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Dealers Must Up Their Corp-Bond Game – Markets Media 

Full Article: Markets Media

A few weeks ago, Graham Giller, head of data science research, CIB Data Science at J.P. Morgan, shared a conversation he had with a credit trader from his firm about a year ago who said that they did not know the price of things.

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  • Tried and failed.
    Tried and failed.June 19, 2017"In the old days dealers simply knew more about how bonds were trading than their buy-side clients. The buy-side accepted this in return for liquidity provision and dealer profit margins. As the article suggests the information asymmetry has declined with the reduction in immediate liquidity. The question is, what have dealers now got that remains relevant to liquidity? Is it new issues that maintain the dealer/buy-side relationship or is a less well-observed undercurr…"
  • Wolfman
    WolfmanJune 16, 2017"Maybe it's me, but it seems that a relatively small group of buy-side firms are leading the charge to become market makers, or price makers as they like to call themselves. There are valid reasons for a move toward an all-to-all market for credit, but there also seems to be a fundamental need for the dealer/client relationship. Oddly enough, there is also a small group of dealers that are leading the charge to move away from market making and generating revenues from…"

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Wolfman
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Maybe it’s me, but it seems that a relatively small group of buy-side firms are leading the charge to become market makers, or price makers as they like to call themselves. There are valid reasons for a move toward an all-to-all market for credit, but there also seems to be a fundamental need for the dealer/client relationship. Oddly enough, there is also a small group of dealers that are leading the charge to move away from market making and generating revenues from fee-based businesses. These roles will converge for some firms and not others and the need for a dealer… Read more »
Tried and failed.
Member

In the old days dealers simply knew more about how bonds were trading than their buy-side clients. The buy-side accepted this in return for liquidity provision and dealer profit margins.
As the article suggests the information asymmetry has declined with the reduction in immediate liquidity.
The question is, what have dealers now got that remains relevant to liquidity? Is it new issues that maintain the dealer/buy-side relationship or is a less well-observed undercurrent now driving this relationship…?

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