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Innovation and Evolution in the Fixed Income Market – Vanguard Report

Full Article: Vanguard Report

Vanguard believes that several key improvements will help electronic trading continue to evolve in ways that are most beneficial to investors. We strongly advocate for policies and practices that (1) limit the fragmentation of trading, (2) encourage direct interaction between buyers and sellers, (3) better link trading and order-management systems, (4) provide greater price transparency, and (5) protect against information leakage.

Comments
  • AndrewOctober 26, 2016"Unsurprisingly, Vanguard’s blueprint for improvement in the fixed income market (or should that be markets?) provides (5 ) broad, rational strategic recommendations. The recommendation to limit trading fragmentation, at first glance, looks potentially contradictory to the paper’s support for competition between innovative matching protocols. However, it may be that limiting fragmentation does not necessarily imply limiting the number of trading platforms. Rather, the…"
  • Goose
    GooseOctober 21, 2016"Thank you Vanguard. It’s a big positive to have another voice in the game, and a buy sider at that. I am still very suspect on banging the “all is well” gong on bid/offer spreads from the Fed Paper. Dedicated FNL’ers will know there were plenty of questions about the measurements and data set involved with some of those conclusions. http://www.fridaynewsletter.com/has-us-corporate-bond-market-liquidity-deteriorated-liberty-street-economics/ I would also strongly sugge…"
  • Wolfman
    WolfmanOctober 21, 2016"As usual, FN selects articles that require some thought. So much so In this case that I'm going to follow the Ignatian contemplation method and place myself into the story. For the buy-side, navigating through the profound regulation-driven changes in market structure without the assistance of counterparts willing to offset my risk with their capital is difficult to imagine. If I were in that position, I would likely be calling for a market structure that might replic…"
  • Stinger
    StingerOctober 21, 2016"Nice piece by Vanguard, doing a great job summarizing the state of play and identifying the main factors for success. I wonder if they are voting with their feet/business, and working with the platforms that cover their suggested points. There are platforms in the market that exactly hit what Vanguard is proposing. The buyside has a bad habit of saying one thing and not supporting it with their business - the traditional trading techniques and relationships are quite…"

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5 Comments on "Innovation and Evolution in the Fixed Income Market – Vanguard Report"

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Charlie
Member
Someone learnt from BlackRock’s mistakes! If you are a fund manager you don’t scream the sky is falling unless you want to attract a regulators attention you publish a nice article saying all is well! The article makes a really good point. Technology is slowly bailing the regulators and the markets out, I am not speaking solely about new marketplaces, much has yet to be done in that space and its changing very slowly. I am talking about the major advancements are being made very quickly within the Broker Dealer community that allows BDs to be a lot more efficient… Read more »
Stinger
Member

Nice piece by Vanguard, doing a great job summarizing the state of play and identifying the main factors for success. I wonder if they are voting with their feet/business, and working with the platforms that cover their suggested points. There are platforms in the market that exactly hit what Vanguard is proposing. The buyside has a bad habit of saying one thing and not supporting it with their business – the traditional trading techniques and relationships are quite ingrained, and management/strategy at the top does not trickle down into change on the trading floor.

Wolfman
Member
As usual, FN selects articles that require some thought. So much so In this case that I’m going to follow the Ignatian contemplation method and place myself into the story. For the buy-side, navigating through the profound regulation-driven changes in market structure without the assistance of counterparts willing to offset my risk with their capital is difficult to imagine. If I were in that position, I would likely be calling for a market structure that might replicate the equity markets. However, if I consider my position carefully, I need to understand the long-term impact of moving toward an un-fragmented structure… Read more »
Goose
Member
Thank you Vanguard. It’s a big positive to have another voice in the game, and a buy sider at that. I am still very suspect on banging the “all is well” gong on bid/offer spreads from the Fed Paper. Dedicated FNL’ers will know there were plenty of questions about the measurements and data set involved with some of those conclusions. http://www.fridaynewsletter.com/has-us-corporate-bond-market-liquidity-deteriorated-liberty-street-economics/ I would also strongly suggest members take a gander at this paper, which tells a different story. http://cfpweb.mit.edu/wp-content/uploads/2016/09/Dick-Nielsen-Rossi.pdf On the conclusion side, I thought it curious that Vanguard wanted to limit trading fragmentation while asking saying electronic trading platforms… Read more »
Andrew
Member
Unsurprisingly, Vanguard’s blueprint for improvement in the fixed income market (or should that be markets?) provides (5 ) broad, rational strategic recommendations. The recommendation to limit trading fragmentation, at first glance, looks potentially contradictory to the paper’s support for competition between innovative matching protocols. However, it may be that limiting fragmentation does not necessarily imply limiting the number of trading platforms. Rather, the solution may entail adding an innovative cross-platform facility, just as the IDBs addressed fragmentation for multiple market-makers. Particularly relevant to the corporate bond markets, the recommendation on integration refers to the critical issue of efficient identification of… Read more »
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