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Let’s Make a Deal(er): Buy-side Requirements for Price Making in Fixed Income Markets – ViableMkts

Full Article: ViableMkts

For buy-side institutions that are formulating a price-making strategy in corporate bonds, a full examination of these key questions can serve as a guide that helps you optimize the benefits of price-making while avoiding the pitfalls.

Comments
  • Wolfman
    WolfmanApril 9, 2017"The Monty Hall picture was a great blast from the past but it's not exactly the "persona futura" of the market. Dealers aren't some game show host giving away money based on chance and greed. They may be more like the banker in Deal or No Deal, lurking in a tower above the market players and pricing in the balance of fear and greed playing out beneath them. Ok, I'm done with the game shoe analogies. What's really at play is the role people play in the markets and the…"
  • Tried and failed.
    Tried and failed.April 9, 2017"What would you rather do, look at the daily diet of billions of stale, bid side bids and offer side offers and no conviction RUNZ from dealers or get the chance to interact with genuine buyers and sellers? As a buy-side you don't have to "price in" the cost of capital, liquidity charge, ageing and market sentiment so you should, in theory be very competitive. You might have to upgrade in terms of trading bench and data analysis, but this arms race is developing fast.…"
  • Mustang
    MustangApril 7, 2017""a buy-side execution trader must transition from a workflow model where they trade what they want, when they want to trade it, to a process that involves trading when opportunities present themselves." Yes!!!! The 5 asset managers that are making a commitment to this strategy have to-- they are too large to not do it. Very few buyside firms have the culture, budget and forethought to do it on their own. Most technology budget is tied up in regulation. I wonder what t…"
  • Goose
    GooseApril 7, 2017"Thoughtful high level piece breaking down some of the decisions and work needed after the “I think I can add liquidity by making prices” statement. Numero uno....Does this make sense for your business? I think a lot of hands go down with that one, but if "yes"... What do I need? Is it worth the potential cost both in technology and relationships? How does it affect fiduciary responsibility? What is the right technology to use? Is it compatible with my legacy systems?…"

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5 Comments on "Let’s Make a Deal(er): Buy-side Requirements for Price Making in Fixed Income Markets – ViableMkts"

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Jester
Member
Bravo on Monty Hall! Legend. I was pleasantly surprised at the measured tone of this article. The normal way buy-side price making in corporate bonds is discussed/reported is much more forceful, as if it is a foregone conclusion that a massive army of asset managers is on the cusp of being active price providers. The reality is that this undertaking is a HUGE transition process and there are maybe a handful (less than 5) asset managers that are making any sort of a commitment to this strategy. For example, a few years ago a prominent buy-side account from the New… Read more »
Mustang
Member

“a buy-side execution trader must transition from a workflow model where they trade what they want, when they want to trade it, to a process that involves trading when opportunities present themselves.”

Yes!!!!

The 5 asset managers that are making a commitment to this strategy have to– they are too large to not do it. Very few buyside firms have the culture, budget and forethought to do it on their own. Most technology budget is tied up in regulation.

I wonder what the performance improvement is from being a price maker at one of these 5 firms?

Goose
Member
Thoughtful high level piece breaking down some of the decisions and work needed after the “I think I can add liquidity by making prices” statement. Numero uno….Does this make sense for your business? I think a lot of hands go down with that one, but if “yes”… What do I need? Is it worth the potential cost both in technology and relationships? How does it affect fiduciary responsibility? What is the right technology to use? Is it compatible with my legacy systems? Do you have the internal DNA to plan and develop this? ”If you don’t know where you’re going,… Read more »
Tried and failed.
Member

What would you rather do, look at the daily diet of billions of stale, bid side bids and offer side offers and no conviction RUNZ from dealers or get the chance to interact with genuine buyers and sellers?
As a buy-side you don’t have to “price in” the cost of capital, liquidity charge, ageing and market sentiment so you should, in theory be very competitive.
You might have to upgrade in terms of trading bench and data analysis, but this arms race is developing fast.

Wolfman
Member
The Monty Hall picture was a great blast from the past but it’s not exactly the “persona futura” of the market. Dealers aren’t some game show host giving away money based on chance and greed. They may be more like the banker in Deal or No Deal, lurking in a tower above the market players and pricing in the balance of fear and greed playing out beneath them. Ok, I’m done with the game shoe analogies. What’s really at play is the role people play in the markets and the expected return for playing those roles. Putting aside the bluster… Read more »
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