Future of Fixed Income Trading Technology, Part 3

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10 March 2023

Developments in Price Discovery and Execution


The mechanisms for trading fixed income products continue to evolve amid a backdrop of market infrastructure challenges, regulatory responses, increasing automation, and ever more pervasive cloud usage. On the one hand, the industry and its regulators struggle to adapt and prepare for liquidity challenges as central banks remove liquidity from the market to combat inflation. On the other, automation and technological innovation are addressing these challenges and creating the potential for new modes of trading. This creates multiple pressure points that risk fracturing the market structure around this asset class (see Figure 1).

This paper explores the impact of these developments on secondary “over the counter” (OTC) trading of fixed income (FI) products. Celent has researched developments in the intersection of market structure and technology that allow sellers and buyers to transact in securities or FI OTC derivatives. We have found an intriguing diversity in approaches across the industry to meet the challenges and realize the opportunities created by this intersection.

Key findings include: