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Bond Tape is a Matter of Time – Markets Media

Full Article: Markets Media

The discussion of whether there will be consolidated tape for fixed income products is no longer a matter of if, but when. The wheels already are in motion for public disclosure of US Treasury trades. They are not moving quickly, but they are moving.  

Comments
  • Goose
    GooseApril 21, 2017"You better believe that a public tape for treasuries is on the way. Once you start collecting data for “regulatory and compliance” purposes, you essentially create the demand for a public tape by investors and dealers. Does anyone want regulators monitoring their trading activity without understanding the benchmarks they are monitoring against? When they do get around to taking the next step, I would strongly caution against the path taken with the FINRA TRACE feed. T…"
  • Jester
    JesterApril 21, 2017"What’s going to be the impact of post-trade reporting for US Treasuries? Well that depends on one crucial factor. Who will be managing the data? From the looks of it, the quasi-government-private institution known as FINRA will be in charge of this precious commodity. Based on FINRA’s previous track record, the full value of this post-trade data will not be realized by the market. FINRA has been notoriously poor at improving the quality and access to data. This is why…"
  • Wolfman
    WolfmanApril 21, 2017"I'm curious to see what sort of reaction the focus article gets this week. We're in an time indeed. Conventional wisdom is that all markets need transparency to operate efficiently, and the broad consensus among regulators and legislators is that we should always err on the side of too much transparency. By the way, these are many of the same people that believed there are times when there is too much liquidity. But I digress. At the core of this article it the notion…"

Tradeweb to Launch All-to-All Corporate Bond Trading in Europe – The Trade

Full Article: The Trade

Tradeweb will extend its all-to-all corporate bond trading service, to be launched in the US later this year, into Europe following an increase in demand for RFQ trading protocols.

Comments
  • Iceman
    IcemanApril 15, 2017"Agreed, always helpful when you have a board of the largest liquidity providers in the market who are the only firms who can vote to make this change to the platform. I think a better question is does this model help the market and what size can you get done. I see this only distorting the value of the asset by making firms believe they can get in and out of assets in size at the same price as an oddlot. Separately what are the fees? and will it be the same for all pa…"
  • Tried and failed.
    Tried and failed.April 14, 2017"The only surprise here is what took them so long? Driven by the need to catch MKTX, not be swayed by the fusion group and leverage the Dealerweb success, this should position TW for increased market share. It illustrates the ability of a large incumbent to be late to the game and still succeed, whereas start-ups who brought the innovation to the market way earlier still struggle for relevance. The tough times for the newbies continue.…"

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?…"

Bloomberg Terminal Users Declined in 2016 – The Desk 

Full Article: The Desk

The report found that Bloomberg accounted for 33.40% of market share as a result of growth in its data feed and other non-terminal business. At the same time, terminal counts shrank for only the second time in company history.

Comments
  • Slider
    SliderMarch 31, 2017"I feel that Bloomberg has been asleep at the wheel and really offered much less on the data innovation front than I would expect. There is this entire data revolution going on and they haven't been innovative ENOUGH. Makes sense data business is comprising MORE revenue but given the goldmine of data they sit on, I would have expected a lot more innovation and try/fail ideas. But it is true that it's difficult for bigger companies to innovate given the ingrained cultur…"
  • Goose
    GooseMarch 31, 2017"Best of luck to those that are getting all hot and bothered over the terminal miss. It’s nice to own the delivery mechanism as well as the info delivered, stickiness has tremendous value….but judging from these numbers looks like Bloomberg is making a long term bet on building valuable data and content as delivery gets democratized….and they are doing a pretty good job of it.…"
  • Tried and failed.
    Tried and failed.March 31, 2017"Looks like business as usual at Bloomberg. So much for all the disruptive technology designed to slay it.…"
  • Jester
    JesterMarch 31, 2017"Saw a competitor to Bloomberg post on LinkedIn that this is Bloomberg’s “Blackberry Moment”. I couldn’t disagree more. According to this article, it looks like Bloomberg is expanding their domination in financial market data which in my humble opinion is the most valuable resource in financial markets. Relying less on terminal sales to make ends meet is a fantastic long term play.…"

Bond Quotes and Performance Art – Bloomberg View

Full Article: Bloomberg View

There’s something a bit creepy about this story, which is not so much about a hedge fund that discovered it would lose money if it was forced to sell a bunch of bonds all at once — though that is true — as it is about a hedge fund that looked into where it could sell bonds and found out that everyone’s whole concept of fair value was completely wrong.

Comments
  • Tried and failed.
    Tried and failed.March 25, 2017"This story graphically illustrates the present liquidity gradient in Fixed Income evidenced by at one end of the curve, large liquid, high grade bonds trading frequently in good volume, to the other end described in this case. Regulation and balance sheet costs have reset liquidity provision. Quotes and evaluated prices in any but the most liquid bonds are no indication of liquidity. Look at what the GS trader (quoting 63/66) said; "not making it" (the basis), "I don'…"
  • Cougar
    CougarMarch 24, 2017"This has got my back up in a BIG way. As both a former proprietary and market marker focusing on far more illiquid issues, at worse market times (height of the crisis), I am aghast at the way the client was treated. I would never dream of spivily asking the client where his bid was - amateur nights no matter how tight you are with the client - let alone bond legend Weinstein. I am genuinely shocked the dealer had the audacity to ask this. Nor would I send out bonds ru…"
  • Tried and failed.
    Tried and failed.March 24, 2017"Too true. In spite of all the regulation and Fintech, Fixed Income remains the bad boy of financial markets and still very likely to be instrumental in the next crisis.…"
  • Merlin
    MerlinMarch 24, 2017"Providing appropriate warnings to the retail investing public is a much better solution to the problem than trying to create liquidity where it does not exist. But my bet is the public would still buy anyway and still get shafted. With the reach for yield in the zero rate environment, everyone is set up for the slaughter now.…"

Obstacles to Innovation in Fixed Income – Grant Wilson / Byron Cooper-Fogarty (Tabb Forum) 

Full Article: Tabb Forum

The market seems to broadly agree that innovation is the best way to resolve the problems presented by these pressures and their impact on profitability. As demonstrated by the small number of established utilities or successful fintech start-ups, however, this often is more difficult than it looks.

Comments
  • Iceman
    IcemanMarch 18, 2017"In reality what this article highlights is it is easier for people to make noise about something that they feel is wring than actually support change through actions and as has been highlighted investment. Change does not happen overnight but it does not happen at all if the apathy of the market remains. Easier to talk about something than invest the time and money in what can be a painful process of change. I see thee incumbents happily in control for a long time to…"
  • CelticBond
    CelticBondMarch 17, 2017"Well FI has not taken on board a number of the innovations that has propelled FX or exchanged traded securities. Calling for innovation when invention is required. As mentioned already the statement 'vested interests' well that is the issue. For too long the buyside have also not seen that their market is not working efficiently & to change this investment has been required. I have heard for too long Trading desks say 'they will never pay to trade' or 'Bloomberg i…"
  • Wolfman
    WolfmanMarch 17, 2017"Whilst I agree that technology can solve many of the perceived problems in fixed income trading, we must also follow the money. The incumbents are widespread. Traders, sales people, portfolio managers and yes, even the technology leaders themselves are cogs in this machine that all have vested interests in the status quo. Solutions that help them make money will be embraced before solutions that replace them. The technology for driverless cars is here today, but befor…"
  • Cougar
    CougarMarch 17, 2017"The elephant in the room is (in)vested interests. In getting a large number of banks to work together on an initiative larger banks often own stakes in the incumbent market infrastructure firms. While these banks own business or clients may acknowledge problems with the incumbents the bank's ownership stakes are an effective inhibitor to change or adoption. In part this article skirts around the core question: does bank strategic investment need to evolve from a profi…"

Buy-Side Tech Spend in Focus – Markets Media 

Full Article: Markets Media

According to a recent report from Greenwich Associates, institutions are allocating their increasingly scarce resources to fixed income pursuits and technology

Comments
  • Slider
    SliderMarch 10, 2017"5% YOY increase in spend allocation into technology is good but I fear that with rising rates and a more liquid/robust Fixed Income market, people may get comfortable again with business as usual leading them to be flippant regarding technological innovation. To realize the importance of technology in this market, participants have to see a clear increase in the bottom line or be exposed to products they simply can't live without like smartphones in the consumer space…"
  • Goose
    GooseMarch 10, 2017"Recognition that you need to increase spending on technology is a good start. I absolutely agree that your OMS is a good place to focus that increase. Slowly but surely, progress is being made in allowing asset managers to aggregate the information they want without needing the blessing of the data originator. The article states that the average buy side desk for comp and tech is $35.8 million. 3% growth split evenly among the two is a total of $538,000 for technology…"
  • Wolfman
    WolfmanMarch 10, 2017"I think the big story here is the focus on reducing the cost of terminals in order to allocate greater resources to other technologies like OMS. The 900 pound orange and black gorilla won't go away easily and will continue to develop added value to their user base. The ability for new technologies to develop solutions away from them isn't simply a technical question but a network question. Don't count them out just yet. What I would have liked to have learned from thi…"

The Asset-Management Pressure Cooker – Bloomberg Gadfly 

Full Article: Bloomberg Gadfly

Behemoth investment firms, from Fidelity to Vanguard to BlackRock, are locked in fierce competition to attract assets, even if that means dropping their fees closer to zero. The result has been increasing strain, borne in large part by asset-management employees, who are being laid off or paid less.

Comments
  • Goose
    GooseMarch 3, 2017"Good points all. I would add govt intervention skewing fundamentals has made it harder to realize active mgmt gains.…"
  • Cougar
    CougarMarch 3, 2017"This article highlights some interesting asset management developments over the last few years: 1. The outcome of increasing correlation of markets & asset classes’ behavior - diminishing the attractions and ability of active funds to provide attractive returns over passive funds/structures - increasing the proportion of funds into trackers/ETFs. 2. Outright yields/returns diminished in most markets off the back of low central bank rates policy shining a spotlight…"
  • Viper
    ViperMarch 3, 2017"It seems like a pretty inevitable path but asset managers have enjoyed an unprecedented growth in assets and revenues for a while. Market rallied all around them and we went straight line tighter for the last 5-6 yrs. It is easy to say just use index funds. So perhaps the generic index following will be commoditized but skill in asset selection is a lot more important in times of increasing interest rates which is upon us so I wouldn't count active management out just…"

The ETF Illusion: An Inside Look – Seeking Alpha 

Full Article: Seeking Alpha

As I’ve said more times than I care to remember, the problem with all of this is that when you stop using something, it invariably falls into disrepair. That disrepair, combined with the absence of banks willing to lend their balance sheet in a pinch, means there’s no liquidity for the assets that underpin these HY ETFs

Comments
  • Tried and failed.
    Tried and failed.February 25, 2017"I agree, the secondary market infrastructure for bonds (Corp & HY) is expensive, inefficient and in decline. Everyone knows that, whether they invest in individual bonds, mutual funds or ETFs. The secondary market actually profits from inefficiency, it will therefore never fix itself. You can measure the secondary bond market inefficiency by observing the H216 revenues for trading desks and platforms. That uplift largely represents the trading cost to investors. A…"
  • Sundown
    SundownFebruary 24, 2017"This has been a long topic of debate. I think there is some merit to the story, but I think ETFs are labeled as the problem when mutual funds have a much larger foot print and the same issues. The true underlying problem is the mechanics of the HY fixed income market. When times of stress occurs, nothing in that market flow smoothly. If the market has a false sense of security that the HY ETF is the magic bullet to the market during times of stress, I think they are m…"

A Little-Known Startup Has Quietly Amassed 100,000 Wall St Users – Business Insider

Full Article: Business Insider

The aim is to become “the industrywide operating layer,” Mazy Dar said. Right now, OpenFin is typically delivered to a desktop together with an application that runs on it. The hope is that, in time, OpenFin will be on the desktop independent of any application, becoming a kind of finance application ecosystem of its own.

Comments
  • Jester
    JesterFebruary 17, 2017"I haven’t run into many people in our industry that really understand what OpenFin is and how it is supposed to make things easier. Let’s put it this way. Remember when most people used AOL for internet and about once a week they would get a CD to upgrade their service? Yes, you would have to constantly download new software just to get on to the internet. Crazy right? Now we just boot up the old computer and connect seamlessly. Well, this is what OpenFin may be able…"
  • Wolfman
    WolfmanFebruary 17, 2017"People used to say that Rodney Dangerfield was an overnight success story, even though he didn't make it in stand-up until he was in his mid 40s, even though he began writing comedy routines when he was 15! Ok, I'm a Dangerfield fan... His "I get no respect" became his signature line. OpenFin now has more than 100,000 users! They have been working on this vision for many years and are a group of talented, hard-working professionals. The idea that startups like OpenDoo…"