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Hayley’s
Comment
*Formerly the Hayley Mail
Dutch courage
The Fixed Income Leaders Summit in the beautiful city of Amsterdam
this year played host to some fiery debates among the buy-side.
N
ow by no means is my
headline of ‘Dutch courage’
suggesting anyone was under the
influence of any alcoholic beverag-
es during their panels, more that
the canal-heavy location seemed to
bring out the confrontational side
of participants.
Having long-been a topic of debate
amongst fixed income market par-
ticipants, it would appear the argu-
ment about a decline in bond liquid-
ity continues to rage. Regulators
worldwide have rejected claims, up
until quite recently, that liquidity in
fixed income has deteriorated since
the financial crisis in 2008.
Lee Sanders, head of fixed in-
come trading at AXA Investment
Management, however, told dele-
gates he has no problem sourcing
liquidity and the use of tools like
the MarketAxess OpenTrading
platform has made the task easier.
He went so far as to say the buy-
side have in fact become lazy when
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Winter 2017
it comes to seeking out liquidity.
Jim Switzer, global head of credit
trading at Alliance Bernstein,
countered this and claimed dealer
balance sheets and a shift towards
passive investing have led to an ex-
acerbation of liquidity. “I disagree
that liquidity today is the best it
has ever been, it’s ok, but step back
and look at the market before the
financial crisis in 2008. If liquidity
is fine, then why aren’t bid offer
spreads higher? We have to keep
talking about liquidity in bond
markets,” Switzer said.
Data was another hot topic at the
Fixed Income Leaders Summit this
year. Panellists raised questions
about whether the buy-side will be
well equipped to have an edge over
large banks to become key players
in fixed income markets. Global
head of fixed income trading at
Pictet Asset Management, Carl
James, also endorsed the hiring
of data scientists to sit alongside
traders on the desk. He told dele-
gates the Pictet team recently hired
two data scientists with no trading
background to make use of the
ever-mounting data that asset man-
agers have seen over recent years.
MiFID II of course, did not fail
to get a mention at the conference.
Rather than debating the require-
ments of the new regulation, senior
market participants looked at the
costs. They agreed complying with
new legislation has created a less
competitive environment for asset
managers and it has led to the rise
of the ‘defensive merger’. We’ve
seen rather recently the creation of
powerhouses boasting billions of
assets under management. Stacked
against these firms are the smaller
asset managers who, panellists
agreed, will need to look for more
creative ways to fight off growing
costs often seen through compli-
ance technology and a squeeze on
profits.