Buy-side ‘in control’ of fixed income liquidity

WBR survey found majority agree the buy-side has the most control over liquidity in fixed income.

A survey on fixed income markets in the US has found that 68% believe the buy-side holds the key to unlocking liquidity in fixed income markets.

US fixed income market participants have agreed that liquidity is now in the hands of the buy-side, and the challenge is actually moving the liquidity from buy-side books, rather than sourcing it.

Worldwide Business Research (WBR), which authored the report, said: “This is quite the role reversal compared with pre-2008, when the majority of the liquidity was held by the sell-side.

“It also casts an interesting light on the fact that our respondents felt that platforms had the potential to offer more liquidity – this emphasises the shift in electronic trading across fixed income markets.”

A significant 53% of respondents told WBR they think trading platforms have more control over liquidity in fixed income.

Industry experts recently agreed that the growth in fixed income platforms will grind to a halt, leaving behind only a few over the long-term.

WBR explained that the growth in fixed income initiatives have “inadvertently given buy-side heads the task of working their way through these initiatives to find new partners and establish who is best to help them find new means of sourcing liquidity.”

Respondents were also asked whether they were evaluating their current platform partnerships in order to help source more liquidity, and 92% stated that they were.

When asked about top trading functions on a platform, 70% said integrated transaction cost analysis capability was key to designing a “perfect trading system”.