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Challenges and opportunities facing OTC markets

Be it the US, Asia, Europe or London, our chief business officer, Mark Leahy, has a few decades of international markets experience under his belt. We caught up with him to discuss some of the challenges and opportunities facing over-the counter (OTC) markets today.

By Mark Leahy, Chief Business Officer


Sourcing liquidity

It’s no surprise that sourcing liquidity remains top of the agenda for corporate bond traders. Even during times of market recovery, when it would be easy to assume that liquidity would improve, it can actually be harder to source. This is why advanced trading technology and state-of-the-art platforms play such a vital role in sourcing more liquid segments of the credit market.

Naturally we humans are more cautious during times of market turmoil, keeping our cards close to our chest, that’s when technology can better enable trading. Innovation is providing a crucial outlet for traders and portfolio managers to source liquidity, regardless of market conditions. If trading technology is to become ubiquitous in the corporate bond market it needs to perform in all market conditions.

Collaboration, not disruption

Technology is often positioned as a disruptor, which it certainly can be, but the best technology is built around collaboration. Take the example of the advent of medium-term notes (MTNs) in the ‘70s; this new standard simplified bond documents and many lawyers feared it would take their jobs. In practice, it just created greater efficiencies, lowered costs and significantly expanded the market.

I expect trading platforms to have a similar impact on the corporate bond market. E-trading venues won’t take away the role of the trader – but elevate it. Particularly on platforms where agility and user satisfaction are prioritised, workflows are more streamlined – meaning traders don’t have to battle with rigid workflows and struggle with multiple endpoints.

Innovation is at its best when it’s aligned with the market structure and involves market participants. Take the well established RFQ protocol as an example; RFQ came from the voice/chat market – but electrifying RFQ has opened up new possibilities for the entire e-trading market, achieving unprecedented scalability. Consider advancements in behavioural metrics and analytics too, facilitating superior counterparty selection, collaboration can be on a scale never witnessed before.

Digitising trading

There is no reason why trading can’t be entirely digital. So far this has been a gradual process, which I believe will now accelerate. As written in Ernest Hemingway’s The Sun Also Rises, when a character was asked how they went bankrupt, the response was: “Gradually. Then suddenly”. Digital trading adoption is going to happen suddenly.

Credit markets are gradually adapting to technology, and this will gain pace. With the end goal ultimately to bring different participants, entities, objectives, and parts of the market, into a single electronic eco-system – unlocking new opportunities and helping traders to achieve optimal results.


When the trading intentions of well-known counterparties in the largely illiquid corporate bonds market are revealed, its usually market moving. So, data security is key – which makes voice trading challenging, as trading intentions can be controlled.

Innovative technology is delivering trust in a way that hasn’t been done before, enabling entire portfolios to be traded. Market participants can own their data, reducing conflicts of interest and keeping information secure and confidential. This increased level of trust and confidence has the potential to be game changing – especially in an OTC market, where it’s hard to know and track where all the bonds are.

When it comes to embracing technology and innovation, despite all the known benefits, it ultimately takes a leap of faith. Muscle memory, that reverts back to type – to the old tried and tested way of doing things – can be hard to resist. But with the ongoing challenges of tumultuous market conditions, set against the opportunities that innovative trading technology presents, it’s getting harder to ignore the benefits collaborative platforms can bring.

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