While big-dealer dominance used to come from their large balance sheets, which allowed them to take principal risk, their dominance now is based much more on the network of clients they’ve created over time, and their ability to connect opposing interests among them. In other words, they know where the bonds are buried.

The Federal Reserve saved the corporate bond market after if froze last year. Now regulators want Wall Street to pay the price of that rescue, and the industry is already pushing back. 

The Fed, of course, had long since joined the Bank of Japan down the quantitative easing rabbit hole. That was in the aftermath of the 2008 global crisis, seven years after the BOJ pioneered QE. Last week, though, came the admission from Powell many of us knew was inevitable: America is officially trapped below zero with the BOJ, and indefinitely so.

“Between Gary Gensler and the existing commissioners’ backgrounds and the current market events, issues related to market structure and market integrity are going to be at the forefront of their minds,” Mirko said. “In terms of the application to the fixed income area, that is also where pre-trade transparency would have some interest.”

This article explains and analyses a crucial but understudied aspect of ETF arbitrage that distinguishes equity ETFs from bond ETFs: the nature of ETF baskets. Whereas for equity ETFs baskets are usually almost identical to holdings, for bond ETFs they are systematically different and include a small share of the bonds in the actual holdings, eg less than 3% for the largest bond ETF. For bond ETFs, baskets also change significantly from day to day and creation baskets tend to have longer duration and higher liquidity than redemption baskets.

“Buy-side traders are upping their game and behaving more like the sell side in that they are becoming increasingly price makers and not just price takers. As a result, they need more advanced and fit for purpose technology.”

US market regulator, the Securities and Exchange Commission (SEC), has reported buy-side firms feel pressured not to publicly speak out about the challenges of the new issue process for fear of seeing reduced allocations in the future.

The trend extends beyond just dollar volumes, though. These entrenched players are cementing their place in the global fixed-income markets with strategic acquisitions and advancements that make bond trading more streamlined.

NASDAQ agrees to sell its U.S. fixed income electronic trading platform, formerly known as eSpeed, to Tradeweb Markets for $190M in cash, adding to its wholesale U.S. Treasurys busines. 

While individual investors using Reddit’s WallStreetBets or other online forums still have little direct influence on the broader debt markets, speculative stock-buying can cause real ripple effects.