Why All the Fuss?

One of our clients commented in passing: What is behind all of the interest in electronic bond platforms all of a sudden?

The electronification of the bond market has been a topic of discussion for a while, but lately we’ve seen a flurry of activity and press.  So what gives?

There are a few basic facts driving this interest:

• Dealer inventories are down something like 70% between 2008 and 2013
• The overall corporate bond market has more than doubled in that time
• Primary bond issuance has risen even faster — some reports say by a factor of 5
• Combining these factors means that dealer inventory now equals only about 1 day of turnover

As a consequence, most of the reservoir of liquidity in bonds exists with the buy-side, yet the infrastructure of the market does not yet reflect that reality.

Additionally, we would say that there has been a cultural shift. Bond investors and firms now believe that the future will be electronic, as it has become for so many other markets.

So now there is a will, and a way.