Improved auto-quoting tops the list of what corporate bond investors would like to see more of from their liquidity providers. That is according to a Coalition Greenwich survey conducted in Q4 2023. Cloud computing and large language models (LLMs) were at the bottom of the list.
The 51 corporate bond investors suggested that while response times and spreads on liquid names are appreciated, quicker responses on less-liquid bonds (or any responses at all) are increasingly in demand.
New and improved solutions for trading blocks also ranked highly. Analysing the findings, Coalition Greenwich’s head of market structure and technology research Kevin McPartland said, “Block trades remain the Holy Grail for bond market electronic-trading supporters. And while the buy side values their counterparty relationships and the liquidity and market colour they bring, improving the block process (even if some of it remains offline) is a focus.”
The buy side is also seeking more data, despite it being in such abundance that market participants struggle to use it all, McPartland notes. “The majority of asset managers we speak with are overwhelmed with the data they already have and struggle to put it to work. But dealers can offer something that goes beyond evaluated prices or TRACE prints. They can provide clients with actionable analysis of their trading performance, and recommendations to improve outcomes—a big step beyond raw data,” McPartland said.
Despite this, transaction cost analysis (TCA) was ranked fairly low, suggesting it is viewed rather negatively as opposed to an invaluable source of market intelligence. “And market intelligence is the lifeblood of the trading desk,” McPartland said.
“All of these asks are predicated on counterparty relationships in which mutual trust exists and are further enhanced when the client feels like their sell-side counterpart really understands what they care about, how they trade and what a successful outcome looks like. Old-fashioned relationships and the best technology both win business but, increasingly, only when the two are smartly intertwined,” McPartland concludes.
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