The Electronic Evolution of Corporate Bond Dealers
59 Pages Posted: 4 Jun 2020
Date Written: May 8, 2019
Technology transformed the trading of financial assets but has been slower to come to corporate bond trading. Combining proprietary data from MarketAxess with regulatory TRACE data, we investigate how electronic request for quote (RFQ) trading affects bond dealers and trading more generally. We demonstrate that electronic trading remains fairly small and segmented, but has wide-ranging effects on transaction costs and execution quality in both electronic and voice trading, and the inter-dealer market. We identify features particular to bond markets that have and may continue to limit electronic bond trading growth. We provide an intriguing portrait of a market in transition.
Keywords: Electronic trading, Voice trading, RFQ, Corporate bond markets, Bond dealers, Transaction costs, Execution quality, Inter-dealer trade, Rating downgrade
JEL Classification: G14, G21, G23, G24
Suggested Citation: Suggested Citation