In the trading of corporate bonds, there are forces driving change. We give an overview of these forces and assess how they are fundamentally driving a move toward increased electronic trading and increased automation in the multi-dealer to client space.

In the report US Corporate Bond Trading Technology Update: The End of the Beginning, Celent examines the forces at play and the innovation taking place in corporate bond trading.

The headwinds of increased regulation, stricter capital regimes, and regulatory-mandated shedding of businesses, all occurring within a volatility-dampened world, have produced tremendous pressures on the infrastructure of the corporate bond market. All this is happening against a backdrop of diverging forces, in respect to continued robust, record issuance, while secondary trading becomes more challenging.

“Forces are at play that could eventually cause a great deal of pain for the holders of corporate debt. The corporate bond market has evolved in a way where reliance on sell side liquidity provision has been paramount,” said Brad J. Bailey, Research Director at Celent. “While request-for-quote (RFQ), as a natural extension of existing workflows, remains a dominant protocol for trading corporate bonds, other trading protocols are being driven by players that find their ability to access liquidity at risk.”