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Capital Markets

Trading platforms: Not yet an electrifying experience

Despite the push into credit derivatives, end investors remain on the sidelines.

Marcus Schüler, Deutsche Bank “People presume that credit derivatives will go the same way as electronic cash bond trading, but the nature of the two is very different”
Marcus Schüler, Deutsche Bank

Electronic trading platforms are the future of debt markets. It is a mantra that is taken for granted not least because regulatory developments such as the EU’s Mifid will further encourage the trend already established. This method of trading is already well established in triple A rated product. The cash credit products are not far behind. The last major frontier to the hegemony of electronic markets was credit derivatives. However, leading platforms MarketAxess, Thomson TradeWeb and Bloomberg have not seen significant growth in dealer-to-client trading.

Amid much fanfare in the autumn of 2005, TradeWeb and MarketAxess unveiled their credit derivative trading platforms, even suggesting that their products would be the solution to major operational worries. Given the explosive growth in credit derivatives it is hardly surprising that the big platforms are keen to grow their business.

Although the operational benefits of straight-through processing are self evident, and indeed electronic processing proved crucial to dealing with the backlog of unconfirmed credit derivative trades identified by the US authorities a year ago, take-up of the platforms has been limited.

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