[ Q & A
|
N I C K
C O X ,
J P
M O R G A N ]
ent version of something that the
market more broadly has become
familiar with. But pre-trade trans-
parency is something that - as far
as I’m aware - hasn’t been tried in
any major market elsewhere. The
concept of systematic internalisers
and the transparency requirements
of that regime too are also a great
unknown. That may be a big chal-
lenge from a liquidity perspective
because it hasn’t been really tested
anywhere else. We don’t know
what the impact will really be.
HM: Do you think buy-side-to-buy-
side liquidity is a viable method of
transacting trades? Or will the buy-
side remain to be heavily reliant on
dealers?
NC: Buy-side-to-buy-side liquid-
ity is another tool in the box. If
you think of every trade, there’s
a certain frictional barrier that
needs to be overcome for the
trade to actually happen. What
this method does is reduce that
barrier for some trades. So, some
trades do occur from buy-side-to-
buy-side, which perhaps wouldn’t
have happened from buy-side to
“For the last few
years, I would say
we have been in a
reasonable stable
state of cost of
liquidity.”
broker-dealer kind of model. This
could be due to the bandwidth of
individuals or even relative cost
benefits. It does help liquidity and
it reduces - not necessarily the
frictional costs of trading - but the
theoretical potential barrier to a
trade actually happening. However
I don’t see buy-side-to-buy-side
becoming the dominant paradigm
any time soon, and particularly for
material risk transfer type trades,
the client-to-dealer paradigm will
continue to dominate for some
time to come.
HM: Can technology provide solu-
tions for issues investors face in
fixed income?
NC: Yes, just as with other aspects
of our lives at home or at work,
technology is changing how we
behave and our function. I think
when I look at the technological
aspects of trading challenges, you
could broadly put them into two
categories. Firstly, liquid products -
which is an execution challenge, so
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