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Electronic Bond Trading Platforms Seek to Attract Larger Orders – Bloomberg

Author: \ February 25, 2016 \ 8 Comments
Full Article: Bloomberg

Electronic platforms are trying to change a system where, for decades, buying and selling has taken place over the phone among investors who prize discretion in the thinly traded market.

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  • CelticBond
    CelticBondMay 5, 2016"In Europe the Govt eTrading orders are significantly down for the last 5+ years. All in Euroland claim that their volumes with the smaller orders are picking up this gap which I doubt. Also many are saying volumes n their IRS platforms which a widers product group covered is picking up the slack?…"
  • Merlin
    MerlinFebruary 26, 2016"The answer is not in the platofrms. The answer lies with institutional investors. Are they willing to move their business to electronic platforms and what are the factors that influence this decision? That is, what problem is being solved. Are they able to get better execution levels on a more frequent basis on the orders they place vs. the information leakage that may be divulged on those orders that do not get executed. We can assume that the information leakage on…"
  • Goose
    GooseFebruary 26, 2016"I echo Jester’s thoughts here. Have operators studied the markets they are trying to imitate? Even in the most liquid markets with standardized price discovery round lots don’t trade electronically. Dark pool average trade size is a couple of hundred shares. It sounds like the thought process is customers + electronic connectivity +lifting protocols from other markets that haven’t there worked for round lots = ROUND LOTS HERE! Maybe this time it’s different…..anyone k…"
  • Byron C-FFebruary 26, 2016"" Maybe, just maybe trading notional sizes >=$5MM in markets that have very little activity require skill, judgement and experience, something that a push button solution may not be able to solve……" totally agree, Jester. That is why our platform isn't push-button, although you do get to push some buttons if you like. We also start at 2 M in EUR, USD and GBP - the size credit trading businesses here deemed to be the start of block. As for no clients quoted in the a…"
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8 Comments on "Electronic Bond Trading Platforms Seek to Attract Larger Orders – Bloomberg"

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Stinger
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Chipper
I think this is an important concept and certainly a current topic of discussion. Everyone wants to do larger trades – the buyside and the venues are both motivated to do so. But the unfortunate reality is that “electronification” of markets has tended historically to cut trade sizes dramatically, and that has been the case in corporate bonds as well to date. There are a few drivers of this: transparency, workflow efficiency, and new incentives for and ability to trade smaller sizes for less operational cost, which pulls in profit-seekers. The equity world has seen this phenomenon occur to a… Read more »
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2 years ago
Jester
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Jester
Electronic bond trading is struggling to attract large orders? Let me adjust this for you: Electronic trading (in every asset class) is struggling to attract large orders. To back Chipper up on this point, a consequence of electronic trading is smaller trade sizes (see chart on US Equities). Despite the assertion that “Everyone is looking to grow the size of trading on electronic markets” there is not one direct quote from a client or a market maker in support of trading blocks electronically for this article? That is because the loudest voices calling for larger bond trades on electronic platforms… Read more »
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2 years ago
CelticBond
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CelticBond

In Europe the Govt eTrading orders are significantly down for the last 5+ years. All in Euroland claim that their volumes with the smaller orders are picking up this gap which I doubt. Also many are saying volumes n their IRS platforms which a widers product group covered is picking up the slack?

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2 years ago
Cougar
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Cougar
The article talks about what the platforms want to achieve rather than the clients themselves. All of this skirts round the issues that each market constituency wants: an improvement to liquidity. What the platforms are suggesting will likely make things worse without reforming their methodolgy of price publication and trade execution. Small sizes are quoted by dealers who wish to appear to be providing liquidity when they are not really as evidenced by the results of trading. Hitting USD 500K on a dealer bid to see them lower their bid is not liquidity but an a forced illusion. The force?… Read more »
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2 years ago
Wolfman
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Wolfman
Market designs take many factors into account, not the least of which is who the participants are and what they need to do. Large block trades are used by different participants for different reasons. For AMs, it’s part of their DNA. For dealers providing liquidity, it’s a way to use balance sheet most effectively to warehouse inventory to provide immediacy of execution to their clients’ If dealers are no longer able to warehouse said inventory, or warehouse less, then a block trades may appear to lose a key user. Whilst this is a credit blog, it’s helpful to consider another… Read more »
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2 years ago
Byron C-F
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Byron C-F
” Maybe, just maybe trading notional sizes >=$5MM in markets that have very little activity require skill, judgement and experience, something that a push button solution may not be able to solve……” totally agree, Jester. That is why our platform isn’t push-button, although you do get to push some buttons if you like. We also start at 2 M in EUR, USD and GBP – the size credit trading businesses here deemed to be the start of block. As for no clients quoted in the article, agree that would help the case, those wanting a solution that helps find the… Read more »
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2 years ago
Goose
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Goose

I echo Jester’s thoughts here. Have operators studied the markets they are trying to imitate? Even in the most liquid markets with standardized price discovery round lots don’t trade electronically. Dark pool average trade size is a couple of hundred shares. It sounds like the thought process is customers + electronic connectivity +lifting protocols from other markets that haven’t there worked for round lots = ROUND LOTS HERE! Maybe this time it’s different…..anyone know how the newer venues are doing?

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2 years ago
Slider
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Merlin
The answer is not in the platofrms. The answer lies with institutional investors. Are they willing to move their business to electronic platforms and what are the factors that influence this decision? That is, what problem is being solved. Are they able to get better execution levels on a more frequent basis on the orders they place vs. the information leakage that may be divulged on those orders that do not get executed. We can assume that the information leakage on the executed trades is small enough that they end up with either better, more frequent executions or both. Otherwise… Read more »
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2 years ago
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