Agency brokers offer new hope for bond market liquidity“There are deep pockets of liquidity away from your real-money managers: structured products desks, [credit] correlation desks – real-money accounts haven’t had access to this sort of business,” says Howitt.
The concept of dark pools of liquidity has, thus far, been limited to equity markets where the expected demise of the exchanges’ monopoly as trading venues has contributed to new trading venues on both sides of the Atlantic. As is often the case, Europe was late to the trend – requiring the impetus of the EU’s Markets in Financial Instruments Directive to build up momentum, and in the past 18 months various dealer consortia and even exchange-led initiatives have been announced. Boasting names such as NYFIX Millennium, RiverCross, Chi-X, and Turquoise, these multilateral trading facilities aim to facilitate efficient execution.
The fixed-income market’s distribution channels are being transformed with the creation of agents that will facilitate the creation of dark pools. Their mode of operation and ownership is clearly different from that in the equity sector where, in general, they have been backed by dealer consortia or large financial data companies.
But they are facilitators of anonymity, which is very important in a dislocated trading environment characterized by lots of forced unwinds and liquidations.