The Banker: Corporate bond market squeezed

03 March 2014 in THE BOND MARKET by Tim Binnington

The Banker - Corporate bond market squeezed as dealers withdraw

"While the platform route may offer some solace to liquidity-hungry investors, an alternative approach is emerging that may in the long run offer a smarter way for banks to source liquidity for their customers. Algorithms are being developed by the likes of start-up Algomi (run by Stu Taylor, formerly global head of matched trading in fixed income at UBS) that allow banks to run a marketplace based on the vast amount of information that flows across trading floors.

“Banks are adopting broking, not risk-taking strategies, with more than 60% of volume now estimated as wash-through,” says Mr Taylor. “The problem we saw was that to be a good broker requires not only centralised information, but more importantly immediate and global coordination that allows individual salespeople to quickly navigate their own firm’s distribution capability.”

Algomi’s solution runs alongside internal bank data sources, including voice inquiries that account for 75% of credit volume but are never shown on electronic venues.

The intelligent use of data to improve communication between participants may not itself lead to higher levels of liquidity, but the idea has attracted interest and Bloomberg is among those with a similar offering in its electronic Trade Order Management Solution. In a world of empty shelves, it is likely to be the cleverest birds that catch the worm."

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