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Electronic Bond Trading Report: US Corporate and Municipal Securities

SIFMA’s report provides the results of its survey of electronic bond trading platforms for U.S. corporate and municipal securities. The survey results highlight a fixed income market structure that is evolving and adapting given regulatory and market constraints, and reflects a significant market focus on electronic trading as an emerging part of fixed income market structure.

See Related Press Release:

SIFMA EBT Report (02-2016)

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Excerpt

Executive Summary

This report provides an overview of select electronic bond platforms in US Corporate and Municipal securities markets.

Relevance to Stakeholders

  • Regulatory and market forces are driving changes in the fixed income market structure.
  • The focus on electronic trading and digitization is growing due to the potential benefits of transparency and liquidity.
  • There is limited information available for stakeholders to gain a robust understanding of the incumbent and new platforms’ functionality and the evolving price discovery and execution protocols.

Objectives and Approach

  • This report provides profiles of electronic bond trading platforms and includes information on the target markets, trading protocols, technology interfaces, planned enhancements and related capabilities. It intends to give stakeholders a greater understanding of the changing electronic trading marketplace.
  • The information provided herein was generated by interviewing management from 19 electronic bond trading platforms. The information has not been independently verified by SIFMA and is limited to the information provided by the platforms.

Initial Observations

  • There has been a significant increase in the number electronic trading venues competing in the growing electronic trading market for US Corporate and Municipal securities. 7 of the platforms interviewed have entered the market in the last 2 years, and 4 more plan to launch in 2016. The increase in platform competition and innovation is concentrated in the corporate bond market.
  • Established trading protocols are being enhanced and several new protocols are emerging to promote price discovery, including order books with live and executable orders, session based trading, and platform determined midpoint pricing. Platforms have been structured, and their services delivered, in a variety of ways to address the differing demands of participants and to garner greater participation.
  • The developments in the electronic trading marketplace for Corporate and Municipal securities reflect a fixed income market that is adapting and evolving