execution facility (SEF) trading.

Representatives from Bloomberg, Credit Suisse, the DTCC’s Data Repository, Thomson Reuters,  tpSEF and UBS shared some rather candid thoughts and information during the verbal free for all.

Although the UBS offers a SEF aggregation service, it currently does not connect to Bloomberg SEF or tpSEF.

And when it comes to differentiating the SEFs that have sizable liquidity, it is all about the bells and whistles that they offer, according to Bloomberg’s Nathan Jenner and Thomson Reuters’ Jodi Burns.

However, the SEF operators might want to cool their technology pitch to swap dealers and institutional investors, suggested PIMCO’s Ric Okun, who spoke on a later SEF-technology panel.

Read the rest of this entry »

Tags: , , ,

This might be heresy for a financial technology blog, but is technology driving business growth in the capital markets?

I ask this because I had an organizational call for a panel discussion I’m moderating during Linedata Exchange New York on October 7 this morning.

The panel,  entitled “Truth or Myth? What Drivers Really Play a Role in Growing the Business Today?”, promises to be an interesting conversation with Jeff Scannell, vice president of trading technology at State Street Global Markets; Ryan Bateman, director of technology at Sands Capital Management; Jonathan Wang, head of business development at TPG-Axon Capital;  and Dushyant Shahrawat, research director at CEB TowerGroup.

It was relatively easy to cover the capital markets from a technological perspective before the 2008 financial crisis. Reporters only had to ask technologists how the specific investment would generate more money for the firm or how would it save the firm money, which could be used to make more money.

After 2008, Dodd-Frank, EMIR and Basel III, reporters started to add a third uncomfortable question: “How will this investment keep the company from being fined by regulators and appearing on the evening news?”

Over the past six years, I have not heard many technologists discuss how IT investments drive business growth. Instead, they have returned to the bearish mantra of doing more with less while throwing available resources at the middle and back offices.

It’s no longer a matter of capturing alpha, but controlling costs and improving internal efficiencies. Hence, why hosted-platforms, outsourcing, cloud computing and their management are the topics of the day.

Looking at my inbox, emails pitching trade reporting, margin management and risk analytics outnumber trade-execution pitches on  low-latency messaging, trading algorithms or smart order routing, at least six or seven to one.

Until some level of volatility comes back to the markets, most firms are left treading water and updating their middle and back offices and it will not change until the US Federal Reserve and the other central banks take their feet off the interest-rate brakes. Then we will see the pendulum swing back to greater investments in the front office.

Am I wrong?

Let me know.

Tags: , , ,

The global frontier markets are mature enough to give the emerging markets a run for their money, according to Aite Group’s Danielle Tierney and Gabriel Wang.

The industry analyst firm recently published a research note, Frontier Markets: Emerging World: Exploring the New Frontier,  in which the authors examine the macroeconomic and fundamentals of 65 frontier markets and found reasonable valuations, low volatility and low correlation between developed and emerging markets.

Usually I am not interested in the straight economic research, but the authors tossed in chart showing that roughly a third of the frontier markets had deployed Nasdaq OMX’s X-stream multi-asset trading platform since 2008.

I’m sure other exchange technology providers like Deutsche Bourse, London Stock Exchange and the New York Stock Exchange had similar wins over the same period, but since I’m not paid for writing this blog let us just take it as a given.

That is about time I started to notice that a rash of press release announcing the various contact wins. It came after assigning one of my favorite stories about the Iraq Stock Exchange’s paper-based trading and had a T+30 settlement cycle (circa 2006) and the post-Regulation NMS exchange consolidation.

As these markets continue to invest in electronic trading, the more efficient they should become.

However, I doubt that it will become much easier for foreign investors to trade directly in the markets due to the standard local market regulations and currency control issues.

Tags: , ,

« Older entries § Newer entries »