Greenwich Associates study reveals difficulty in executing corporate bond trades; Transparency and Liquidity are Lacking

MarketsMuse update courtesy of extract from Jan 23 Wall Street Letter, followed by our own comments (thanks to our Exec Editor’s providing more than average knowledge of corporate bond trading and the assortment of electronic exchange initiatives intended to increase transparency and liquidity in the corporate bond marketplace, one that is notorious for being a less-than-transparent over-the-counter market place)

Buy-side firms are experiencing difficulties executing corporate bond trades of more than $15m, a study by Greenwich Associates has revealed.

According to the findings, 80% of the institutional investors report troubles when executing larger trades, which reflect a decline in market liquidity caused in large part by the pullback of fixed-income dealers in the wake of new and more stringent capital reserve requirements.

With dealer inventories shrinking, investors’ search for new liquidity providers is proving a boon to the fast-developing ranks of electronic trading platforms.

All-to-all trading, previously unheard of in corporate bond markets, accounted for an estimated 6% of electronically executed US trades in 2014 as a sign that market dynamics are evolving, the report said.

The report entitled US Corporate Bond Trading: A Multitude of Platforms Give Investors Options, identified 18 emerging electronic platforms competing for the corporate bond trading in the US. Continue reading →