Chris Concannon helped drive a revolution in equity trading. Now the MarketAxess president says bond investors could save billions by taking inspiration from the stock market.
- Chris Concannon, president and chief operating officer at MarketAxess, highlighted areas where the bond market could benefit from mirroring how stocks trade, and where it should differ.
- Concannon, who joined the electronic marketplace for corporate bonds in January, previously served as CEO of Bats Global Markets and president and COO of Cboe Global Markets.
- He said the ability to work orders, or putting a buy or sell order in the market and executing it over a period of time, is one example of an innovation from the stock market that could save investors billion if implemented in fixed income.
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WASHINGTON, DC - Chris Concannon's departure from Cboe Global Markets to join MarketAxess in January was viewed by many in the industry as another sign the speed and innovation prevalent in the stock market would start to bleed into bond trading.
Now, 10 months after taking on the role of president and chief operating officer at the largest electronic marketplace for US corporate bonds, Concannon has some ideas on where bond trading would benefit most from mimicking equities and where the two markets should remain separate.
Concannon, who spoke at an industry conference Thursday here, noted it won't be an all-out sprint to completely mirror how stocks are traded.
"I walked in thinking - no offense to the equity people - we got it all wrong in equities. The regulations forced some of this stuff, and the less liquid end of the equity market got treated poorly." Concannon said. "What is nice about the fixed-income market, it is going to be a patient walk to a more electronic market."
One area bond investors should look at how stocks are traded is the concept of working an order, or putting a buy or sell order out into the market and handling it over time across multiple counterparties.
As it stands now, Concannon said, investors either work with one dealer to handle large, block orders or trade small tickets as quickly as possible to get them off their trading desk.
"The concept of working orders still hasn't reached the fixed-income market," Concannon said. "I think there will be a lot of evolution around how clients can put some orders in the machine and work the larger, more complex orders."
Innovations like that, or around how investors price bonds, are areas where the bond market can see big benefits from taking inspiration from how equities trade, Concannon said.
"Investors would save billions," he added.
However, Concannon said some parts of the bond market should remain the same, instead of following in the footsteps of the stock market. RFQ, or the process of requesting a price from a dealer, will continue to be how a majority of trading takes place, he added.
Bonds that don't trade frequently, of which there are many, shouldn't be required to be widely displayed as it will make them more difficult to trade, Concannon said.
Maintaining a range of trading protocols, and giving investors choice, will be key as the market changes, Concannon said.
But there is no doubt that change is coming, he added.
"There are a lot of people in the community that just don't get. They just don't know it's happening," Concannon said. "They're convinced that there are too many CUSIPs, so we can't have electronic trading. That is just not the case."