BUY-SIDE
TRADING
There has been a major rise
in buy-side-to-buy-side
trading, but will the trend
continue and evolve?
E
lectronic trading venues
have been springing up to
connect buy-siders with
each other thus cutting
out the middle man. It is a
more direct and cheaper way to trade.
At the same time asset managers--the
likes of Citadel, Deutsche Asset Man-
agement, Amundi and Pioneer—have
been reshaping their business from
pure asset management to a more
expansive risk-taking role. According
to a study by Greenwich Associates
published last year, 29% of global
bond investors currently make prices
in corporate bonds or plan to do so
using electronic trading platforms in
the near future. There is no doubt that
the appetite for increased buy-side to
buy-side trading is there.
“We will first go to a buy-side-to-
buy-side platform when looking for
liquidity and second to a broker,” says
Matthieu Chardot, head of business
development and client relations at
BNP Paribas Dealing Services. “It
doesn’t mean we will always find li-
quidity but we do that first. The more
hits they get the more the buy-side
will use electronic platforms to trade
with each other.”
Equity trading has been first and
furthest in pushing the buy-side-to-
buy-side trading model via electronic
marketplaces. At present 54% of
equities are traded electronically
between buy-siders, according to
Greenwich Associates. The market
lent itself naturally to this kind of
trading with fewer variations in asset
identifiers making it easier to match a
seller of a stock with a potential buyer.
Things are slightly more complex for
fixed income, however, which is not as
easily structured as equities due to the
heterogeneous nature of the market.
“On equities you have one specific
and unique identifier,” says Adrian
Berwick, head of trading for Dublin
and London at Pioneer. “Fixed income
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