Question: What do you mean by “electronification� in fixed income trading?
Answer: The rising use of electronic and automated trading in fixed income and related derivatives markets referred as “electronification�.
Question: What is the reason that adoption of electronic trading is slow in fixed income market?
Answer: Electronic trading in fixed income markets still remains less prominent compared with other asset classes. A key factor for the slower adoption of electronic trading in fixed income has been the complexity of the asset class for example it has varied coupons, maturities, embedded options, covenants.
Question: Can you describe what is electronic trading in Fixed Income?
Answer: Electronic trading has a variety of steps that are part of the life cycle of a trade. Electronic trading means transfer of ownership of a financial instrument by matching of the two counterparties in the negotiation or execution phase of the trade electronically. Electronic trading broadly should have following steps: - Trades conducted in systems such as electronic quote requests on dealer platforms. - In Dark pools the quotation of prices or the dissemination of trade requests electronically. - Trade Settlement happens electronically. - Regulatory reporting happens electronically within the 15 mins of trade. There are now different types of electronic trading platforms i.e. ETP, these systems that match buyers with sellers, it may differ in terms of the composition of their clients and their trading protocols.
Question: What is an old “Quote Driven� market in Fixed Income?
Answer: A customer or client who wish to trade a specific security/bond used to contact one or more dealers over the phone, asking for currently available prices to buy and sell. This market structure is known as a quote-driven market, a market in which executable prices are offered in response to counterparties requests to trade.