See below, from today’s FT. Old news to most in the FI e-trading space, however when the topic came up during the Hedge Fund panel at the SIFMA conference the panelists tended to ask why? Unless you wish to become a bank……
“Hedge funds seek access to eurozone bonds
By Gillian Tett in London
Published: February 26 2007 22:50 | Last updated: February 27 2007 00:57
A battle has erupted around the eurozone government bond market with several powerful hedge funds trying to gain direct access to MTS, the main eurozone government bond trading platform.
The move by the funds, which include groups such as Citadel and Vega, could potentially undermine the control that investment banks wield over Europe’s government bond market.”
Personally I can see the appeal of anonymity to these guys….but the spreads on MTS will tend to be wider than on a B2C ECN such as TradeWeb or even MTS’s own BondVision system. In saying that, they will clearly be targeting the genuine, lumpy axes that are posted – whilst adding their own – whilst still trading via the phone/B2C systems.
Fixed Income E-trading 
March 1, 2007 at 8:22 am
and does everyone have the same quoting obligations?
March 1, 2007 at 8:28 am
Well no, I can only guess they’d opt for Price Taker status rather than Price Maker…..
Access the EPDA’s discussion paper re: 3rd Party Access here:
http://www.finextra.com/finextra-downloads/newsdocs/EPDA.pdf
They raise the issue of Direct Participation vs. Order Routing. Needless to say, they don’t favour either so long as current obligations exist.
March 30, 2007 at 12:34 am
Hedgy desire is to leave orders…some of the big boys are now quoting markets (2way) in most products they have an option book in. In US, a few funds are ready to quote 2-way on anything with deriviate or e-liquidity. Hedgy’s will continue to be the drivers until another Hedgy fallout where the staff/skills/methods etc are hired by asset managers.
March 30, 2007 at 10:17 am
I see access to a pool of e-liquidity in repos as being part of the reasoning….as for orders, I guess by taking a Price Maker role they can effectively do that, but then you have the obligations that MTS Price Making carries with it. A Hedge Fund could soon find themsellves out of a position they want & in one they don’t.
As I’ve asked before, is this all about liquidity? Or do they see bid-offer spread as a genuine source of alpha?