Just a thought in relation to waratahs post question regarding credit bonds here
With a “client” hat on I’d be complaining that dealers credit inventory pages are not clearly showing what they are genuinely making market in. If I look at Bloomberg (or other) I might see a whole bunch of dealers offering 000’s of bonds at 5×5, which appears great but I know that when I send an inquiry my certainty of execution is very limited – especially if Ive done my homework on stock selection and found something a bit whacky to pick up a bit of alpha. Existing AXES offerings are better targeted, but still open to misuse -intentional or not. Of course this isnt just fixed income – it’s the same story with equity IoIs; it all comes down to a dealer saying they are a buyer/seller when [to me] they are not.
So do we get someone to “police” IoIs and Axes (hey, did we all groan?) or turn this on its head; how about if buyside sent out executable bid/offer lists? So without having to work with baggage/history of dealers existing inventory offerings (pricing pages, axes, ioi), and being an initiative that is driven by buyside genuinely posting bid/offers for other market participants to aggress, do we reach a model that would work “better” for the credit bond market?
Conceptually is this really a million miles away from existing model? Aren’t these bid/offer lists just a bunch of RFQs specifying the attributes (cpn, mty, duration, issuer, sector, …) and a target trading level, rather than being an inquiry for a specific issue? (Sure, loads of details to ensure you only get hit/lifted once per order if its multidealer, and how about partial fills from all the dealers you asked to add up to a total fill?, central order book? attributed/name give up/ccp/prime bro?, and so on)
This isn’t pitched as a replacement of the existing e- markets. Just a question as to why we should not break out of the model of “just” replacing existing manual workflows with an electronic equivalent in order to offer processing gains and scalability. So a question to the ECNs and platforms, if you want to capture market share in the electronic space, why not also explore new and different transaction types that are solely and specifically for the electronic markets?
And if you’re still with me, with Mifid changing the potential execution venues for other asset classes, why would the above model need to be limited to just credit or indeed just bonds?