Brief history of electronic bond platforms

18 June 2015 in THE BOND MARKET by Tim Binnington

When Stephen Gallagher, Head of Algomi US, recently spoke to Wall Street Letter, he gave a brief history of electronic bond platforms, saying that as the bond market continues to evolve, technology will play a key role in connecting buyers and sellers quicker using the most accurate information.

The evolution of the fixed-income market over the past 15 years has in many ways been mirrored by advancements in technology.

Throughout my time in financial services, I’ve seen first hand how changes – oftentimes spurred by regulations – in the bond market cause technology companies to respond with innovative solutions to tackle new challenges. Today, and in the future, technology is helping to steer the industry towards greater efficiency and profitability.

Bond trading used to be far from instantaneous. Things started with a salesperson, going to a trader and then back. These communications were oft en facilitated with a phone, fax machine, or perhaps Bloomberg Messenger. A buy-side employee might receive a long list of bonds in the morning, spend the day mulling over which ones to purchase, and call back a salesperson at 3 p.m. with an order. It was a tedious process.

Starting in the early 2000s, technology firms began to look at ways the bong-buying process could be made more efficient. I was a managing director at Bank of America at this time, charged with keeping track of innovation in the marketplace. We looked at more than 70 companies in 18-month period trying to solve inefficiencies in the bond market. A few companies, such as Tradeweb and MarketAxess, emerged as market leaders. The paperless request for quote model took hold, and faxing orders became a thing of the past.

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