Getting Wall Street banks to hang up the phone and embrace electronic trading in corporate bonds has never been easy, but there's evidence the old guard is finally learning some new tricks.
Tradeweb Markets, a derivative- and bond-trading system owned in part by Goldman Sachs Group and JPMorgan Chase & Co., has secured a toehold in the $8.6 trillion U.S. corporate bond market. Three years after it first offered corporate bond trading, the firm now handles roughly 1% of volume electronically, according to Raymond James & Associates. In a market dominated by giant investment banks, where 80% of volume continues to be transacted over the phone or by chat message, that looks like a revolution.
Wall Street firms have maintained their grip on the market through their role as debt underwriters, giving them the power to allocate newly issued bonds to favored clients. Goldman Sachs, JPMorgan, Morgan Stanley and their peers also have the most comprehensive view of the market: they, not their asset manager customers, have the best access to price data, in part because only they can see trades done between banks. The phone has long been the preferred means of passing on that intelligence to customers.
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