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Trading platforms | Fixed income


“I don’t think bringing in new execution venues will have a dramatic impact on liquidity. It will probably help, but most of these systems really need


meaningful traction which can take years.” Stuart Campbell, Invesco


Investment bank UBS’s single-dealer platform,


Price Improvement Network – Fixed Income (PIN-FI), also allows trading of fixed income although the volumes seen are low at present. Michael Cannon, co-head of investment grade trading at UBS said “PIN as it currently exists typically clears some of the smaller transactions, meaning it is used for matching customer inquiries and improving price and liquidity on the smaller transactions for clients as they adjust and rebalance their portfolio.”


He notes that the service is meant to facilitate liquidity for the customer base, acting as “an additional outlet rather than being an alternative way of going to the dealer community, as with some electronic markets.”


In January 2012 PIN became a liquidity supplier


to Galaxy, a fixed income multilateral trading facility (MTF) launched by trading system supplier TradingScreen in 2011. The firm which operates a central limit order book, had itself been set up in response to a call from the French government’s economic ministry, which was concerned about the limited liquidity and transparency in Europe’s bond market. “With TradingScreen we have created a price


aggregator that goes across banks, MTFs and regulated markets to provide a full picture of the market. Clients should be able to access all of these pools and trade on any model they wish,” notes Male.


Established platforms such as MarketAxess are also looking to introduce different trading styles. “Traditionally, on MarketAxess, we have


Best Execution | Autumn 2012


provided the ability for institutional investors to send request-for-quotes (RFQs) to a group of market-making dealers,” says Rucker. “Recently we’ve introduced a functionality called Market Lists that allows an investor firm to send the RFQ to the dealers of their choice, but at the same time to send it out to buy-side users on the platform. If an investor finds an order for a bond on the list, from another investor, which matches their requirements they can trade against it. So with Market Lists we are bringing buy-side institutions together to trade bonds, although there is always a dealer used as intermediary.” There is some scepticism on the buy-side as to how successful these new entrants will be. “When a venue carries the name of a bank I am suspicious, I think venues should be more objective,” said the chief executive of mid-tier asset manager. “I see more potential for Galaxy and NYSE Euronext’s BondMatch because you have to be so careful a bank is not putting its trader in front of an order.”


Stuart Campbell, head of global fixed income trading at asset manager Invesco, uses electronic RFQ platforms aggressively but currently avoids crossing platforms or single dealer platforms. “Smaller trades will always be run across


electronic platforms because it is efficient to request multiple quotes in a size up to about $10m, for liquid on-the-run deals,” he says. “I don’t think bringing in new execution venues will have a dramatic impact on liquidity. It will probably help, but most of these systems really need meaningful traction which can take years. If you look at the RFQ systems like Tradeweb, MarketAxess and Bloomberg they were slow to get started even where they had bank sponsorship.” He suggests Aladdin would have potential, but BlackRock might need to tackle the issue of streaming prices from the banks into the system. “If you don’t have a live price how do you know


where to set your bid or your offer as a client?” he asks. “Or if you could combine BlackRock’s platforms with a session model with five-minute windows, you wouldn’t have the need to stream live prices all the time.” ■


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