Mostly… fixed income and cross product eTrading

February 7, 2007

SIFMA survey 2007

Filed under: etrading — holky @ 9:21 am

Securities Industry and Financial Markets Association (SIFMA) press release said “The Securities Industry and Financial Markets Association (SIFMA) today released the results of its 2nd Annual European Fixed Income e-Trading Survey, which reveals that sellside, buy-side and trading platforms expect e-Trading, as a percentage of volumes, to grow by as much as 38% in 2007.  This follows the sell-side reporting a 32% growth in volumes of e-Trading as a percentage of the total from 2005 to 2006.”

  • Multidealer RFQ is the dominant model for executing electronically in liquid markets.
  • Price consistency is the top reason buyside choose particular dealers.
  • Depth of liquidity top reason buyside pick a platform.
  • STP functionality not a particularly big factor in platform selection.
  • And 42% of the buyside respondents do not know about MiFID.
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    1. User friendliness scored very highly also, when chossing a trading venue, and yet speed was surprisingly low. I’d suggest this was a result of speed being assumed….but this isn’t always the case.

      Interestingly Liquidity Hub mentioned in another session that they plan to provide Request For Streaming Prices for $ & € Swaps & UST, rather than RFQ. A number of people in the Swaps session saw this as having more of a credit impact than RFQ on Swaps…..personally I don’t see why…please explain if you know.

      Comment by waratah — February 12, 2007 @ 12:36 pm

    2. Does that mean Liqudity Hub will do streaming executable prices ?

      My take on the credit impact would be that swaps on RFQ platforms have the credit check done when the client raises the RFQ ticket. For order driven swap platforms (ISwap), one posts the credit limit for each counterparty at SOD.

      So how will LH enfore a credit limit across multiple simultaneous executions by the same counterparty ? I’m not in the LH committees and WGs, so can only guess…

      Comment by etrading — February 12, 2007 @ 12:59 pm

    3. I believe so eTrading, RFS will mean the response will be executable. How long they are streamed for? I don’t know.

      I’d have though Requesting a streaming price vs. requesting continuously updating quotes (based on an on-the-wire time) would have the same credit impact….that’s why I suspect I’m missing something here. I guess all will be revealed in due course.

      Comment by waratah — February 12, 2007 @ 2:12 pm

    4. Is the impact the credit check itself? – when you get a RFQ you check the clients credit limit and work out if there are any break clauses to apply. It’s a B-I-G calculation if done right. While that processing delay might be broadly ok for a single RFQ (unless you ask clients wholl tell you it all takes far too long), is the issue you heard about that you need to recheck the credit limit for each new price/rate that you are going to send back in the stream?

      Though you also have to ask how many banks actually have an online/on-the-fly credit check that is able to accurately gauge in real time whether the client has sufficient credit for the swap in question, taking into consideration [and weighting in terms of revenue to be produced from] all of the business that is still in draft/in the pipeline with the client (the weighted bit because you dont want a vanilla swap trade to blow up the credit rating of a client part way through an elephant trade!).

      If its a periodic 2-dimensional limit refresh and you just subtract new exposure of each proposed trade from that to see whether the answer is less than 0 (oversimplified but you know what i mean) then i cant see an immediate issue.

      Comment by holky — February 12, 2007 @ 5:44 pm

    5. Holky, that was the problem, it wasn’t explained in any detail. Although it was clear that the impact was on the credit check rather than the check itself making an impact.

      I’m going to have to dig a bit deeper….it is bugging me because I don’t see the issue. Even if you re-check the limit each time the streaming price changes, why not each time a new price is sent in RFQ? See what I mean?

      Comment by waratah — February 13, 2007 @ 11:49 am

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