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Bond market trading is going through a period of unprecedented change. The traditional bond trading model, mostly reliant on market makers and voice broking is being eroded. This is due to a number of factors: natural evolution driven by technological progress; the drive for cost efficiency; and regulatory pressures, such as Basel III undermining broker-dealers’ capacity to hold, finance, or hedge trading positions. This is resulting in an increasing electronification of markets.

MiFID II is also driving change in trading practices and market structure, spurring technological advance to create more efficient and effective trading models. Firms are re-directing their business strategies to adapt to the changes in fixed income. Even though there is a consolidation in their business and a reduction in trading and sales teams, there is still a recognition that with change, comes opportunity. The future bond trading landscape will see unique new entrants, innovative incumbents and adaptive trading protocols and venues.

Whilst it remains difficult to predict how European trading in secondary markets cash bonds will look in future we can be certain that fixed income trading will look different to equity trading, given the fundamental differences between the two asset classes. Equity trading development has been focused on speed and high frequency trading using electronic algorithms, whereas fixed income is more about ‘automation’, focusing on efficiency, optimisation and sourcing liquidity.

ICMA’s paper identifies the forces at work and the success criteria necessary for platforms and technology providers trading in the new environment.

October 2017
Market electronification and FinTech by Gabriel Callsen.

January 2017
Bond trading market structure and the buy side by Elizabeth Callaghan.

April 2016
Evolutionary change: The future of electronic trading of cash bonds in Europe by Elizabeth Callaghan.

Publications: Financial Stability Review from the Banque de France.


Liz Callaghan
Director, Market Practice and Regulatory Policy, focused on secondary markets
Direct line: +44 20 7213 0313