MarketsMuse.com Fixed Income & Trading Tech update is without a rating and instead, takes a long view towards this week’s announcement from inter-dealer broker GFI Group launch of an electronic service for “dealers only” to trade odd lots of corporate bonds. For those not in the know, “odd-lot” is generally under $1million notional value.
This is not to suggest that GFI’s launch represents anything innovative; more than a few electronic platforms intended to make trading in corporate bonds easier have started up and since failed throughout the past 20 years, and GFI’s recent announcement is on the heels of six other announced initiatives during the past 3 years alone. The fact that GFI is aiming at the so-called underbelly or odd-lot marketplace puts them in competition with among others, multiple dealer pages on Bloomberg’s terminal farm, entrenched player MarketAxxes, and to a much lesser extent, the NYSE Bond system (“NYSE BONDS”) a platform that was first introduced around the same time as the Ford Edsel.
More interesting than the below “news flash” courtesy of TradersMagazine, readers following the “electronification of corporate bond trading” should borrow back from time and reflect on a report published in 2013 by McKinsey & Co. & Greenwich Associates (click on image below). Despite its aging, the white paper remains evergreen.
Electronic trading in the fixed-income market is about to take another leap into the digital age for those traders looking to execute non-standard order sizes, or odd-lots. GFI Group has announced a new electronic trading platform for odd lot corporate bonds in the U.S. Historically, odd lots have been traded via telephone and voice brokering. GFI’s new offering, available via CreditMatch, serves the dealer-to-dealer market for corporate bonds with a notional value of less than $1 million. Odd lot transactions represent almost 90% of the number of trades in the interdealer corporate bond market and almost 20% of the notional amount traded, according to FINRA. Effective today, the new service consists of an end of day odd lot matching session that provides instant executions via CreditMatch, GFI’s electronic trading system for corporate bonds and derivatives. The service will be extended into a fully executable Central Limit Order Book (CLOB) during the third quarter of 2015. Trades will be electronically posted to FINRA’s Trade Reporting and Compliance Engine (TRACE) and cleared by Pershing.
