Bringing voices together to promote well functioning markets
Every Friday, we send you an email of top articles related to corporate bond market development. The newsletter is a free service.
Sign Up!
Join Discussion ⌄
All Posts By

ChrisWhite

Pricing (Corporate Bonds) in the Dark – Risk Magazine (free download)

Author: \ January 20, 2017 \ 5 Comments
Comments
  • Slider
    SliderJanuary 20, 2017"I think the buy-side is also scarred by what happened in 2008. They understand now that given the evolving regulatory environment, they don't ever want to be beholden to dealers for liquidity. And why should they be at this point given they hold more of the bonds and have better price discovery? Dealers were always banking on the opaqueness of the OTC market to make money and that model is no longer viable given the push to transparency. Depending on the nature of the…"
  • Goose
    GooseJanuary 20, 2017"Risk takes up the mantle on a critical liquidity topic that hasn’t gotten much coverage. Dealer price discovery continues to diminish to the detriment of the dealers, and just as importantly, to the buy side. While the buy side can opportunistically provide liquidity, I believe it is a pipe dream to think they will become truly significant players in immediate risk transfer. The more markets evolve electronically, the more important the market makers become. Ask the e…"
  • Wolfman
    WolfmanJanuary 20, 2017"Information was not at the core of the dealer-as-market-maker model - capital was. In the vacuum left by persistently low rates and regulatory restrictions on capital at risk, the buy-side is engaging as price makers. Rates aren't skyrocketing and risk tolerance may increase somewhat, but the reality is that if dealers can't make money making markets, they have no incentive to do so. I think the most interesting part of the report was that the buy-side starts with a p…"
  • Cougar
    CougarJanuary 20, 2017"I agree with Viper's points. We know the sellside is starving secondary trading of balance sheet for years because the business was not economically viable from capital costs, and more recently increased information asymmetry biased to the buyside etc. Banks now recognize this and better need to control their information. The buyside needs the sellside as its insurance policy not for the 95% of time but the 5% when the buyside price makers and sellside market makers a…"
View More Comments
Join the Discussion

Wall Street Startup Backed by Soros and Thiel is in Talks to do a Big Deal – Business Insider 

Author: \ January 11, 2017 \ 2 Comments
Comments
  • Jester
    JesterJanuary 15, 2017"I hope for the best for these two initiatives, but the numbers don’t look good. Mainly, the institutional corporate bond market simply doesn’t have enough activity to create a meaningful electronic trading business around. One thing is clear. This new combined entity will have to reduce overhead considerably to get anywhere near cash-flow positive in the next few years.…"
  • Wolfman
    WolfmanJanuary 13, 2017""The combination would combine the two platforms' user bases". Electonifie has "unique users" and will be added to "TruMid's actively engaged users". I'm not clear as to what this really means for the merger. There's no clarity as to how much, if any, volume Electronifie has attracted or which platform will be used. The market is looking for an alternative to MarketAxess, that's clear from the number of platforms run by smart people who wouldn't invest without some du…"
View More Comments
Join the Discussion

‘Trust But Verify’ in Bond Market – Bloomberg

Author: \ January 6, 2017 \ 8 Comments
Comments
  • Merlin
    MerlinJanuary 6, 2017"What do you think market makers do if the don't "make up a price"? Who/where do they get the price from? If someone else, how did the first person in the chain come up with the price? All prices are "made up " in that it represents what someone is willing to pay at a moment in time.…"
  • Goose
    GooseJanuary 6, 2017"I agree with Merlin. This, or shades of it, happen in every pool of commerce out there. You, Mr. Institutional Investor, pulled up your trusty Bloomberg, ran the bond with your own assumptions, and decided there was value in the security at the offer price. Your bad.…"
  • Avatar
    SliderJanuary 6, 2017"If he gets off, it would set an extremely bad precedence. Its time for the corporate bond market to head toward transparent pricing - yes you can't make the kind of money you used to anymore if prices are transparent but it is what it is. There is no reason for this type of inefficiency in such an established market. The protocol can't be you can just make up prices whenever you feel like it because 'everyone does it'. Its ridiculous. Have we learned nothing from 2008…"
  • Mustang
    MustangJanuary 6, 2017"This is a complete and utter joke. This defense seems ludicrously stupid. I am pretty sure they got this defense from Animal House: "...You can't hold a whole fraternity responsible for the behavior of a few, sick perverted individuals. For if you do, then shouldn't we blame the whole fraternity system? And if the whole fraternity system is guilty, then isn't this an indictment of our educational institutions in general? I put it to you, Greg: isn't this an indictment…"
View More Comments
Join the Discussion

Tensions Build Over Bond Allocations and Pricing Feedback – Overbond.com

Author: \ December 15, 2016 \ 6 Comments
Comments
  • Goose
    GooseDecember 16, 2016"Breaking down the wall of the new issue construct will be no easy task. It’s been a new issue dream market for awhile now, deals crowded with firms reaching for yield, syndicate desks are shooting fish in a barrel. Auction style IPO/debt raising have worked (Google IPO, US Treasuries,) and Zions Bank has a solid track record of auctioning new and secondary debt, albeit on a smaller scale. Will electronic methods like this catch on as automation continues? What happens…"
  • Merlin
    MerlinDecember 16, 2016"The new issue process in corporate bonds is criminal activity that the regulators have ignored for years. Playing favorites is the rule not the exception. And there is plenty of reason to play favorites; see more secondary flow, take someone out of a position when needed, you know, you scratch my back and I'll make sure you get great new issue allocations! The article seems to suggest that some dealers are going to 'equalisation' (must be European given the use of the…"
  • Wolfman
    WolfmanDecember 15, 2016"Well, well, well, we really seem to have hit a nerve with the 10,000 hours team. It's hard to ignore the sarcastic cynicism with which the experts evaluate the syndicate relationships. It's clearly based on fundamentals that over the past six or seven years have shifted and may no monger represent how this process should actually work. The increase in issuance and its related demand from investors has certainly made the syndicate managers job easier, but in the end, i…"
  • Mustang
    MustangDecember 15, 2016"I always wonder why regulators turn a blind eye to so many clearly obvious "inequities" in FI. In particular, I like this line: "Issuers are paying us for our distribution capabilities and certainty of execution.” If the secondary market is any indication, the increase in electronic trading and the "all to all" sentiment don't say much about your "distribution capabilities" and "certainty of execution". In fact, quite the opposite. Primary issues largely sell themselv…"
View More Comments
Join the Discussion

Rise of Bond ETFs Mean Little Mourning for the Middlemen – FT

Author: \ December 9, 2016 \ 5 Comments
Comments
  • Tried and failed.
    Tried and failed.March 24, 2017"I am a bit late to this discussion, but there is a very important point to make about ETF liquidity; it is absolutely not dependent on secondary bond market liquidity. Firstly ETF market makers are rarely bond dealers, they are usually equity dealers. Secondly ETFs have primary and secondary liquidity. Primary is creation and deletion of ETF shares by APs that can require the buying and selling of underlying cash bonds. Worth noting that an ETF can diverge from the li…"
  • Iceman
    IcemanDecember 10, 2016"ETF's are certainly the product of the day at the moment driven in no small part by Blackrock referring to them at every turn which again is no surprise given they generate a significant amount of revenue from the product. There is significant discussion about the consolidation of the corporate bond market and the role the banks played in ensuring they were the biggest winners, I wonder when someone is going to start looking at the ETF market and the 'Asset Managers'…"
  • Merlin
    MerlinDecember 9, 2016"Here is something to think about. How do you value a corporate bond ETF if there are no underlying markets/prices in the bonds making up the ETF???? By definition do the ETF market makers also become the de facto market makers for the underlyings as opposed to today where many of the AP's activity is dominated by taking liquidity?…"
  • Goose
    GooseDecember 9, 2016"Exchange traded ETF’s bring together retail and institutional interest in a myriad of investment strategies across several adjacent FI products. I believe that has to drive flow downstream for larger outright and complex cash trades. Long term plus for the “middlemen”, whomever they may be. Their business model may evolve, but you will need them more than ever.…"
View More Comments
Join the Discussion

Sellside to join Liquidnet as they warm to fixed income fintech (Reuters)

Author: \ November 30, 2016 \ 4 Comments
Comments
  • Slider
    SliderDecember 5, 2016"Agree with everyone else here. Doubtful there will be much liquidity without the big dealers as is always the case. I am also curious as to the fee structure as well.…"
  • Merlin
    MerlinDecember 1, 2016"If there is one thing everyone has learned by now, it is that the major dealers have zero interest in supporting an all to all platform. In the article itself they even state, "Most of the sellside interest is coming from regional banks that perhaps don't have the global client networks" . No kidding that most (read ALL) of the interest is coming from 'regional banks' and let's be clear that when they say regional, they mean the non-major european banks, probably name…"
  • Jester
    JesterDecember 1, 2016"I absolutely love the headline for this article. Reuters, have you no shame? From what I can tell, this is simply a change in policy by Liquidnet to allow the sell-side access to their fixed income platform. What this article fails to mention is whether or not ANY DEALERS have actually joined. I am sure some will, but come on Reuters…..do better. Now what is so interesting about this development is it was a predictable as the winter solstice. Want to know why? Because…"
  • Wolfman
    WolfmanDecember 1, 2016"It seems that deep pockets will come in handy for this launch and I'm curious as to what the fee structures are. The industry in general bemoans the high fees associated with MA and if Liquidnet can survive months of on-boarding liquidity and can build up a business that lowers the cost of execution, they'll have a good chance of surviving. I don't think there's any doubt that there is room for new trading paradigms, but both dealers and buy-side firms are challenged…"
View More Comments
Join the Discussion

ICAP’s Spencer Reboots Market Stalwart With Bet on Digital – Bloomberg

Author: \ November 18, 2016 \ 4 Comments
Comments
  • Slider
    SliderNovember 18, 2016"This makes complete sense given how inefficient and archaic the IDB market is. "Spencer is betting the house on committing everything to electronic platforms, No one else in the interdealer broker industry has done that before." No one has done it before because the industry would rather self-sabotage by resisting change than get with the program. Kudos to him for making a bold move in the right direction!…"
  • Goose
    GooseNovember 18, 2016"As this article discusses, this move by ICAP screams like a giant “FOR SALE” sign to me. Lose the complex, messy, contract laden, potential lawsuit, overlap of the voice business. “Stitch together a mosaic of existing and developing systems and programs to deliver”. Streamline the technology offering to cut costs and improve interoperability. On the execution side, I believe the margins/marketshare of incumbent electronic execution businesses are only going to come un…"
  • Jester
    JesterNovember 18, 2016"This strategy by ICAP….excuse me, NEX, makes one of two assumptions. 1) NEX can build a formidable tool kit of electronic market solutions which would eventually turn the company into an attractive takeover target for larger players Not a bad idea and not without precedent. It was not too long ago that NASDAQ purchased a platform from an ICAP competitor for over a billion dollars, so yes Virginia, there is a Santa Claus. Hopefully, any potential NEX suitors don’t pay…"
  • Wolfman
    WolfmanNovember 18, 2016"A brilliant move to position NEX for a buyout and reach for high margin business lines. There are risks, however, when moving a company into a utility space. With continued standardization of formats and an increasingly cost-constrained customer base, building for-profit utilities may prove to be a daunting exercise. Is Spencer up for it? Absolutely! Will the tens of millions of dollars being spent by Silicon and Valley and Alley to develop technologies like distribut…"
View More Comments
Join the Discussion

Trump’s Transition Team Pledges to Dismantle Dodd-Frank – Bloomberg

Author: \ November 11, 2016 \ 2 Comments
Comments
  • Wolfman
    WolfmanNovember 12, 2016"There are numerous components of DF that have little to do with improving the safety and soundness of markets such as hiring quotas for banks. CLEARLY, there are also components that have improved the system and whose principals are shared among regulators globally. It seems to me that the FSOC will be reined in and the CFPB is likely to be removed, but don't be surprised if you also see Volker neutered and regulations lessened upon the smaller banks. Most people aren…"
  • Slider
    SliderNovember 11, 2016""Big banks got bigger," sounds like such a classic Trump 'talking point'. When you're measuring market cap, not the case. Are we going to keep going through boom and bust cycles? Are we EVER going to learn from our mistakes?…"
View More Comments
Join the Discussion

Euronext and Algomi Look to Deepen Bond Liquidity – Markets Media

Author: \ November 4, 2016 \ 6 Comments
Comments
  • Iceman
    IcemanNovember 6, 2016"Very interesting point on the SIX work that has been going on with Algomi and how this will be coexist. On the face of it being linked to both SIX (for some years) and then flipping into Euronext and JV'ing to launch a competing issue does not seem like very ethical business practice. Even having the comment in the press release (not Switzerland) points to recognized issues although anyone with a cursory knowledge of SIX offering knows that it was not Swiss bonds. The…"
  • Merlin
    MerlinNovember 4, 2016"This article seems to confuse issues. This JV appears to be an IDB using dark pool fuzzy matching as its protocol. Which, if I am not mistaken, is identical to what SIX is running on the same Algomi technology. But the author then quotes 'market experts' on things such as; "..clients want tools and services to aggregate liquidity from all available sources, as well as flexible market structure models in order to ensure best execution and greater access to data". " ..t…"
  • Goose
    GooseNovember 4, 2016"From the high level of information given, this is a nice validation of a piece of the technology Algomi has built. Euronext gets access to tech that is not core to its current matching trading technology, Algomi gets a partner with a hell of a lot of counterparty connectivity. 2mm is barely pocket change for Euronext, so this doesn’t strike me as a ringing endorsement. Also given this and their similar deal with SIX, is this part of the technology where the true value…"
  • Stinger
    StingerNovember 4, 2016"This combination is very interesting, with Algomi having had a difficult time generating paying customers for its traditional business of information processing. The concept makes a lot of sense although I believe it is at odds with Algomi's originally stated goal of connecting, not trading. That said, it is hard to see $2.3mm going very far, and I hope Euronext is prepared to continue investing in the project. We have seen a bit of a shake out in this space with a ha…"
View More Comments
Join the Discussion

©2016 - Friday Newsletter. All Rights Reserved.