Fixed-income firms are expected to continue migrating to electronic trading models in the U.S. and Europe as tight spreads force dealers to cut trading costs and as regulatory concerns rise. "Tighter spreads are reducing execution costs," said Harrell Smith, manager of the securities and investments practice at Celent, a research and advisory firm, explaining the demand for electronic platforms from sell-siders.
And with regulatory scrutiny on the rise, particularly in the U.S. credit markets, the need for increased transparency will drive a push toward greater use of automated systems because they are more transparent, said Silvio Oliviero, v.p. in ecommerce, credit & rates at J.P. Morgan. On the flip side, there is a general concern in the dealer community the rise of automated trading will undermine relationships between the sell-side and its investing clients, noted Serge Marston, director of electronic markets at Deutsche Bank.
From the buy-side perspective, electronic trading is positive because it boosts liquidity by pressuring dealers to offer better prices, investors said. Yet Jacques Sterck, global head of the dealing desk at Dexia Asset Management, noted electronic trading remains fragmented. "[I want] one global platform offering all products, instead of specialists in govvies, corporates, etc.," he said.