Electronic bond trading on the up in the euro zone

Electronic bond trading on the up in the euro zone

Financial institutions in the euro zone are using electronic platforms to transact more than 50% of trade in government bonds on the inter-dealer market, along with 70% of all tickets, including basis trading, according to research conducted by BearingPoint.

Peter Schurau, SVP, financial services, EMEA, says an indication of the growing appeal of electronic bond trading is the way in which market data providers such as Bloomberg, Reuters and Thomson Financial are pushing into the market.

"These providers will soon expand their range of services. For example, Reuters is planning to operate its own trade platform, " says Schurau.

The study, which surveyed more than 30 experts from financial institutions, found that although multi-dealer platforms (B2C) registered record transaction volumes, most participants reported a recent decline in trade on the electronic inter-dealer market. The volume of most electronically transacted benchmark instruments has declined by more than 30% since March of 2004.

A short-term revival of voice brokers on the European retirement fund market is also affecting electronic trading volumes. In contrast to the electronic platforms, brokers usually offer smaller spreads and serve clients with an individual range of services.

The study also found an increasing blurring of the borders between the B2B and B2C markets. The MTS Group, for instance, is planning to connect the inter-dealer and multi-dealer markets via the same interface, while ICAP/BrokerTec and MarketAxess are planning an alliance in order to serve both markets.

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