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Wall Street Startup Backed by Soros and Thiel is in Talks to do a Big Deal – Business Insider 

Full Article: Business Insider

Electronifie, a bond trading platform led by former Goldman Sachs trader Amar Kuchinad, is in exclusive talks to be acquired by TruMid 

Comments
  • Jester
    JesterJanuary 15, 2017"I hope for the best for these two initiatives, but the numbers don’t look good. Mainly, the institutional corporate bond market simply doesn’t have enough activity to create a meaningful electronic trading business around. One thing is clear. This new combined entity will have to reduce overhead considerably to get anywhere near cash-flow positive in the next few years.…"
  • Wolfman
    WolfmanJanuary 13, 2017""The combination would combine the two platforms' user bases". Electonifie has "unique users" and will be added to "TruMid's actively engaged users". I'm not clear as to what this really means for the merger. There's no clarity as to how much, if any, volume Electronifie has attracted or which platform will be used. The market is looking for an alternative to MarketAxess, that's clear from the number of platforms run by smart people who wouldn't invest without some du…"
Swearing an oath with fingers crossed behind back concept for dishonesty or business fraud

‘Trust But Verify’ in Bond Market – Bloomberg

Full Article: Bloomberg

The bond market is “closed off to you and me” and often involves shady practices and less-than-truthful information, Butswinkas said. Former President “Ronald Reagan’s saying ‘trust but verify’ would be an understatement,” he said.

Comments
  • Merlin
    MerlinJanuary 6, 2017"What do you think market makers do if the don't "make up a price"? Who/where do they get the price from? If someone else, how did the first person in the chain come up with the price? All prices are "made up " in that it represents what someone is willing to pay at a moment in time.…"
  • Goose
    GooseJanuary 6, 2017"I agree with Merlin. This, or shades of it, happen in every pool of commerce out there. You, Mr. Institutional Investor, pulled up your trusty Bloomberg, ran the bond with your own assumptions, and decided there was value in the security at the offer price. Your bad.…"
  • Slider
    SliderJanuary 6, 2017"If he gets off, it would set an extremely bad precedence. Its time for the corporate bond market to head toward transparent pricing - yes you can't make the kind of money you used to anymore if prices are transparent but it is what it is. There is no reason for this type of inefficiency in such an established market. The protocol can't be you can just make up prices whenever you feel like it because 'everyone does it'. Its ridiculous. Have we learned nothing from 2008…"
  • Mustang
    MustangJanuary 6, 2017"This is a complete and utter joke. This defense seems ludicrously stupid. I am pretty sure they got this defense from Animal House: "...You can't hold a whole fraternity responsible for the behavior of a few, sick perverted individuals. For if you do, then shouldn't we blame the whole fraternity system? And if the whole fraternity system is guilty, then isn't this an indictment of our educational institutions in general? I put it to you, Greg: isn't this an indictment…"
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Tensions Build Over Bond Allocations and Pricing Feedback – Overbond.com

Full Article: Overbond

Bond investors and syndicate bankers are growing increasingly frustrated with each other as the already thorny topic of allocations and how to reward investors for their feedback is being further poisoned by new regulations.

Comments
  • Goose
    GooseDecember 16, 2016"Breaking down the wall of the new issue construct will be no easy task. It’s been a new issue dream market for awhile now, deals crowded with firms reaching for yield, syndicate desks are shooting fish in a barrel. Auction style IPO/debt raising have worked (Google IPO, US Treasuries,) and Zions Bank has a solid track record of auctioning new and secondary debt, albeit on a smaller scale. Will electronic methods like this catch on as automation continues? What happens…"
  • Merlin
    MerlinDecember 16, 2016"The new issue process in corporate bonds is criminal activity that the regulators have ignored for years. Playing favorites is the rule not the exception. And there is plenty of reason to play favorites; see more secondary flow, take someone out of a position when needed, you know, you scratch my back and I'll make sure you get great new issue allocations! The article seems to suggest that some dealers are going to 'equalisation' (must be European given the use of the…"
  • Wolfman
    WolfmanDecember 15, 2016"Well, well, well, we really seem to have hit a nerve with the 10,000 hours team. It's hard to ignore the sarcastic cynicism with which the experts evaluate the syndicate relationships. It's clearly based on fundamentals that over the past six or seven years have shifted and may no monger represent how this process should actually work. The increase in issuance and its related demand from investors has certainly made the syndicate managers job easier, but in the end, i…"
  • Mustang
    MustangDecember 15, 2016"I always wonder why regulators turn a blind eye to so many clearly obvious "inequities" in FI. In particular, I like this line: "Issuers are paying us for our distribution capabilities and certainty of execution.” If the secondary market is any indication, the increase in electronic trading and the "all to all" sentiment don't say much about your "distribution capabilities" and "certainty of execution". In fact, quite the opposite. Primary issues largely sell themselv…"
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Rise of Bond ETFs Mean Little Mourning for the Middlemen – FT

Full Article: Financial Times

ETFs have become the easiest way for US and European investors to trade bond risk without a middleman. The bond ETF is adding liquidity, sharpening price discovery, and reducing pressure on banks’ balance sheets, especially under stress 

Comments
  • Tried and failed.
    Tried and failed.March 24, 2017"I am a bit late to this discussion, but there is a very important point to make about ETF liquidity; it is absolutely not dependent on secondary bond market liquidity. Firstly ETF market makers are rarely bond dealers, they are usually equity dealers. Secondly ETFs have primary and secondary liquidity. Primary is creation and deletion of ETF shares by APs that can require the buying and selling of underlying cash bonds. Worth noting that an ETF can diverge from the li…"
  • Iceman
    IcemanDecember 10, 2016"ETF's are certainly the product of the day at the moment driven in no small part by Blackrock referring to them at every turn which again is no surprise given they generate a significant amount of revenue from the product. There is significant discussion about the consolidation of the corporate bond market and the role the banks played in ensuring they were the biggest winners, I wonder when someone is going to start looking at the ETF market and the 'Asset Managers'…"
  • Merlin
    MerlinDecember 9, 2016"Here is something to think about. How do you value a corporate bond ETF if there are no underlying markets/prices in the bonds making up the ETF???? By definition do the ETF market makers also become the de facto market makers for the underlyings as opposed to today where many of the AP's activity is dominated by taking liquidity?…"
  • Goose
    GooseDecember 9, 2016"Exchange traded ETF’s bring together retail and institutional interest in a myriad of investment strategies across several adjacent FI products. I believe that has to drive flow downstream for larger outright and complex cash trades. Long term plus for the “middlemen”, whomever they may be. Their business model may evolve, but you will need them more than ever.…"
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Sellside to join Liquidnet as they warm to fixed income fintech (Reuters)

Full Article: Reuters

Electronic trading venue Liquidnet will sign sellside firms to its fixed income platform in the next few weeks, a significant shift from a buyside only model as banks become more receptive to the all-to-all concept.

Comments
  • Slider
    SliderDecember 5, 2016"Agree with everyone else here. Doubtful there will be much liquidity without the big dealers as is always the case. I am also curious as to the fee structure as well.…"
  • Merlin
    MerlinDecember 1, 2016"If there is one thing everyone has learned by now, it is that the major dealers have zero interest in supporting an all to all platform. In the article itself they even state, "Most of the sellside interest is coming from regional banks that perhaps don't have the global client networks" . No kidding that most (read ALL) of the interest is coming from 'regional banks' and let's be clear that when they say regional, they mean the non-major european banks, probably name…"
  • Jester
    JesterDecember 1, 2016"I absolutely love the headline for this article. Reuters, have you no shame? From what I can tell, this is simply a change in policy by Liquidnet to allow the sell-side access to their fixed income platform. What this article fails to mention is whether or not ANY DEALERS have actually joined. I am sure some will, but come on Reuters…..do better. Now what is so interesting about this development is it was a predictable as the winter solstice. Want to know why? Because…"
  • Wolfman
    WolfmanDecember 1, 2016"It seems that deep pockets will come in handy for this launch and I'm curious as to what the fee structures are. The industry in general bemoans the high fees associated with MA and if Liquidnet can survive months of on-boarding liquidity and can build up a business that lowers the cost of execution, they'll have a good chance of surviving. I don't think there's any doubt that there is room for new trading paradigms, but both dealers and buy-side firms are challenged…"
Rear view of a relaxing trader who is sitting in front of a trading station which consists of four screens with financial data. A concept of forex trading. New York panoramic view

ICAP’s Spencer Reboots Market Stalwart With Bet on Digital – Bloomberg

Full Article: Bloomberg

The interdealer broker is transforming itself from a noisy bazaar into a streamlined financial technology firm called NEX Group. The company is expanding beyond its traditional banking customers to attract pension funds, asset management firms and even corporate treasurers to its electronic trading platforms.

Comments
  • Slider
    SliderNovember 18, 2016"This makes complete sense given how inefficient and archaic the IDB market is. "Spencer is betting the house on committing everything to electronic platforms, No one else in the interdealer broker industry has done that before." No one has done it before because the industry would rather self-sabotage by resisting change than get with the program. Kudos to him for making a bold move in the right direction!…"
  • Goose
    GooseNovember 18, 2016"As this article discusses, this move by ICAP screams like a giant “FOR SALE” sign to me. Lose the complex, messy, contract laden, potential lawsuit, overlap of the voice business. “Stitch together a mosaic of existing and developing systems and programs to deliver”. Streamline the technology offering to cut costs and improve interoperability. On the execution side, I believe the margins/marketshare of incumbent electronic execution businesses are only going to come un…"
  • Jester
    JesterNovember 18, 2016"This strategy by ICAP….excuse me, NEX, makes one of two assumptions. 1) NEX can build a formidable tool kit of electronic market solutions which would eventually turn the company into an attractive takeover target for larger players Not a bad idea and not without precedent. It was not too long ago that NASDAQ purchased a platform from an ICAP competitor for over a billion dollars, so yes Virginia, there is a Santa Claus. Hopefully, any potential NEX suitors don’t pay…"
  • Wolfman
    WolfmanNovember 18, 2016"A brilliant move to position NEX for a buyout and reach for high margin business lines. There are risks, however, when moving a company into a utility space. With continued standardization of formats and an increasingly cost-constrained customer base, building for-profit utilities may prove to be a daunting exercise. Is Spencer up for it? Absolutely! Will the tens of millions of dollars being spent by Silicon and Valley and Alley to develop technologies like distribut…"
Businessman tearing contract

Trump’s Transition Team Pledges to Dismantle Dodd-Frank – Bloomberg

Full Article: Bloomberg

“The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”

Comments
  • Wolfman
    WolfmanNovember 12, 2016"There are numerous components of DF that have little to do with improving the safety and soundness of markets such as hiring quotas for banks. CLEARLY, there are also components that have improved the system and whose principals are shared among regulators globally. It seems to me that the FSOC will be reined in and the CFPB is likely to be removed, but don't be surprised if you also see Volker neutered and regulations lessened upon the smaller banks. Most people aren…"
  • Slider
    SliderNovember 11, 2016""Big banks got bigger," sounds like such a classic Trump 'talking point'. When you're measuring market cap, not the case. Are we going to keep going through boom and bust cycles? Are we EVER going to learn from our mistakes?…"
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Euronext and Algomi Look to Deepen Bond Liquidity – Markets Media

Full Article: Markets Media

Dealers will be able to access the trading interface either directly through their existing Algomi technology or their stand-alone systems. The MTF will use algorithmic smart matching processes to create an auction between dealers to improve liquidity and search for best execution.

Comments
  • Iceman
    IcemanNovember 6, 2016"Very interesting point on the SIX work that has been going on with Algomi and how this will be coexist. On the face of it being linked to both SIX (for some years) and then flipping into Euronext and JV'ing to launch a competing issue does not seem like very ethical business practice. Even having the comment in the press release (not Switzerland) points to recognized issues although anyone with a cursory knowledge of SIX offering knows that it was not Swiss bonds. The…"
  • Merlin
    MerlinNovember 4, 2016"This article seems to confuse issues. This JV appears to be an IDB using dark pool fuzzy matching as its protocol. Which, if I am not mistaken, is identical to what SIX is running on the same Algomi technology. But the author then quotes 'market experts' on things such as; "..clients want tools and services to aggregate liquidity from all available sources, as well as flexible market structure models in order to ensure best execution and greater access to data". " ..t…"
  • Goose
    GooseNovember 4, 2016"From the high level of information given, this is a nice validation of a piece of the technology Algomi has built. Euronext gets access to tech that is not core to its current matching trading technology, Algomi gets a partner with a hell of a lot of counterparty connectivity. 2mm is barely pocket change for Euronext, so this doesn’t strike me as a ringing endorsement. Also given this and their similar deal with SIX, is this part of the technology where the true value…"
  • Stinger
    StingerNovember 4, 2016"This combination is very interesting, with Algomi having had a difficult time generating paying customers for its traditional business of information processing. The concept makes a lot of sense although I believe it is at odds with Algomi's originally stated goal of connecting, not trading. That said, it is hard to see $2.3mm going very far, and I hope Euronext is prepared to continue investing in the project. We have seen a bit of a shake out in this space with a ha…"
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A Handful of Giant Investors Have the Fate of the Bond Market in Their Hands – Business Insider

Full Article: Business Insider

The top five investment companies hold $264 billion in US high-yield bonds, according to a big report from Stephen Caprio and Matthew Mish at UBS. That’s equivalent to 20% of the market. The top 20 hold $605 billion, equivalent to 46%

Comments
  • Merlin
    MerlinOctober 28, 2016"Hi Wolfie, I am not sure I agree with point #3 stating that execution fees have been driven down due to technology. MarketAxess is trading what, 80,, 85, 90% of corporate bond volume in N.A. and don't think their fees have budged. And I am not aware of any of the existing ATS fees being reduced. I think maybe NYSE reduced fees but no one uses them anyways and Bloomberg didn't reduce theirs because they don't charge anything to begin with. I do agree that technology ha…"
  • Merlin
    MerlinOctober 28, 2016"The article makes already well know points. The question regarding the fate of the bond market is how these mutual funds actually manage their funds and if they are making appropriate changes to cushion themselves against an onslaught of potential redemptions. While carrying larger cash balances may be more prudent in terms of protecting their investors, there is negative incentive to do this as it materially reduces the return provided by the fund. While this is like…"
  • Goose
    GooseOctober 28, 2016"Agreed Slider. It was quite interesting how Blackrock enjoyed the asset growth banquet, but in 2014 began to voice their opinion on liquidity http://i.imgur.com/4rSna2d.gif Then the SEC began to consider the concept of regulating the buy side as significantly important finanancial institutions, and the message has become. http://stream1.gifsoup.com/view2/20141110/5135504/remain-calm-o.gif…"
  • Slider
    SliderOctober 28, 2016"I am continually hearing anecdotes of how the big funds are being allocated egregious shares of new issue deals which exacerbates this inequity. The market should now be considering the "too big to fail" theory as it relates to the buy-side it seems.…"
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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…"