The Securities Industry and Financial Markets Association (SIFMA) today announced the results of its Fourth Annual European Fixed Income e-Trading Survey. The survey conducted during November 2008 and January 2009 canvassed 64 buy-side investors, 13 sell-side firms and 5 trading platforms.
For the first time in several years, due to the credit crisis, market participants reported a decrease in fixed income e-trading volumes in 2008 with fifty percent (50%) of buy-side respondents reporting that they were trading more than sixty percent (60%) of their fixed income volumes electronically. This is compared to sixty percent (60%) of respondents saying they traded above the same level in 2008 which is significantly less.
Similarly, sell-side respondents reported thirty-three percent (33%) electronic fixed income volume trading in 2008 versus thirty-four percent (34%) in 2007.
“These results seem to be only temporary and credit crisis related, as the market expects continued growth of electronic volumes in 2009,” said Mark Austen, managing director of SIFMA affiliate the European Primary Dealers Association.
Other important trends which emerged from the survey are that a minority of buy-side respondents (31%) expect to be using a single platform for all of their institution’s wholesale electronic trading activity in the near future (against an overwhelming majority of 85% of the respondents last year).
The leading factors today for the buy-side in determining whether to trade a product electronically are best-execution and price transparency. A key reason for choosing which platform to trade with by the buy-side still remains the depth of liquidity. This is distinct from 2008’s responses where the most important factors affecting choice of trading electronically were streaming prices and market volatility.
There is a consensus amongst the market players on both the sell-side/buy-side on duration of market volatility which is likely to be prolonged whereas last year there was an equal split believing that it was either temporary or prolonged.
Finally it is worth noting that there is a move in preference by the buy-side to the use of single-dealer platforms and multi-dealer inventory from multi-dealer request for quote. This reverses a year on year trend that buy-side had continually preferred multi-dealer request for quote systems.
The results of the survey will be a focal point of SIFMA Market Liquidity Conference which takes place today in London at the Brewery.
Please view full survey results at this link.