MiFID II could prompt buy-side firms to form a new role as price-deciders for trades, according to the heads of fixed income trading at some of Europe’s largest asset managers.
Speaking on a mostly buy-side panel at the Fixed Income Leaders Summit in Amsterdam, several heads of desks agreed the role will stem from being price makers, although it will evolve due to more data and the use of technology.
“The buy-side will need to participate more in the price making process as technology opens up and data becomes more available in fixed income,” said Juan Landazabal, global head of fixed income and FX trading at Deutsche Asset Management.
Brett Chappell, head of fixed income trading at Nordea Asset Management, agreed with Landazabal but explained the subtle difference will be in price deciding.
“We will become price-deciders. I know traders on the sell-side have in-depth knowledge of what is happening with each individual ISIN, but now the buy-side puts its own data and IOIs into their systems.
“So, even though we do not have the in-depth knowledge like a trader at a bank does, we can decide at what level to trade and this is what is new… We can go to a bank and say we are bidding here, do you have an offer? That’s the difference,” Chappell told delegates.
Antonio Pilato, head of trading desk at Generali Investments Europe, also explained he sees prices streaming from around 25 banks, but often the only prices he pays attention to are his own.
He added the discussion should then shift towards how to distinguish the high- and low-touch trading activities on the trading desk.
The concept of price making has long been a topic of discussion on the buy-side. Earlier this year, BlackRock’s global head of trading, Supurna VedBrat, told The TRADE the buy-side will take on a more price maker role, and will disclose prices as opposed to making markets.
“A price maker is different from a market maker – as a price maker you are willing to declare the price at which you will buy or sell a security. Being a price maker can be beneficial if there is a market event or for liquidity constraint products,” she said at the time.
All panellists agreed the main focus will be on liquidity in a post-MiFID II world, with the breath of liquidity expected to improve, although transparency will not necessarily lead to higher liquidity.