Welcome!

News Feed Item

US Corporate Bond Market Seeks New Trading Solution as QE Tapering Looms, Says TABB Group Research

Danger signs in the US corporate bond market are flashing like a lighthouse’s beacon and according to new TABB Group research, the market is searching for new alternatives to trade credit as low interest rates have driven credit issuance to all-time highs.

The challenge, according to Larry Tabb, CEO, and director of fixed income research Will Rhode, co-authors of a new research study, “US Corporate Bond Trading 2013: In Search of a New Market Structure,” is that the current OTC market structure revolves around dealer balance sheets and leverage, which today are under siege by regulators and are being scaled back by bank management. “This is pushing the traditional dealer-based, capital-intensive and voice-based market toward electronic channels. While the existing electronic players are active, well used and supported, many of the current structures revolve around existing capital-intensive business models. That leaves the credit market with unmet needs and significant challenges,” says Tabb.

After speaking in September with heads of trading of the largest buy-side fixed-income managers and global heads of credit, or heads of credit e-commerce, of the largest bond dealers, TABB Group learned there is uniformly strong demand for a new corporate bond market structure allowing diverse sources of liquidity to find one another as the end of Quantitative Easing (QE) nears. However, warns Rhode, “solving these issues will take investment, guts and breaking (or at least bending) established business models. Improving liquidity in 70,000 corporate bond issues (CUSIPs) is a Herculean task.”

Key findings from the study:

  • 85% of buy-side and 83% of sell-side firms are interested in seeing an independent platform emerge to facilitate liquidity challenges, but there is no clear consensus on a business model and rules of play.
  • The buy side would like to see a Central Limit Order Book (CLOB); dealers lean toward a Session-Based market.
  • Dealers are worried about their ability to provide capital amidst new regulations such as Basel III, leverage ratios, stress testing and increased scrutiny of dealer funding through repo.
  • Fixed-income mutual funds have absorbed an additional $1.35 trillion of fixed-income assets, In June 2013, when hints of a reversal of the US Federal Reserve’s backed up interest rates, mutual investors dumped $200 billion in bond funds in only a few weeks.
  • Although a majority of buy-side firms are reluctant to take an ownership stake in a new bond platform, most (buy and sell side) agree that dealers must own a stake in a new platform for it to succeed.
  • More than three-quarters of the buy-side said now is the time for an Alternative Trading System (ATS) to emerge to take market share away from the traditional OTC market dealers and existing electronic platform providers.

While the challenges are sufficient enough to foment change, the catalyst for action is not yet in sight. “Nonetheless,” says Tabb, “the time may be ripe for a new corporate bond trading platform (or trade protocol) to emerge to challenge the status quo.”

The 32-page study with 46 exhibits can be downloaded by TABB Group Research Alliance Fixed Income clients and pre-qualified media at http://www.tabbgroup.com/Login.aspx. For a copy of the Executive Summary or more information, visit www.tabbgroup.com. To purchase the report, write to [email protected].

About TABB Group

Based in New York and London, TABB is the only research and consulting firm focused exclusively on capital markets, based on the interview-based, “first-person knowledge” research methodology developed by Larry Tabb. For more information, visit www.tabbgroup.com. In 2010, TABB launched TabbFORUM, the online capital markets community for peer-to-peer opinion and analysis covering current industry issues, tracked daily by 18,000-plus professionals; in October, 2013, QuantFORUM, a new online channel for the quantitative investing community went live.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
In today's uber-connected, consumer-centric, cloud-enabled, insights-driven, multi-device, global world, the focus of solutions has shifted from the product that is sold to the person who is buying the product or service. Enterprises have rebranded their business around the consumers of their products. The buyer is the person and the focus is not on the offering. The person is connected through multiple devices, wearables, at home, on the road, and in multiple locations, sometimes simultaneously...
Basho Technologies has announced the latest release of Basho Riak TS, version 1.3. Riak TS is an enterprise-grade NoSQL database optimized for Internet of Things (IoT). The open source version enables developers to download the software for free and use it in production as well as make contributions to the code and develop applications around Riak TS. Enhancements to Riak TS make it quick, easy and cost-effective to spin up an instance to test new ideas and build IoT applications. In addition to...
Identity is in everything and customers are looking to their providers to ensure the security of their identities, transactions and data. With the increased reliance on cloud-based services, service providers must build security and trust into their offerings, adding value to customers and improving the user experience. Making identity, security and privacy easy for customers provides a unique advantage over the competition.
CenturyLink has announced that application server solutions from GENBAND are now available as part of CenturyLink’s Networx contracts. The General Services Administration (GSA)’s Networx program includes the largest telecommunications contract vehicles ever awarded by the federal government. CenturyLink recently secured an extension through spring 2020 of its offerings available to federal government agencies via GSA’s Networx Universal and Enterprise contracts. GENBAND’s EXPERiUS™ Application...
"We've discovered that after shows 80% if leads that people get, 80% of the conversations end up on the show floor, meaning people forget about it, people forget who they talk to, people forget that there are actual business opportunities to be had here so we try to help out and keep the conversations going," explained Jeff Mesnik, Founder and President of ContentMX, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
SYS-CON Events announced today that Isomorphic Software will exhibit at DevOps Summit at 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Isomorphic Software provides the SmartClient HTML5/AJAX platform, the most advanced technology for building rich, cutting-edge enterprise web applications for desktop and mobile. SmartClient combines the productivity and performance of traditional desktop software with the simp...
"When you think about the data center today, there's constant evolution, The evolution of the data center and the needs of the consumer of technology change, and they change constantly," stated Matt Kalmenson, VP of Sales, Service and Cloud Providers at Veeam Software, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
I wanted to gather all of my Internet of Things (IOT) blogs into a single blog (that I could later use with my University of San Francisco (USF) Big Data “MBA” course). However as I started to pull these blogs together, I realized that my IOT discussion lacked a vision; it lacked an end point towards which an organization could drive their IOT envisioning, proof of value, app dev, data engineering and data science efforts. And I think that the IOT end point is really quite simple…
Redis is not only the fastest database, but it is the most popular among the new wave of databases running in containers. Redis speeds up just about every data interaction between your users or operational systems. In his session at 19th Cloud Expo, Dave Nielsen, Developer Advocate, Redis Labs, will share the functions and data structures used to solve everyday use cases that are driving Redis' popularity.
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 19th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo Silicon Valley Call for Papers is now open.
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
To leverage Continuous Delivery, enterprises must consider impacts that span functional silos, as well as applications that touch older, slower moving components. Managing the many dependencies can cause slowdowns. See how to achieve continuous delivery in the enterprise.
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, discussed the importance of WebRTC and how it enables companies to focus...
"My role is working with customers, helping them go through this digital transformation. I spend a lot of time talking to banks, big industries, manufacturers working through how they are integrating and transforming their IT platforms and moving them forward," explained William Morrish, General Manager Product Sales at Interoute, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Up until last year, enterprises that were looking into cloud services usually undertook a long-term pilot with one of the large cloud providers, running test and dev workloads in the cloud. With cloud’s transition to mainstream adoption in 2015, and with enterprises migrating more and more workloads into the cloud and in between public and private environments, the single-provider approach must be revisited. In his session at 18th Cloud Expo, Yoav Mor, multi-cloud solution evangelist at Cloudy...