The Full FX Unfiltered

In the latest video, Colin Lambert steps way outside his comfort zone to discuss fixed income market structure. He is joined by Steve Toland, co-founder at fixed income infrastructure provider TransFICC, who explains the prevailing market structure in fixed income and how its evolution has led the firm to launch TransACT to meet demands from its clients to better automate the RFQ workflow.

Toland further explains that the growth in all-to-all trading, has in turn led to an equivalent growth in RFQs, to the degree that no manual desk can manage the weight of requests. This leads Lambert to observe that FX had a similar evolution some time ago, at which point Toland leans on his extensive FX experience to discuss the nuances between the two market structures – mainly the incredibly fragmented nature of fixed income and how trade sizes are coming down with increased automation.

Lambert then asks the question, having listened to Toland’s explanation of fixed income market structure evolution, ‘is this necessarily a good thing and will we sit down in a couple of years’ time to discuss market quality?’ Toland observes that automation will continue to grow, but unlike in FX, there is very little direct bilateral trading, therefore the market quality debate will be different.

A very interesting conversation continues with a chat about market data, including the move towards a Tape, and the resulting impact on transparency and why that will work for some, and potentially not for others, and the impact of regulation – something that is much more important in fixed income than FX – specifically DORA.