• inside_market_data
  • inside_reference_data
  • buy_side_technology
  • sell_side_technology
imd-fixed-income-report-nov2012

Fixed Income special report

  • Send
  • Comment
  • Send to Kindle

November 2012 - sponsored by: MarketAxess, MTS

Click here to download the PDF

Fixing Fixed Income

With the world still recovering from a drawn-out financial crisis, it's easy to forget that the initial catalyst for this economic collapse was the credit crunch, and that the inability to accurately value and price fixed income assets was a major contributor to the resulting chaos, which also led to the shattering of fragile sovereign debt issues and downgrades of the credit ratings of countries previously thought untouchable.

Part of the solution was to press for improved transparency in the fixed income and derivatives markets, by proposing to move swathes of previously over-the-counter instruments onto exchanges-or at least, centrally-cleared, exchange-like venues-to generate more accurate and transparent pricing and eliminate counterparty risk. Not only does this help investors better price assess the risk of potentially riskier instruments, but it also helps them determine which are actually risky-there's always talk of a flight to quality when markets look fragile, but first you have to figure out which assets are quality and which aren't.

Another component of the solution-in part a result of the above move to exchange-like venues-is the availability of more data. As the "electronification" of fixed income markets continues, it naturally begets a more structured and safer trading environment, encouraging more liquidity, more trading, and more data as a result. The upshot is that if you have more data that is more timely and delivered at a higher frequency, the more accurate your pricing will be as a result.

However, this increased liquidity and availability of data has an unintended consequence, making the fixed income markets more attractive to algorithmic and high-frequency traders seeking alternative sources of alpha from their algorithms outside the equities markets. But are the still-convalescing credit markets ready for the inevitable disruption of HFTs, or is fixed income still too fragile for high-frequency? And should algos with the power to create Flash Crashes even be allowed to trade the debt issued by the government that regulates them. Either way, any HFT involvement would also open the fixed income markets to the same regulatory scrutiny that HFT has attracted in other asset classes. But considering credit's role in precipitating the financial crisis, perhaps even more regulatory scrutiny of the fixed income markets isn't a bad thing after all.

Click here to download the PDF

  • Send
  • Comment
  • Send to Kindle

Winner's Announced: Inside Market Data Awards 2014

View the winners...

The winners of the 12th annual Inside Market Data Awards 2014 and Inside Reference Data Awards 2014 were announced in New York on May 21, recognizing industry excellence within market data and reference data. To view the winners across the 31 categories click here.

imd-ird-awards-logo-2014

Training

Latest Whitepapers

waters-equinix-whitepaper-may2014

Tackling Teething Troubles: Examining the Current State of the OTC Derivatives Market

The over-the-counter (OTC) derivatives market is in the midst of a global regulatory restructure. Authorities in Europe, Asia and the US are currently...

eagle-whitepaper-jan2014

A data-centric approach to portfolio management

A fast, flexible and reliable investment decision-making process must be based on access to accurate and consistent information throughout an organization....