[ I N D E P T H | B U Y - S I D E P R I C E M A K I N G ]
when making prices – must prove they have serviced their clients to the best of their ability . Without reliable data , institutions lack the conviction to price make effectively . While firms are every day becoming more and more sophisticated using composite tools and advanced TCA , more work needs to be done . Markets that can naturally have less transparency like credit and the emerging markets will likely be even further behind the curve .
The success of all-to-all offerings hinges on data . They have had more success in the US thanks to consolidated public data sources and a subsequently much higher see rate for instruments that have meant the buy-side in the US have committed significant resources to pricing back . However , the lack of a similar consolidated data offering in Europe and the UK has slowed the progress of all-to-all , as those limited few with access to a valuable and clear picture of the market are more reluctant to leak that to others .
The consolidated tape for fixed income is one potential solution and has been confirmed by regulators on both sides of the channel ( see pg . 60 for a deeper analysis of the fixed income tape ). However , it has not yet had an implementation start date agreed upon in either the EU or the UK . Meanwhile , key aspects of it such as deferrals , flags and who the provider will be , are yet to be decided . The likelihood is we are still a way off and until prices move away from being indicative to being more commoditised , mass adoption of all-to-all is likely a way off too .
“ We have to be careful also because if the transparency regime is causing damage by information leakage too soon in a cycle , it will affect banks ’ appetite to take on risk positions if they don ' t feel that they ' re protected enough . There ' s a trade-off to it as well ,” says Gibson . “ It ’ s catch-22 . The high value add of me going out and price making is on stuff that doesn ' t trade and where possibly there isn ' t much transparency around it . Unfortunately , the situations where I would envisage being happy to go out [ and price make ] are also the ones where transparency on the market is probably not as high as other areas .”
Essential , and still lacking in the market , are clear indicators around liquidity type . The type of liquidity accessible in the market has massively changed in recent years – exacerbating the need for clearly defined flags in the consolidated tape of the future in order to understand why a transaction has happened alongside historical trade data .
“ The buy-side would be potentially more willing to show their cares if they knew that their axes were being labelled and disseminated in a more granular and smarter fashion . If you start labelling types of liquidity that are out there it offers more confidence and clarity around how to engage with that ,” says Poole .
“ The onus is on us to ensure that we ' ve got the right data feeds , the right opportunities to access
“ Bridge Axe will offer buy-side the opportunity to post axes anonymously to Bloomberg .”
PAUL KAPLAN , GLOBAL HEAD OF CREDIT , EQUITIES AND TRS , BLOOMBERG
16 // TheTRADE // Q3 2023