Banks must adapt to changes in the fixed income market in order to gain a competitive advantage, according to research published by London-based consultancy GreySpark Partners today.
Regulatory reform is highlighted as the key driver behind changes to the structure of the fixed income market, bringing and end to debt warehousing by market makers, though macroeconomic pressures are also influential.
These forces have led to increased use of technology and e-trading in these asset classes.
In the report, GreySpark said banks need to adapt to changes in the market by becoming specialist providers of liquidity in fixed income.
In order to achieve the required standard, the report suggests banks will need to enhance their existing sales and trading tools to emphasis cost-effective access to bonds liquidity and interest-rate derivatives liquidity. Enhancements to post-trade functionality are also needed, according to GreySpark.
Frederic Ponzo, GreySpark managing partner and lead author of the report, said: "The rules of the game governing fixed income markets are changing drastically. As a result, banks must decide soon how to build or rebuild a competitive advantage in fixed income e-trading".