Fear is a Four Letter Word

But Opportunity is an 11-letter word. And 11:4 is about the ratio of bond traders that now see electronic trading as an Opportunity (58%) compared to those that see it as a Threat (21%), according to a new study by Greenwich Associates. In 2015 the ratio was much closer to 1:1, so it appears the market is evolving decisively in favor of e-trading.

It would be interesting to see the break-out of opinion by market sector and by sizes traded. Liquid markets like Treasuries have moved substantially to e-trading. Similarly, odd-lots in a variety of markets including (munis and corporates) have moved to e-trading, even where the market is not liquid.

But the quadrant of trading that includes idiosyncratic, large trades should require more hand-holding from an analytic and transactional point of view. So a pure e-trading model may never be appropriate for these sectors.

Rather, electronic tools that empower rather than eliminate brokers will be the future of e-trading for such markets. One-click trading may be the dream, but for some markets this may not be realistic in the near term. Rather, tools that make sales teams incrementally more efficient at sell-side firms, or that develop new channels for traders to source liquidity, or that uncover trade opportunities like matchers that were unavailable before, may be the real value-add of e-trading.

Tools to help them do their jobs better? No wonder traders smell opportunity rather than fear.