Connectivity issues a major barrier for bonds

Panel at Fixed Income Leaders says budgets do not allow firms to connect to all fixed income platforms, as number available in market rises to 101.

Despite vendors building solutions for bond market connectivity, technology budgets are stopping the buy-side from linking to other firms to trade bonds, a panel has agreed.

A panel at the Fixed Income Leaders Summit conference in Boston this week discussed the ‘artificial barriers’ asset managers face and agreed platforms need to adopt an all-to-all nature to ensure firms do not need to connect to multiple platforms to find liquidity.

Chip Bankes, head of trading at Loomis Sayles & Co. explained to delegates the barriers in trading bonds “comes down to nonconformity of connectivity”.

Bankes added: “From a technology budget standpoint, it’s difficult for Loomis Sayles to link to all of the platforms. An all-to-all platform where all participants can connect is needed.”

A fixed income platform evaluation day at the event found there are now 101 platforms on the market, and this is still increasing and causing further fragmentation.

The panel agreed that the ability to access the market with consistence across venues and platforms is key for connectivity.

Sam Priyadarshi, head of fixed income derivatives at Vanguard, told the panel certain firms don’t have access to certain markets and “larger clients have better liquidity and therefore better prices.”

The panel also discussed the complexities of price formation in the bond market where the panel agreed it can be difficult to figure out which price is executable.

Pryadarshi added the market is perceived as an “economy between price makers and price takers” but the distinction between the two will become more blurred.