Question: Can you describe what is the inter-dealer system in fixed Income market?
Answer: In the inter-dealer system, dealer trades with one another based on the customer request. And earn money from both the buyer and seller as a commission. In this case client or customer does not trade directly with each other as in case of exchange-based trading.
Question: What is the Dealer-customer based trading platform in the Fixed Income?
Answer: In this case dealer trade with their customers or clients. That is also known as dealer customer segment. Clients are usually asset managers, pension funds, insurance companies and corporations. Again, end user does not directly trade with another end user. Detail of the trade was only known to counterparties and dealers. Because everything was happening over the phone. And it was never disseminated to wider public investor. Because of market segmentation, quotes and trade prices for the same bond at the same time could vary greatly across dealers. SDP: Stands for Single Dealer Platform MDP: Stand for Multi-Dealer platform.
Question: What do you mean by Oder-Driven market in the Fixed Income?
Answer: Fixed income markets had a major shift with electronic communication networks (ECNs) started to gain traction in inter-dealer markets. An ECN is a system which electronically matches buy and sell orders for securities. ECNs operate as virtually centralized marketplaces, aggregating offers to trade and matching them against incoming trade requests. In contrast to the dealer-client markets, which were quote-driven, these platforms were generally order-driven. An order-driven market is a market in which executable prices are offered in advance of any requests to trade.
Question: What do you mean by Central Limit Order Book (CLOB)?
Answer: In some cases, ECNs uses the trading protocol of the central limit order book (CLOB). This is a trading protocol in which any outstanding bids and offers by market participants are stored in a queue and must be executed in a priority (usually time based, first come first serve) sequence. In the inter-dealer market, CLOBs are transparent to participants, in the sense that any ECN member may view the set of bids and offers at which one can sell or buy. Transaction prices and volumes were often disclosed post-trade.