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ChrisWhite

Time for the Market to Rethink Liquidity – Investor Daily

Comments
  • Wolfman
    WolfmanMay 26, 2016"Right on, Jester! This is required reading and hits all of the key points. Fixed Income ain't equities and the current product offering doesn't mimic retail-designed equity products. Yes, I know, ETFs can fit the bill, but they are not shares in a company, they are pools of inventory that are managed, for hidden creation and redemption fees, by the :owners" of the ETF. The market is evolving, yes, but it is not an evolution created by intelligent design. Rather, it is…"
  • Jester
    JesterMay 26, 2016"This article is REQUIRED READING for market participants. Why? It discusses the problem of liquidity without perception bias and admits the real challenges behind potential solutions. For example: “Electronic systems may make trading easier, but they are unlikely to add liquidity to a market unless the point above is addressed by all parties in the market (ie, the willingness to assist in providing liquidity rather than just being a passive participant).” AMEN. Many o…"
  • Hollywood
    HollywoodMay 26, 2016"The article lists many suggestions as to how the bond market will evolve and what can be done to mitigate lack of liquidity. Blackrock and others have proposed changes to market structure to improve liquidity. Nobody, however, is discussing how to educate the average retail investor or even “sophisticated investors” on the inherent risks of corporate bond funds. Many assume fixed income is safe and secure and, being in a fund…even better (diversification!)! However, f…"

Tradeweb Pushes New Credit Trading Model in Europe – eFinancial News

Comments
  • Hollywood
    HollywoodMay 21, 2016"Yes, Stinger – tough crowd. Some facts: Blast RFQ creates noise. Dealers get thousands upon thousands of RFQs per day. It is impossible to keep up so, many dealers don’t pay attention. Average Dealer time-outs can exceed 80%. If a TV show (for dealers) forced you to watch commercials 90% of the time (blast RFQs), you would just shut it off…or, not pay attention. Moreover, if I’m a deal in comp with 99 other dealers I probably did something wrong to win the trade. Winn…"
  • Iceman
    IcemanMay 21, 2016"Perhaps TW should look at rolling out the dealer-sweep protocol of matching at mid for <=1mm with a follow on if required to the Buy-Side and see what happens. Or maybe some dealers are already putting Buy-Side flow into it so this would just make everyone clear on who they are actually doing a trade with. While not being the utopia at least it actually moves the market structure although pro's and con's for doing this so deep thought required and the Buy…"
  • Stinger
    StingerMay 20, 2016"Tough crowd in here. I'm with Merlin, I perceive that Tradeweb is understandably trying to be slightly different/creative while catering to their ownership. Their mandate is to break the monopoly that dealers now have to contend with in the RFQ space (more so in the US than Europe), and they have been given a lot of money and time to do it. Simply hanging around the goal mouth may be the best strategy with a client base that is actually quite resistant to creativity a…"
  • Merlin
    MerlinMay 20, 2016"OK, I get all of you. But unclear that poking fun is necessary here. Yes, TradeWeb could release its own version of "Open Trading" (amazing that 'all to all' has morphed into "open trading" just because MKTX CEO didn't want to antagonize the dealers and believed it was good marketing) but you may want to ask 'why'? For the entire prior decade, TradeWeb got lambasted in the States for being a 'me too' credit platform and never gained traction. In fact, as we all now kn…"

FCA Urged to Review Bloomberg Bond (Trading) Rejections – The Trade 

Comments
  • Slider
    SliderMay 15, 2016"It is still a shock to me that after all the discussion surrounding this topic, including a plethora of news articles, numerous long conference panel discussion on Fixed Income market structure, and some rather deep analytical dives into fixed income market data from academia, that most equities centric regulators are still flabbergasted at the concept that fixed income electronic markets are indicative at best. With the operative words being "AT BEST". Coming from an…"
  • Goose
    GooseMay 13, 2016"A lot of insightful commentary here already. My thinking pretty much follows the line of Mustang’s. Information fragmentation for market makers (you can’t even easily aggregate ATS’ markets, then throw in heterogeneous chat and message formats) leads to the need to manually check those multiple sources before committing to price. Plus, you are in competition trying to service your customer, who has grown to x times your size, and actually has a far superior view into…"
  • Mustang
    MustangMay 13, 2016"This post hits it on the head. BBG is only the ultimate liquidity solution if you only look at them. They SHOULD be regulated. They have a network. They should be leasing that network and clipping a fee. They are fighting a shrinking market, Eikon taking terminals, Symphony, etc. Why not lease your lines?…"
  • Tried and failed.
    Tried and failed.May 13, 2016"This will make you laugh. Six years ago I developed software that enabled buy-side clients to send my trading firm live, executable bids and offers that went onto ALLQ in the name of my trading firm, protecting their identity. This meant a buy-side could now be the bid and/or offer live and firm on ALLQ and get hit or lifted by other buy-sides, just like a market-maker. It told me then that the buy-side have abundant liquidity that is better quality than the sell-side…"

Identifying Certainty in an Uncertain Fixed Income World – Bloomberg Trading Solutions 

Comments
  • Jester
    JesterMay 7, 2016"We all know that this article is a commercial, so I will cut the authors some slack regarding the facts of their case. I do wonder if they laughed to themselves when they wrote: “Change will continue to come in unexpected forms and from a multitude of directions, which makes sourcing liquidity more important than ever. In today’s uncertain climate, waiting and inaction are not options. For 30 years, the world’s fixed income leaders have turned to Bloomberg first for t…"
  • Avatar
    Prop TraderMay 6, 2016"Charlie, should you be posting here if you don't understand? Please be honest. You are so off on your analysis. "Immediate access to 650 institutions and 3000 traders"-->THAT IS NOT TRUE FOR ANY TRADER. The terminal represents LEGACY DtoC RFQ, WITH DEALERS ALWAYS HAVING LAST LOOK...yes, even with magenta. Each dealer must APPROVE all enablements to trade, so again you WILL NOT HAVE ACCESS TO ALL THOSE OTHER TRADERS AND INSTITUTIONS. Think of the terminal as a MIRRO…"
  • Avatar
    CharlieMay 6, 2016"Its all about the network! Although in this product offering simply the number of venues that a user can access? Could a stand alone company offering wide access be just as attractive? As I understand it BBG charges extra for this trading access as its part of TOMS, do I have that right? So perhaps a competitor could compete. Having said that BBG does a great job of integrating the execution with downstream processes so a competitor would have to offer more than conne…"
  • Mustang
    MustangMay 6, 2016"Exactly! If BBG truly connected to all venues then this would be a monumental shift. BBG does a lot of things. Many of them not well, largely because there's no incentive for them. However, they have the most vast network in a market that has tons of good ideas, though everyone is trying to build the network. For BBG, why not solidify your place by allowing others to leverage your network and then charging for that use? The more venues that connect, the more valuable…"

This Might Be the Biggest Problem With the ECB’s Plan to Buy Corporate Bond Debt – Bloomberg 

Comments
  • CelticBond
    CelticBondMay 5, 2016"Funny when BUBA did this for Covered Bonds all hailed this initiative alas BUBA struggled to find secondary market liquidity, pricing & thus struggled to achieve what they set out to help. THey approached several platforms to get more secondary trading, but none of the banks wanted to play.…"
  • Mustang
    MustangMay 1, 2016"This very much resonates with me. Not only has their intentions to buy rendered fundamental credit analysis useless, but their intentions to potentially be the largest seller in a given issue equally exacerbates the issue. One one hand, the ECB buying further constrains liquidity, but their selling is the one-two punch that could cripple the market. What exactly constitutes the criteria for them selling? With a money manager or insurance company, etc; you know what th…"
  • Jester
    JesterMay 1, 2016"This article does a solid job of pointing out a few of the potential issues that ECB corporate bond buying could cause, but there is so much more to discuss if we look at the actual problems that these policies have generated. The seeds of this poor strategy are planted in a basic misunderstanding of how markets work. The central banks clearly think that bond buying programs add liquidity to financial markets the same way that adding oil to the gears of a car would re…"
  • Merlin
    MerlinApril 29, 2016"Good comments as always guys/gals. The ECB is going to be paying through the nose for overpriced assets since it has told everyone that it is going to buy these (information leakage 101) and unless they hold them to maturity, good luck selling them (information leakage 102). European investors and banks must be salivating at the potential opportunities this could create. And the 'forced selling' based on ratings changes, even better! Maybe huge money making opportunit…"

OpenBondX E-Trading Platform Introduces New Rebate Fee Structure for Fixed Income Trading – PR Newswire

Comments
  • Goose
    GooseApril 22, 2016"Interesting question. I know they have solved for this in the equity market. FNL community know how that functions?…"
  • Goose
    GooseApril 22, 2016"Cougar that is a great point on Heisenberg. I had not thought of it that way. Thanks.…"
  • Iceman
    IcemanApril 22, 2016"Given the focus on regulation (TCA/Best Ex) and ensuring the end client is getting a fair deal not sure how this works in that world for an Asset Manager / WM. To Voodoo3's point if the rebate hits the traders pnl and not the end clients is this not hurting the end client? I would be interested to know for the Buy-Side who are using it if they are telling their end clients they are doing so and if the end client gets to choose to 'route to the destination that actuall…"
  • Cougar
    CougarApril 22, 2016"I really like this model as it solved the game theory and effects akin to the Heisenberg uncertainty principal. As Charlie mentioned the initiator/price taker must know where the bonds are trading as when they enter their price it can be autoexecuted if the dealer is inside their price. We're grown-ups in the Street and if a buyside participant doens't know where their bonds are trading given marking requirements, bond runs and various data feeds overlayed with their…"

Losses Mount at Fixed Income Startup Algomi – Financial News

Comments
  • Mustang
    MustangMay 18, 2016"I wonder what Neptune thinks of all the software providers in the space. Are they looking to just be a free utility or are there aspirations to do something interesting with the data? Or will this be up to dealers and buyside to build/buy tools on top of?…"
  • Merlin
    MerlinMay 18, 2016"Why is there so much "comparison" of Algomi and Neptune? They do very different things. Algomi's Synchronicity is a pre-trade workflow tool to help sell side corporate bond salespeople and traders identify and prioritize axes to work on. It competes with TradeWebs/Codestreet's product and Bloomberg DASH . All focus on helping sell side execute trades. Algomi also has Honeycomb, a system where dealers using Synchronicity can feed information for the benefit of buy side…"
  • CelticBond
    CelticBondMay 16, 2016"Neptune requires someone to pay for the build as Etrading Software themselves cannot afford this. So as such a utility that will struggle as they did with their IRS translator. There are so many free models already out there why would a Inv. Mgr not sign as they then await a clearout? Algomi's financial headache is interesting as the management are very focused no on North America? Why not get the project going & gain traction in one location rather than are too s…"
  • Merlin
    MerlinMay 13, 2016"Neptune is way cheaper for dealers to participate with and is much more aligned with how they wish to continue to run their business. There has been little friction with Neptune's model and the community. Algomi on the other hand....…"

The Difference Between Price Makers and Market Makers – Greenwich Associates Blog

Comments
  • Charlie
    CharlieApril 8, 2016"Another well researched and thought provoking article from Kevin McPartland and Greenwich. How deep does the 'planning to do so' (make prices) actually go? Are firms speaking from frustration with the status quo and making threats or have they really planned a course of action and worked it all out? It seems to me that price making is quite a responsibility for firms to take on. Do they have the manpower, or are they planning to hire? Firms would not only have to set…"
  • Goose
    GooseApril 8, 2016"Nice work by GA, in that it begins to address what you can likely expect from the buy side in regards to additional liquidity. Given the role of the buy side, their incentives, and mandates…..the answer seems to be “some”, but not material enough. Once you have a buy side firm that says, “yes I can do this, and want to”…what next? GA shows that the buy side recognizes the need for prices, but the mechanism for the next step is going to be “evaluated prices”? I am in c…"
  • Merlin
    MerlinApril 8, 2016"The most interesting finding in the Greenwich report to me is that more accounts now think they can be liquidity providers after ignoring the situation for the last 3-5 years. And Greenwich does a good job of clarifying what they believe that means regarding market making and what they call price making but what I will call opportunistic liquidity provision. Hedge funds cannot be market makers in credit as it is an information business and they will be cut off from in…"
  • Cougar
    CougarApril 7, 2016"This is a sound well researched article. Marking-making is akin to insurance. If premiums are paid the donwsides will be covered when it goes wrong. If you skimp on the premiums you'll have nothing to run when the house burns down. Of course, if you have enough capital, you can be an insurer yourself but you unlikely to be very good at it. Today, the market isn't paying the premiums. The dealers aren't being remunerated to provide constant liquidity. Do-it-yourself or…"

US Companies Overpaying for Bonds; Banks May Be to Blame – Reuters

Comments
  • Merlin
    MerlinApril 6, 2016"Cougar, I would agree with you if this were an actual underwriting process like in the old days where if you priced the deal wrong.... But for a long time now pretty much all deals are negotiated. Syndicate desks are order takers just trying to keep as many people (think largest buy side clients as per Mustang) happy as possible so they can still print risk-free money.…"
  • Cougar
    CougarApril 2, 2016"I traded off-the-run secondary markets and judging the spread premium for the illiquid was a definite skill, all while in competition. I wasn't getting paid by anyone so not only do I rarely sympathize with banks but even rarer do I sympathize with syndicate desks! The non-frequent borrowers in primary are a direct analogy for my own experiences.…"
  • Mustang
    MustangApril 2, 2016"I don't think it's necessarily difficult to price these issues. Clearly an AAPL or MSFT first issuance is much different than say, a $100MM low triple B infrequent issuer with some structure. With the latter, there is more pricing risk, though easily remedied. That said, of course banks are playing a game. It's in their benefit to do so. Buyside firms play games too with large orders vs actual allocations. As you noted, issuers are lying back for other services and am…"
  • Merlin
    MerlinApril 2, 2016"You guys/gals are making me laugh defending the banks by arguing how much harder it is to price infrequent issuers so the 'concession' must be greater. How hard do you think is was to price Microsoft's or Apple's first issuance? One could easily argue that it is the frequent issuers that should be paying a bigger concession as investors are often full in their names and you need to make it attractive to get them to open up more lines or for others to position and work…"