Adoption of SDPs in Fixed Income

Following Paul Blank’s post in May of this year about the market share of single-dealer platforms vs multi-dealer platforms, I’ve been looking at a number of industry surveys, and the thing that leaps off the page at me is the growth in the adoption of electronic trading for Fixed Income products, and in particular the growth in the use of single-dealer platforms for this asset class.

According to the Barclays Capital “2009 Survey on Electronic Trading” 96% of those surveyed who trade OTC derivatives expect to trade the same or a higher proportion electronically over the next 12-18 months compared to the trade volumes to date.

And data we’ve extracted from the SIFMA 2009 Trends Survey (included below) clearly shows that the preferred channel showing the largest year-on-year growth in every asset class is single-dealer portals, with multi-dealer and exchange channels mostly staying the same or reducing (CDSs are the exception where exchange channels have grown in preference). The SDP year-on-year growth varies from 50% in CDSs to over 600% in US Treasuries. Admittedly the absolute proportion of FI business conducted through single-dealer channels is small, but it’s growing more quickly than any other channel, as this data shows.

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