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Are IDBs Obsolete? (Chris Ferreri) – Tabb Forum

ObsoleteMany market structure pundits claim the IDB model is becoming obsolete with electronification of fixed income. But nearly 15 years after the death knell first rang for IDBs, they are still a significant component of the wholesale markets. Full Article 

Comments
  • Sundown
    SundownNovember 11, 2015"One can argue that the IDBs have been the one of the most innovative participants in the current market structure. They are not the fat, lazy person on the other end of a phone yelling like they once were. They are sophisticated businesses operations run by savvy market structure people. Since they are were capital meets need, they are probably the best at determining inflection points in market structure. Many have dismissed these IDB participants as subordinate or c…"
  • Charlie
    CharlieNovember 10, 2015"The question that immediately sprang to my mind on reading this article was 'are dealers actually becoming brokers'? One can perhaps see why dealers are getting so upset when IDBs start to speak with clients. Dealers value proposition is less putting capital at risk and is more about distribution, something that IDBs have done well for decades. If, as anecdotally we are continually being told, dealers are in fact becoming order takers and searchers for the other side…"
  • Gab FredianiNovember 8, 2015"You only have intermediation if there's money paid for a valuable service. In the old days some of this added value was made up of entertainment and other nicies that are no-go today! I remember discussing what made a good broker: 'one who brings in lots of money' says his employer... 'One who brings me good flows/business/prices' says the dealer. Voice and hybrid Businesses alone will not be big or significant enough to build those powerhouses from the late 90s which…"
  • Goose
    GooseNovember 6, 2015"There changes Mr. Ferreri mentions are definitely causing a lot of angst in the IDB/Dealer relationship. The value proposition that drove the compensation structure of the IDB market continues to be under pressure. Dealers mainly pay brokers to maintain an anonymous wholesale market where they can add/lay off risk, and most importantly of all, get price discovery, all away from the eyes of the clients they serve. Changes are leading to less balance sheet/less propriet…"

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4 Comments on "Are IDBs Obsolete? (Chris Ferreri) – Tabb Forum"

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Goose
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There changes Mr. Ferreri mentions are definitely causing a lot of angst in the IDB/Dealer relationship. The value proposition that drove the compensation structure of the IDB market continues to be under pressure. Dealers mainly pay brokers to maintain an anonymous wholesale market where they can add/lay off risk, and most importantly of all, get price discovery, all away from the eyes of the clients they serve. Changes are leading to less balance sheet/less proprietary trades and quoting/less revenue for the IDBs. The IDB market begins to test the edges of the boundaries with clients outside of the dealer community.… Read more »
Gab Frediani
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You only have intermediation if there’s money paid for a valuable service. In the old days some of this added value was made up of entertainment and other nicies that are no-go today! I remember discussing what made a good broker: ‘one who brings in lots of money’ says his employer… ‘One who brings me good flows/business/prices’ says the dealer. Voice and hybrid Businesses alone will not be big or significant enough to build those powerhouses from the late 90s which dreamt of sitting at same table as banks and exchanges

Charlie
Guest
The question that immediately sprang to my mind on reading this article was ‘are dealers actually becoming brokers’? One can perhaps see why dealers are getting so upset when IDBs start to speak with clients. Dealers value proposition is less putting capital at risk and is more about distribution, something that IDBs have done well for decades. If, as anecdotally we are continually being told, dealers are in fact becoming order takers and searchers for the other side of the trade, aren’t they in fact ‘merely’ brokers? As such do dealers need a plethora of IDBs? After all if dealers… Read more »
Sundown
Guest
One can argue that the IDBs have been the one of the most innovative participants in the current market structure. They are not the fat, lazy person on the other end of a phone yelling like they once were. They are sophisticated businesses operations run by savvy market structure people. Since they are were capital meets need, they are probably the best at determining inflection points in market structure. Many have dismissed these IDB participants as subordinate or complicit with their dealer customers. However, that is far from the truth if you look at the path they have taken to… Read more »
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