A Fixed Income Perspective
With Jutta Schneider, European Head of Fixed Income Trading, Allianz Global Investors
We currently trade 80-90% of our fixed income electronically, so we are ahead of the curve compared to many other involved counterparties. Over the last two years an increasing number of new trading platforms has been introduced to the market to meet the new requirements and provide trading possibilities despite low liquidity. We took this opportunity to continuously test and evaluated those different trading systems in order to stay well informed and ensure best liquidity for our trading.
Obviously, we cannot test all of them, as there are over 40 new initiatives by now. Nevertheless we have met with a representative sample (new trading platforms as well as new information systems) which for instance also opened up buy-side to buy-side access in addition to the usual buy-side to sell-side trading we usually do.
A mandatory requirement for onboarding a new system is the direct connection to our OMS. This is true even for those systems that allow us to only monitor liquidity as opposed to a trading system.
We have witnessed that the markets are becoming increasingly illiquid and sophisticated due to new regulations and capital control measures. This implies that the requirements for trading overall is becoming more complex. In this demanding environment the question whether the buy-side will become a major provider for liquidity arises more and more. As far as I can estimate neither the buy-side desks nor the numerous new trading platforms will become the new major liquidity sources. This will continue to be the task of the sell-side. However establishing new possibilities for the buy-side counterparties to match interest directly on an anonymous platform is opening up new opportunities and increasing transparency.
Taking all this into account it remains essential to maintain close relationships with the sell-side for sourcing liquidity and being able to trade efficiently in the market.
Another key area for us is the internal relationships between traders and portfolio managers. At Allianz Global Investors we have established an intensive communication and interdepartmental cooperation which has been running a long time now. This means we are not only focused on the pure execution but providing an extended function by supporting the portfolio managers in various ways. We provide feedback on liquidity, present trading ideas and show them relevant axes.
Yet we are not only involved in secondary business but also for the setup of new portfolios and new trading instruments. Usually the PMs ask us for our opinion on any planned bond purchase and schedule to carry out the planned set up.
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