Can new trading platforms save the corporate bond market? Traditionally, banks acted as huge bond warehouses and market makers so that asset managers could trade at will and in quantity.
But stricter regulation on capital, liquidity and proprietary trading have changed the picture such that banks’ inventories of corporate bonds are down by a half since before the crisis. To make matters worse, the market is extremely fragmented with upwards of 100,000 instruments in circulation in Europe compared with only about 1500 to 2000 stocks, as we reported in our special report on cross-asset solutions in July.