Back to top

Why Fixed Income Trading Is and Isn’t Like Equities Trading

A lit lighbulb hovering over a human palm
Peter Holmgren
November 25, 2020
Facebook Twitter Xing Mail LinkedIn

As part of my inauguration into valantic FSA’s eFICC platform, I have been reviewing some of the reports by Greyspark on the same subject.

Two related themes in the credit market caught my eye. The first is that, as we all know, the ability of banks to warehouse risk has been severely curtailed by all the post-GFC regulation we have seen. Bank inventories have declined from a peak of nearly $250 billion to less than $50 billion today. 

At the same time, though we have witnessed a surge in corporate debt issuance driven by super low-interest rates, central banks’ asset purchase programmes and a corporate “dash for cash” in these uncertain times.

Taken together, this means that participants have to reassess their use of technology for providing and accessing liquidity. Like Equities, Fixed Income increasingly relies on a spectrum of liquidity provision mechanisms: straight from main dealers, non-bank market makers, buy-side direct liquidity as well as D2D, D2C and A2A platforms, even stock exchanges.

Handling efficiently such complexity, whilst complying with best execution and transparency rules, isn’t always easy and requires new tools that can automate these evolving trading workflows. That’s why the impact of the right technology in Fixed Income will be such a game-changer…