The take-up of electronic trading in global fixed income markets accelerated sharply in 2006, according to the annual Securities Industry & Financial Markets Association (Sifma) survey.
The data revealed that 74% of operators of electronic trading systems for fixed income securities witnessed an increase in trading volume during the first three quarters of 2006 compared to 2005. 28 percent reported a volume increase of twenty percent or more since 2005.
Every year since 1997, Sifma has surveyed firms that offer electronic trade execution services in fixed income securities and related products, principally for broker-dealers, institutional investors and bond issuers.
22 of those surveyed in this year’s report – entitled ‘eCommerce in the Fixed-Income Markets’ – said their platforms are compatible with FIX protocol version 4.4. Version 4.4 of the FIX Protocol Organisation’s (FPO) technical specification for the electronic communication of trade-related messages came with a large number of additions and changes designed to facilitate the use of FIX for trading fixed-income products.
Value-added services
The majority of those surveyed said their platforms provide users with direct access to trade clearance and settlement systems, reporting links to a variety of clearing organisations including DTCC, NSCC, GSCC, Euroclear, Clearstream and Bloomberg.
Other value-added products and services designed by the firms to streamline their clients’ trading process include confirmation and allocation, electronic research delivery and risk monitoring or management.
“Market participants are increasingly turning to electronic execution as trading platforms grow even more sophisticated,” says Michael Decker, head of research and policy analysis, Sifma. Increasing adoption of electronic execution enhances the liquidity of the trading platforms. “In turn, enhanced liquidity, as well as efficiencies and cost reductions, continue to draw users to the electronic trading marketplace,” notes the report.