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US Treasury Dealers Accused of Collusion By Big Investors – FT

Full Article: Financial Times

A group of 17 US public pension funds and insurers have filed a lawsuit in New York alleging that their access to some electronic trading venues in the world’s biggest government bond market was blocked by a group of banks.

Comments
  • Goose
    GooseNovember 17, 2017"I don’t have a law background, and my days being on a desk are a bit behind me, but my 2 cents. Auction Charge - It seems like a bit of time was spent talking about client auction information being shared internally across the treasury sales and trading desks. Maybe things have changed, but I don’t see how you could avoid overhearing market color on who is doing what across either desk, perhaps that’s just supporting fodder to show the dealer’s didn’t have any procedu…"
  • Wolfman
    WolfmanNovember 17, 2017"Regarding the auction complaint, the behavioral change raises a red flag. Regarding collusion, the structure of the bifurcated market arguably benefitted the buy side. Dealers regularly provided their clients with better liquidity at the moment than the dealers themselves enjoyed. They placed their capital at risk and delivered an immediacy of trade to their clients.…"
  • Viper
    ViperNovember 17, 2017"On the auction scandal. If there is actually collusion going on in chat messages then that is bad. It is what busts the dealers in every case even if the underlying act is benign. I used to always lose money bidding in auctions so I am struggling to even understand how this scheme would work. However, undoubtably, information is power and understanding where major customers are bidding would be extremely valuable. A lot of the data depends on post June 2015 observatio…"

Entire Ivy League Outpaces Harvard Endowment in Fiscal Year 2017 – The Harvard Crimson

Full Article: The Harvard Crimson

While most Ivy League endowments were able to capitalize on the bull market in fiscal year 2017, Harvard’s performance was weighed down by a series of high-value markdowns it took on some of its investments. The University’s financial report, released last week, detailed a nearly $10 billion markdown on domestic fixed-income assets, which include investments like treasury bonds, junk bonds, and corporate bonds.

Comments
  • Wolfman
    WolfmanNovember 3, 2017"First, kudos to the editor of the Friday Newsletter for nailing the image once again. I assume Billy Ray is on the Dartmouth site! While this article may not be typical of the newsletter, it does underscore the notion that we are in a bear market for bonds. These aren't like equities bears, but for the institutional investor or typical bond fund, they are nonetheless dangerous to yields. The Fed has said rates are going up, and for bond geeks, that means bond prices a…"

ICE to Buy Virtu’s Bondpoint for $400MM – The Trade 

Full Article: The Trade

ICE has agreed to buy Virtu Financial’s fixed income trading venue BondPoint in a deal worth $400 million. The purchase will enable ICE to bolster its fixed income capabilities within its data and technology structure as it continues to expand into the asset class.

Comments
  • Slider
    SliderOctober 28, 2017"While there are obviously a lot of smart people out there and it sounds like many of them were bidding for Knight Bondpoint, I don't understand how they get to that valuation. It seems people are using MKTX as the comparison but MKTX is in a unique position basically owning the NA credit space for over 10 years now watching TradeWeb and Bloomberg trip all over themselves multiple times in an effort to compete with them. To be fair, TradeWeb has done and awesome job in…"
  • Goose
    GooseOctober 27, 2017"The game continues to evolve. I thought it was pretty interesting that the announcement came right before the MKTX earnings announcement and call. It certainly created a diversion on the call, and generated some interesting question and response, you certainly wouldn’t have thought MKTX bid on them (unconfirmed press). From a structural perspective, KBP is the best credit ATS fit for an exchange. Minimal front end presence, lowest cost structure that is majority focus…"

What Renaissance Tech Has That You Don’t – Institutional Investor 

Quantitative hedge fund firm Renaissance Technologies, founded by mathematician James Simons, has had near real-time prices on corporate bonds and other debt for years. 

Comments
  • Wolfman
    WolfmanOctober 20, 2017"Pre-trade data can be invaluable, but it is not a substitute for finding the clearing price for the amount you need when you need it. The structure of the fixed income market isn't actually broken. We have near-zero volatility with historically low rates and capital restrictions creating this problem. While having more data always sounds like a solution, on its own it doesn't solve those issues.…"

Technology Spending Key to Fixed Income Market Share Growth – Traders 

Full Article: Traders Magazine

The top six U.S. government bond dealers have an aggregate annual technology budget of $26 billion. That astounding figure illustrates the extent to which technology prowess has become the key determinant of success or failure for banks competing in capital markets, reports Greenwich.

Comments
  • Slider
    SliderOctober 14, 2017"'Technology spend' would seem to cover a lot of things. If we look at from the FNL perspective on how FI technology is developing I think we can say that while progress has been made, most firms are still in shambles. It is different to build something that does something than to build something that people will use to do that something. The capital markets issues attempting to be addressed today are broad and varied, leading to huge internal spends and a plethora of…"
  • Cougar
    CougarOctober 14, 2017"That there is still a problem in fixed income that other asset classes overcame years or decades ago despite all the other asset class experts being parachuted in, as well as the significant spend, point to persisting problems - lack of information to deal (AKA 'price') decisively with confidence. These two issues are the inhibitors to market structure change: 1) the need to concentrate liquidity (rather than pretend to offer all-day liquidity) to allow traders to und…"
  • Jester
    JesterOctober 13, 2017"This article is an early Christmas gift to internal IT teams at banks, but it left me with a few questions. This "$26 billion" in proposed annual tech spending across the top six US government bond dealers, is that for just government bond trading or all products? I can't believe it is the former because there is just no way that government bond desks can sustain an average annual tech spend of ~$4 billion. Treasury market making never made that type of money and toda…"
  • Wolfman
    WolfmanOctober 13, 2017"$26,000,000,000.00 is a very big number, but the powers that be understand that this is a necessary spend. What this does, however, is identify a market for technology providers to attack. Talking on new IT development projects is a lengthy and expensive task and I think we'll see more and more third party solutions stepping into the fray. What's needed is a unique combination of technology knowledge and market knowledge which opens the door for start-ups, consultants…"

Bloomberg is fighting back against Symphony – Business Insider

Full Article: Business Insider

Bloomberg, the financial data giant, is offering customers of its signature terminal a way to use its chat function as a stand-alone feature for just $10 a month. The offering, first reported by the Financial Times, undercuts Symphony, a chat and data startup once touted as a “Bloomberg killer” because of its low-cost offering and backing from Wall Street’s biggest firms.

Comments
  • Iceman
    IcemanOctober 9, 2017"While I echo my learned colleagues views I would also add that if you look at Symphony's 'traction' in the financial markets it is not exactly far reaching.... how many companies are connected externally to chat with their clients? A stat I would love to see compared to BBG given the tag line and the amount of money and time invested in the system from the financial markets. On the plus side I do see the market changing and as Mustang pointed out a combination of Symp…"
  • Goose
    GooseOctober 6, 2017"Between overall cost cutting pressure and Symphony deals, the dealers have likely gotten rid of every single Bloomberg terminal that is not deemed essential. Maybe Bloomberg is betting on that fact, and sees this as a relatively cheap call to see if this offering can blunt Symphony by fill the needs of those not on it yet (am guessing there are a lot of firms of all shapes and sizes that aren’t), and connect back with users who didn’t deem the 22k bill essential. Now…"
  • Viper
    ViperOctober 5, 2017"I'm struggling to see the reason for this product’s existence. This does not help sales who only use IB to chat with clients. The IB-only Bloomberg product will only allow you to chat with internal employees. I hated having to fork over $2,000 per person for a Terminal, but there is no real option because their clients are all traders who need Terminals for other reasons. Switching to Symphony is a big effort for an organization and it has already been done by most of…"
  • Mustang
    MustangOctober 5, 2017"This is interesting on many fronts. Where to start? First, BBG is offering chat only for customers that have one BBG terminal at a $22k cost and for internal use only. This is competitively worse than Symphony, which has no restrictions and is both internal and external. I don’t see how a $10/month cost decrease offsets a competitively worse offering than Symphony. Price isn’t the issue and this doesn’t stave off Symphony at all. Instead, it gives Symphony a more valu…"

Most Bond Traders Don’t Like Their Jobs – Greenwich Associates 

Full Article: Greenwich Associates

Most respondents who were negative about the sell-side trading role were positive about other parts of financial services. Moving from the sell side to the buy side was mentioned more than once, as there is more opportunity for growth with less stringent regulations and a debatably steadier stream of recurring revenue based on assets rather than transactions.

Comments
  • Slider
    SliderSeptember 29, 2017"Jester, come on. Bond traders just might be in the second most overpaid job in the world, right behind bond salespeople. If they aren't happy, sure, go look for another career but the vast majority don't have a skill set easily transferable into the new world. Just look at what happens to older bond traders and salespeople that either didn't make enough or spent too much when they were in the same position, scrounging around trying to hang on any way they can at whate…"
  • Charlie
    CharlieSeptember 29, 2017"Not surprising given that traders think tactically, not strategically. Their optimization period is now to next bonus, or, at best, next promotion. If they were thinking about their careers over the next 10 years+, they would realize that we are probably at peak regulation. Someone thinking of joining compliance now is buying a top. Someone thinking of getting into trading is buying closer to the bottom. The upside certainly appears lower today, but I think the prevai…"
  • Jester
    JesterSeptember 29, 2017"Is this article really news? Bond trading on the sell-side has become an exercise in dodging bullets for some time now. If you aren’t blowing yourself up standing in front of toxic flow, you are constantly being told to reduce the size of your book. That combined with the fact that 90% of the days now feel like "Summer Fridays" due to lack of volatility, makes for a pretty bad seat. Finally, another aspect not mentioned in the article is the growing practice of paying…"

Robots Are No Match for the Human Bond Trader – Bloomberg Gadfly

Full Article: Bloomberg Gadfly

Bond markets, for example, have been relatively resistant to the technology onslaught, even as electronic platforms eat up market share at the less sophisticated end of things. Unlike stocks, which are fairly homogenized and easy to trade, bonds come in many different shapes and sizes.

Comments
  • Wolfman
    WolfmanSeptember 22, 2017"Humans who understand how to work with robots will outperform humans who don't. A robot told me that.…"

Goldman Sachs Has a Plan For Its Misfiring Bond Business – Business Insider 

Full Article: Business Insider

Schwartz provided some rarely seen detail on sales performance by client type. Sales credits are down heavily for hedge funds. Given hedge funds make up almost a quarter of Goldman Sachs’ sales credits, that’s a problem for the bank. 

Comments
  • Goose
    GooseSeptember 15, 2017"GS has always given heavy weight to the derivatives side of the FICC business. Today, many of its derivative stars hold key seats dictating the direction of the FICC businesses. I wonder if GS has the internal DNA to increase its penetration in the asset manager/corporate space Interestingly, there was an FT article a few weeks ago talking about the new GS algo in credit. Making several thousand automated odd lot markets has yet to prove a winning strategy to institut…"

Alternative Theory on Corporate Bond Liquidity – ViableMkts (Chris White)

Full Article: ViableMkts

Regardless of your position, settling this debate is critical because the US corporate bond market is the most systemically important market in the financial world. If there is a liquidity problem, it is vital that we identify the causes and begin to implement solutions.

Comments
  • Charlie
    CharlieSeptember 10, 2017"Definitely an interesting discussion and compelling set of facts. As the article states, the concept of liquidity is a difficult one to pin down precisely. But there are some clearly wrong ways to look at it, such as based solely on realized trading activity, another good point made in the report. Opportunities to trade is also a tough one, since it's a bit of a joint test of liquidity and REASONS to want to trade (which requires some volatility, or some other catalys…"
  • Wolfman
    WolfmanSeptember 8, 2017"As usual, another Viable Markets insightful article. I think the lack of liquidity in the corporate bond market is a function of low rates, pressure on capital at risk, the introduction of ETFs and transparency impacting market making opportunities. The fixed income markets are, in general, less prone to reacting severely to market news and geo-political shocks. There have been any number of news items that should have had this markets reeling, and for the most part,…"