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equities now . As things have become more electronic and technology has built into these processes , fixed income has adapted some of these equity elements . That ' s what fixed income portfolio trading is , it ' s using an equity product or process . Fixed income ETFs have allowed portfolio trades to happen .”
“ In fixed income , the algo use on the sell-side has seen a big increase and that has fed into why portfolio trading has been so successful as well . The ability for the street to price a lot of these smaller securities quickly and efficiently has really changed and it made the market a lot more liquid in the smaller sizes .”
According to Raymond , portfolio trading has had significant impact on the fixed income liquidity landscape . The protocol has boosted top-down liquidity – focused on macroeconomic factors – and dried up bottom-up liquidity – focused on a company ’ s fundamentals , he explains . A result that has had both positive and negative impacts .
“ The top-down liquidity that you see because of portfolio trades is remarkable . Frankly , you have more liquidity in fixed income markets now than accounting for around 36 % of the asset manager ’ s fixed income business .
When Raymond first came across fixed income exchange traded funds ( ETFs ) however , – the renowned catalyst for the explosion of portfolio trading seen in the last four to five years – he was not convinced .
“ When I first heard about fixed income ETFs , I said this is not going to work and this is going to decrease liquidity in fixed income . I was completely wrong ,” he explains .
“ It ' s almost like fixed income is catching up to
“ There are some really hard conversations that need to be had across the street . Getting the data is one thing , analysing the data and turning it into useful information is a whole other ball game .”
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