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Low Latency Blogs

Andrew Howieson

This is a contributed article from Andrew Howieson, an advisor to FactEntry.

Corporate bond markets are inherently illiquid

There is now wide recognition that corporate debt markets lack sufficient liquidity to meet investor trading requirements. Blackrock’s September 2014 paper Corporate Bond Market Structure: The Time for Reform is Now described the trading market structure as “broken”. The withdrawal of dealer capital, driven by Basel III and Dodd-Frank regulation (leading to a reduction in corporate bond inventory from $250 mm to $60 mm in 2014) is broadly cited as the cause of dwindling liquidity. Market followers with longer memories may recall that buy-side concern over market liquidity and transaction costs pre-dates Basel III and was the driver of a generally brief but extensive flourishing of electronic trading “solutions” around 2000. It is not unreasonable to suggest the corporate bond markets are inherently illiquid and were only made partially and temporarily liquid through the application of dealer capital, at a price.

The marketplace is whirring with great minds turning their attention to what the latest ESMA rules for MiFID II actually mean. We’re not sure anyone has completely figured that out yet, but we’ll be watching closely as we’re embroiled in a number of projects that are impacted to various degrees by the latest ESMA utterances, which emerged earlier this week.

We enjoyed an electric session this week with Bloomberg on what we used to call machine-readable news. Along with our own excellent webinar on Big Data last week – where we heard from, among others, Thomson Reuters Starmine’s Adam Baron on event-driven research – the seminar at Liverpool Street’s Andaz Studio offered some fascinating insight on how ‘news’ has been transformed to feed quantitative models for trading.

Big Data is taking off in financial services markets as firms begin to pull together structured and unstructured data, and implement enterprise and risk apps dedicated to issues including finding alpha, managing conduct risk and analysing market sentiment.

Word has it that ESMA is serious about its intention to publish its final guidance on MiFID II this month. With a possible (unconfirmed) publication date of September 24 doing the rounds, the market is bracing itself for a vigorously more prescriptive approach than under MiFID I, with less wiggle room for divergence from the base requirements.

In its first major release since licensing TS Associates’ TipOff latency measurement system a year ago, London-based infrastructure monitoring specialist Velocimetrics has unveiled a new range of high performance TipOff appliances, one of which offers more than six times the storage capacity of previous appliances. The new appliance range will also underpin future releases of Velocimetrics’ eponymous system performance monitoring systems.

By Zoe Schiff

Azul Systems’ resale agreement with Chelmer will allow the Auckland, New Zealand-based trading systems supplier to offer Azul’s Zing Java Virtual Machine (JVM) to add consistency and scalability to clients’ low-latency infrastructures. The deal also expands Azul’s presence in Asia / Pacific.

High-performance data platform provider Redline Trading Solutions has added Bloomberg’s consolidated B-PIPE market data feed to the list of feeds available via its InRush accelerated ticker plant.

Kevin Covington’s appointment to the board of Delta Capita this week underscores a perhaps more wide-ranging development: the emergence of the Plato Partnership, which named Delta Capita as its strategic consultant earlier this year.