Trading platforms | Fixed income
Into the breach
Into this arid market new trading venues are launching. Creating more places to trade might seem counter-intuitive when liquidity is already hard to pin down, however in markets without centralised venues it could be just what the doctor ordered. With a decline in sell-side liquidity, the obvious solution is to look for ways to connect up buyside counterparties. “Clearly many people are looking at whether alternative trading styles can help solve some of the liquidity problems in the credit market,” says Rucker.
This year asset manager BlackRock is planning to launch the Aladdin Trading Network (ATN), a fee-based crossing service for its buy-side clients, which it hopes will be a “paradigm shift in the way corporate bonds are traded on the buyside.” It is planned that the platform will be opened for the trading of equities and other securitised assets at a later date.
Larry Fink has said he hopes his fi rm, which
currently crosses about 6% of its trades, could cross as much as 30% of trades although he has been cautious about the speed at which that would happen. “If we could see a narrowing in bid-ask
46
spreads, quite frankly we don’t need the Aladdin trading platform,” he said during the Q1 analyst call. “If we are seeing a persistent widening in spreads, we believe this system will fl ourish and grow.” “Buyside fi rms don’t like working directly with only one dealer or dealer platform,” says Francesco Cicero, head of e-Trading at interdealer broker GFI. “They have no issues with opening up the market although that is not ideal for dealers. As a result, dealers are looking for intelligent ways to retain the order fl ow with the buyside fi rms without necessarily on-boarding the risk. A way to do that is to pass it to someone else as quickly as possible, matching client orders where actually the dealer just intermediates the trade.” Broker Goldman Sachs launched a bond trading platform in June called GSessions. It offers two fi ve-minute trading sessions on Tuesdays and Thursdays, one dealing with a high yield bond and the other an investment grade bond, and both supported by a fi xed level of liquidity guaranteed by the bank. The fi rm has rolled out the service in US and
Europe and plans to increase the frequency if the platform is successful.
Best Execution | Autumn 2012
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