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Capital Markets

e-trading: New markets bolster IDBs

Can the rapid growth of e-trading in recent years continue?

But LiquidityHub shuts down


A mere nine months since launch, LiquidityHub, a multi-dealer platform, has ceased operations. Being less a trading platform than a sophisticated messaging system, LiquidityHub was a dealer-led response to shift interest rate derivatives from voice to electronic trading. It was backed by 16 banks, and was aspiring to move into government bonds after interest rate swaps. In a statement, LiquidityHub said that the decision came because of "recent market conditions, which have called into question the current scalability of the LiquidityHub model".

Despite the liquidity crunch, electronic trading of fixed-income securities has held up, relatively, in recent months say traders. Excluding March, which was highly volatile, volumes have been strong this year. This is the continuation of a long trend – e-trading has made huge strides in recent years. In the US, 57% of fixed-income trading is now electronic, according to a report from Celent, a research and advisory firm for financial institutions. That figure is the result of a compound annual growth rate of 17% since 2003, and is expected to reach 62% by 2010. The development of e-trading has advanced the most in the more liquid, standardized products, namely government bonds.

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