January 2007


I was chatting to a Hong Kong based colleague earlier this week. As the chat turned to specific countries and their trading habits, he mentioned Korea (South of course!).

Interestingly 30% of the trading in the Bond Market goes via the Korean Stock Exchange. The other 70%? Via YAHOO instant messaging!!!!!

Essentially the salespeople at the six main securities houses send out broadcast messages to the clients with a list of offers, axes etc. The clients react accordingly or do keyword searches when looking for a particular bond or issuer etc. Any efforts by ECN’s to break in to Korea have met with plenty of apathy & a genuine satisfaction in the way things are done now – both sellside & buyside.

I’m not suggesting this as a way forward in Europe, but viva la difference!

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Story below from Finextra. GS were suspended last week from NewEuroMTS and now looks like they have decided to stay out!

http://www.finextra.com/fullstory.asp?id=16428

Given that January is often a month of reflection, it is time to challenge what most of us hold true in Fixed Income eTrading.

Why?……….well, over the festive season I was thinking about the past 5-years and how this segment of the industry has developed. How many traders now wouldn’t know what to do without their TW, ALLQ, BBT, BV, RTFI etc, etc. BUT……I thought, have things really been radically changed. In the sense of sudden, dramatic and fantastically beneficial change- a “breakthrough idea” to use Harvard Business Review speak.

I’m talking about something that has revolutionised, not WHO you do business with (covered in AmazonBay), but HOW you do it.

When you really think about it, the workflow difference between calling 5 banks and using TradeWeb is not that different to using the phone. It is undoubtedly easier and more efficient, but from a purely workflow perspective you are still essentially asking the same people the same thing and getting back the same answers…..just via a better medium, in most cases. Indeed this has been the key success of eTrading; being able to replicate what was/is done on the phone but making it more efficient. So it is in no way a criticism.

So what are a few of the areas we can challenge in the industry and move, in some small way, towards this revolutionary step? I guess for starters how about:
– Banks make prices and Funds take prices
– Gilts market will never be truly electronic, it is an old gentleman’s club
– True STP is FIX reliant
– Algo trading isn’t for Fixed Income
– Hedge Funds can’t be serviced electronically

Please feel free to add others in the comments section!

Now I sadly haven’t come up with the “breakthrough idea” but I’ll keep asking questions of people smarter than I and hopefully they will, by some indirect result. It is something we all should try and get our people thinking about. That means sell side, buy side & ECN, sales, trading, settlements & IT. This means challenging popular opinion on matters such as the above. Only by participants grinding their axe will this happen, I still see too much acceptance of the status quo.

So as far as the participants are concerned, it is a case “Whatever you want, whatever you like!”….sorry, bad gag!

News out of the States:
“Consolidation in the multi-participant trading platform space has long been talked about but it has now taken a step forward with news that State Street Corp. has agreed to acquire Currenex, the independently owned online foreign exchange trading place.” More on http://www.profit-loss.com/

Not FI, I know, but yet another example of the trend towards banks running the venues they provide liquidity for.