As widespread buy-side demand increases for new electronic bonds trading platforms, institutional block crossing dark pool Liquidnet has indicated its interest in operating a fixed income venue, but said it has no firms plans at this stage.
John Kelly, COO of Liquidnet, said fixed income was a complex market and many solutions that have proved effective in equities would not suit a bonds trading platform.
“We do not have any concrete plans yet to launch anything but we are actively looking into this,” he told theTRADEnews.com.
“Corporate and treasury bond liquidity is one of the biggest problems that has to be solved in capital markets the world over and it’s an issue our buy-side members continue to raise with us,” Kelly said.
Recent regulatory regimes including Basel III’s Liquidity Coverage Ratio, which requires banks to hold larger reserves of high quality assets to cover cash outflows, and expected requirements under the Volcker rule have caused banks to scale back their inventories of fixed income products, reducing liquidity for buy-side participants.
A report released this week from TABB Group showed 77% of 25 of the largest US buy- and sell-side firms agreed a new alternative trading platform for corporate bonds could succeed in attracting market share from existing platforms.
This suggests support for a Liquidnet offering is ripe amongst asset managers faced with increasing difficulties in trading less-liquid fixed income products.
“At Liquidnet we are about solving problems to make markets more efficient. We did that with trading large blocks of equities and now many of our members are approaching us about making the fixed income market more efficient – which is a very different market,” Kelly said.