Now We Have Two Answers to the ECB Corporate Liquidity Question – Bloomberg

Author: ChrisWhite \ August 3, 2016 \ 6 Comments

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  JesterAugust 7, 2016"This article and debate stops and starts with one key statement from this article: “Firstly, a big caveat is in order. There's no standard and objective measure of bond-market liquidity since bonds are predominately traded over the counter (OTC), unlike stocks. As a result, market benchmarks to gauge a snapshot of liquidity conditions — roughly defined as market participants' ability to buy and sell bonds, on a given stable trading day, without triggering a material s…"
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  MustangAugust 5, 2016"I'm also in the camp that they are creating a bigger liquidity problem. It's very hard to surmise that the ECB isn't creating a liquidity problem when the author correctly admits that: "Firstly, a big caveat is in order. There's no standard and objective measure of bond-market liquidity since bonds are predominately traded over the counter (OTC), unlike stocks. As a result, market benchmarks to gauge a snapshot of liquidity conditions — roughly defined as market parti…"
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  GooseAugust 5, 2016"Like others, I am, um, very suspect that the emergence of the ultimate supertanker in the shallow waters of bond market liquidity will have no ill effect. Chart 2 seems to show a gradual widening of the non-eligible vs. the eligible and purchased. Crowding into the trade and the action, plus more trade data points to manage risk against, while the have nots suffer? Supertanker oil spills do severe damage to the ecosystems in which they operate.…"
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  MerlinAugust 5, 2016"I am in the camp viewing the ECB as creating a bigger liquidity problem. Not because they are competing with investors for bonds; in that regard they are just another player in the market, although a big one! But because the program has injected uncertainty into the market about which bonds it is buying/will buy and when they reach their max holding amount. Market makers and investors both now need to navigate this uncertainty in an attempt to determine the proper pri…"

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Project Sentinel Completes MiFID II Technology Specification – The Desk 

Author: ChrisWhite \ July 28, 2016 \ 8 Comments

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  WolverineJuly 29, 2016"The emergence of this project clearly illustrates that the historical models of buying or building core banking technology on an individual basis, particularly for the purpose of fulfilling regulatory obligations, are no longer viable. Building individually is too expensive, carries no competitive advantage because everyone has essentially the same requirements, and carries too much risk of failure, which, when regulation is involved, is not an option. Buying individu…"
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  LeonJuly 29, 2016"The one year delay has provided an opportunity for the market participants to think strategically on MiFID II implementation. There is a small windows – closing quickly – for organisations to collaborate together and think outside of the box. A difference between the majority of the collaborative initiatives and Sentinel is that MiFID II is not a nice-to-have and has a firm deadline: Wednesday 3rd of January 2018. Participants will be compliant but at what costs and w…"
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  CholoJuly 29, 2016"Inv.Banks have been too short sighted in terms of IT, and never wanted to share anything. Big mistake!!!! All of them are suffering on the cost side. It really makes a lot of sense to collaborate among like-minded banks, and share IP & IT cost in non alpha-generating / value differentiating activities. It really makes me wonder why nothing is happening on the Operations side…. A no-brainer would be to do something similar in BackOffice (collaboration / utility mod…"
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  WolfmanJuly 29, 2016"Banks will always be reluctant to outsource their core competency, but there are myriad examples of coopetition when technological solutions are delivered. Banks generally don't build their own ATMs but do think of innovative ways to improve their customer experiences with them. SalesForce had become the ubiquitous CRM tool and I would suppose that with enough capital behind them, Sentinel can become a similar tool. I don't know what that does for companies that curre…"

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Morgan Stanley Profit Beats Estimates as Bond Trading Gains – Bloomberg

Author: ChrisWhite \ July 22, 2016 \ 2 Comments

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  GooseJuly 22, 2016"A positive report, and just having earnings stability going forward in this environment would be a big plus. However, since FNL is mainly focused on the top stories in the credit market, this statement gives plenty of pause, “Foreign exchange, commodities and securitized products were areas of strength within fixed income, particularly ahead of the Brexit vote, Chief Financial Officer Jonathan Pruzan said in an interview. Client activity has subsided since then, thoug…"
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  HollywoodJuly 22, 2016"The article states: “Maybe on an annual basis we are closing in on a sustainable and predictable level” for fixed-income revenue, Kotowski said. “That would be a significant positive after years of grinding lower industrywide, but of course one needs more than one quarter to draw that conclusion firmly.” - Agreed - Small sample set from 1 market participant. Perhaps banks have re-balanced and found their sweet spot....time will tell. One thing for sure, Banks need to…"

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Bond World Grows Less Opaque – Bloomberg Gadfly 

Author: ChrisWhite \ July 15, 2016 \ 3 Comments

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  Voodoo3July 17, 2016"More data in 1s and 2s won't change the real structure of the market. This is noise rather than progress.…"
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  JesterJuly 16, 2016"This article is one big bowl of assumptions, wrapped in a candy coated shell of myth topped with a cherry of a conclusion: Transparency is good for electronic trading, bad for big dealers. It is not the author’s fault, this is generally the feeling amongst many traditional market participants as well, even if the evidence is to the contrary. Here is the thing, if your business model is reliant on mark to market sorcery to create paper profits, then absolutely, transpa…"
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  WolfmanJuly 16, 2016"Mother, mother ocean, after all these years I've found My occupational hazard being my occupation's just not around. Isn't it wonderful that the regulators want a component of market structure without really understanding the true impact?…"

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US Corporate Bond Market: What Year Is It? – ViableMkts 

Author: ChrisWhite \ July 7, 2016 \ 9 Comments

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  MustangJuly 15, 2016""You cannot create liquidity, but only try to ensure that all liquidity opportunities are actioned." In the current market, I wholeheartedly agree. I think too many are focused on creating new liquidity, when that seems like too huge of a lift. Instead, if we additionally focused on maximizing every possible liquidity point, we'd be in a better position. What good is a bid or an offer on some electronic platform if it's nearly impossible to find?…"
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  MerlinJuly 12, 2016"There are no inputs. These "real time" pricing feeds are a sham. You will never create an oddlot market where you can hedge roundlot trades. You cannot auto trade a roundlot market. I am not convinced you can auto trade an oddlot market successfully unless all you are doing is trading off of others prices. We have been trying to put a square peg in a round hole long enough. Can't everyone just go do their jobs? The market has and will continue to adjust to the current…"
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  matlami2016July 10, 2016"Completely agree - it's GIGO (garbage in garbage out) as far as these models go, right? The fundamental problem is lack of real-time reliable pricing inputs. And unlike, say, equities, the information to noise ratio of inputs from other markets (e.g. macro S&P 500, VIX, CDX.IG, ...) is very low. Having made that general comment, I would say though that if one were to focus on the most liquid bonds, I don't see why it is that difficult to have tradable real-time pr…"
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  JesterJuly 10, 2016"Since you asked for thoughts, I will oblige. Yes, there are several vendors working on real-time pricing for corporate bonds, but there is a large gap between their pitch and the performative reality of data in this market. For example, Markit just announced the launch of their real-time pricing product with the promise of providing on demand pricing information on 35,000 CUSIPs. What their offering may provide in breadth it will most definitely lack in accuracy. Bott…"

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BlackRock to Push Wall Street Chat Tool – 4 Traders 

Author: ChrisWhite \ July 1, 2016 \ 6 Comments

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  CelticBondJuly 23, 2016"I agree with the comment & at $2k+ pm its a very expensive chat mechanism along with expensive analytics. Dealers must realise how much monies they gave away to BBG over the years & their own failures to build their own analytic deliveries.What could be interesting developments are new analytic entrants that are cheaper coupled with Symphony…"
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  IcemanJuly 2, 2016"As has been discussed a number of times a chat function itself is hardly ground breaking so Symphony needs to continue to develop their platform and adopt new features and functions that appeal to a broader cross section of the community. What is interesting is this still seems to be a closed system instead of the original ideal that was asked for by the very first investors who were looking for an open system to be inter operable. Perhaps it is to bigger a stretch to…"
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  WolfmanJuly 1, 2016"So, most people will admit that 95% of what they use Bloomberg for is chat. If the BlackRock gorilla decides it will no longer permit their employees from chatting on Bloomberg, then the tide will have to shift. That's the bottom line. If he 5% non-chat usage is still essential to the particular Bloomberg user, Symphony has succeeded in increasing their cost instead of reducing it. Now, these are early days and who know what other services Symphony intends to offer (t…"
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  GooseJuly 1, 2016"It’s not like Symphony is just a functionality release or two ahead of a similar technology and business model. There is a huge gulf between the technology, models, and delivery of Symphony and Bloomberg.. This is an inflection point on completely changing the delivery of fixed income communication. IF, and given the stakes it’s a big IF, Blackrock pushes ahead and IS the gorilla to build the Symphony external community, what is the response by Bloomberg? Its not just…"

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Over Half of Buy Siders to Re-Evaluate Fixed Income Brokers – The Trade 

Author: ChrisWhite \ June 24, 2016 \ 2 Comments

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  MerlinJune 24, 2016"Don't buy side accounts review their dealer relationships at least annually already? Are they doing it differently or more aggressively this year??? And are 64% saying it is their TOP priority or just a top priority? It would seem to make a big difference and the wording is not clear. But if we assume it is THE top priority, we get very little information on how they are actually evaluating their dealers. 18% selected 'cost effectiveness' as the #1 priority in selecti…"
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  WolfmanJune 24, 2016"“Not surprisingly the focus is cost effectiveness, highlighting the on-going constraints buy-side actors are facing.” The dealer-to-client model is changing and new solutions are necessary. I get it. What's unclear to me is which forces will win out in this "becoming" that is happening. Companies will propose new solutions and if they can capture critical mass, they will succeed. We're inundated with new platforms to solve these problems, and in the past, getting the…"

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Buy Side Provides More Fixed Income Liquidity – Markets Media 

Author: ChrisWhite \ June 17, 2016 \ 13 Comments

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  MustangJune 20, 2016"I agree with all this-- you nailed it on the head. One more important point: Market Axess is offering a "free" pre-trade solution, wherein dealers put the interests of their buyside customers. Theoretically, they know which buyside firm is a buyer of a bond and which buyside firm is a seller of that bond-- all because dealers are telling them. So, assuming MA has a footprint with their pre-trade tool, then the dealer community is seeding Open Trading with trades. More…"
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  matlami2016June 19, 2016"""in the most liquid bonds, trading participants use ECNs for micro lots, RFQ for odd lots, and voice for round lots and blocks. These solutions, for the most part, solve for immediacy and exact size. The struggle is in the large blocks and illiquid bonds." - Hollywood in comments above Pretty much a great summary of current state - question is whether there is an evolutionary path for e-Trading out of the liquid micro-lot world, or is e-Trading destined to remain jus…"
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  MerlinJune 19, 2016"Sorry, for being unclear. I should have said "...about 10% of MKTX global volume".…"
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  matlami2016June 19, 2016""in the most liquid bonds, trading participants use ECNs for micro lots, RFQ for odd lots, and voice for round lots and blocks. These solutions, for the most part, solve for immediacy and exact size. The struggle is in the large blocks and illiquid bonds." Pretty much a great summary of current state - question is whether there is an evolutionary path for e-Trading out of the liquid micro-lot world, or is e-Trading destined to remain just for micro-lot liquid bonds fo…"

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James Switzer (Alliance Bernstein) On Taking Control – The Desk 

Author: ChrisWhite \ June 10, 2016 \ 5 Comments

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  MerlinJune 12, 2016"Nice piece by The Desk in helping to get the word out. Jim and team have been speaking about Alfa for 6+ months now at various conferences and people seem to finally be taking notice. For me, the most important part of what I can ascertain from Jim's description of Alfa is the capability to capture incoming data to be used for both immediate alerts as well as a db for historical relevance. This move to structured data from unstructured data capture seems compelling as…"
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  GooseJune 11, 2016"Excellent article on concrete MEANINGFUL changes taking place in the markets. AB's efforts tie into a similar thought thread from last week. As the wall comes down and the buy side can aggregate the multiple marketplaces, the same liquidity that a dealer posts on all venues is suddenly in one place. AB all things being equal, can choose what venue makes the most economic sense to execute on. Flip side, the dealer knows he can get to AB on a choice of venues, will choo…"
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  JesterJune 10, 2016"This was a great piece in that it set an example for what must be done for the buy side to take the next step in fixed income. Here are the things that particularly caught my attention: 1) Alliance looks globally for dollar bond liquidity Not many people are aware that due to outsize dollar global issuance over the past few years, several banks have trading desks that trade the exact same names in different locations. Yes my friends, that means it is possible for the…"
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  MustangJune 10, 2016"A few things stand out: 1. AB is taking the initiative to build tools that help them find liquidity. They are not waiting on software providers, dealers or the market to "transform". Atta boy Jim! 2. Younger talent. One of the biggest impediments of technology in FI is the culture. "Pre-trade" software is what every other market has been calling a CRM for 20 years. It still amazes me that every trading desk and every buyside firm doesn't have this. Or if they do, then…"

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