Sat, Oct 21, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Canadian Fixed Income: In Crisis, An E-Trading Surge - Greenwich Associates

Wednesday, October 28, 2009
Opalesque Industry Updates - In the midst of the global financial crisis, Canada’s largest and most active institutional fixed-income traders led a long-awaited move into electronic trading, according to new research from Greenwich Associates.

Thanks to the relatively prudent and conservative strategies pursued by Canada’s banks during the boom years, the nation’s fixed-income markets escaped the worst consequences of the global credit crunch. Nevertheless, the crisis has had a lasting effect on both institutional fixed-income investors and the dealers that serve them.

In particular, some of Canada’s leading fixed-income dealers have responded to the tumultuous market conditions by narrowing their strategies and focusing their efforts and resources on a smaller group of select clients. At the same time, many of the large foreign dealers that had built a significant presence in the market scaled back their Canadian operations rapidly and dramatically as a result of their own serious balance sheet issues. The end result: Many Canadian institutions experienced disruptions in relationships with one or more of the dealers they relied on for coverage in specific domestic and international fixed-income products.

Faced with gaps in sell-side coverage and a sudden and dramatic widening of spreads, Canada’s institutions turned to electronic trading platforms as a new and alternative source of liquidity. In 2008, only 36% of institutions generating more than $10 billion in annual fixed-income trading volume used electronic trading platforms for this business. In 2009 that proportion surged to 61%, driving the overall share of Canadian institutions trading electronically to 43% from 40%.

Greenwich Leaders: Canadian Fixed Income

Three firms dominate the Canadian fixed-income market: BMO Capital Markets, TD Securities and RBC Capital Markets. Each of these dealers has captured a market share of 16-17%, and in aggregate, these firms account for half of all fixed-income trading volume in Canada.

Institutions rate RBC Capital Markets as the market’s highest quality provider, and the firm ranks as the Greenwich Quality Leader in Overall Franchise Strength, Sales and Trading. BMO takes top honors in quality of fixed-income research. TD Securities ranks second in quality ratings in sales, trading and overall franchise strength. “The strong gains made by TD Securities in terms of the quality of their fixed-income platform are worthy of special note, and they place the firm in a strong position in the fight for institutional trading relationships,” says Peter Kane.

TD Securities was also one of the main beneficiaries of the significant increase in electronic trading volume last year, along with RBC Capital Markets. As Woody Canaday concludes, “Both firms saw strong increases in the number of investors trading with them through the CanDeal electronic platform.”

Specialist Firms Capitalize on Market Turmoil

Disruptions in relationships between Canadian institutions and their fixed-income dealers created an obvious opportunity for other dealers to expand their franchises by adding new institutional trading relationships. Certain firms have proved more adept than others at exploiting these opportunities. In particular, a group of specialist firms including Desjardins Securities, Casgrain and Laurentian Bank Securities have taken advantage of the change in market environment by upgrading their capabilities and the quality of service they deliver to institutional clients. For example, 42% of Desjardins Securities clients say their relationship with the firm has improved over the past 12 months. “Even if these shifts have not yet amounted to actual increases in market share, these specialist firms are building new relationships and cementing existing ties to institutions,” says Greenwich Associates consultant Woody Canaday. “The situation parallels that seen in the United States, where regional dealers have hired talent away from the contracting bulge bracket and upgraded their capabilities. They are positioning themselves for expansion in the very near term.”

Another group of dealers has had less success in capitalizing on the disruptions in institutional dealer relationships. “There are a few major Canadian banks that actually lost market share from 2008 to 2009, even as some very credible competition receded,” says Peter Kane. “Although it is difficult to generalize about the performance of these banks due to differences in their strategies, it is likely that some of them will look back on the past 12 months as a missed opportunity.” Corporate website: Source

- FG

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Regulatory - David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge, Carried interest tax: How much does it matter?, Odey sees 'terrifying' mix in MiFID, tapering, asset values, Hedge funds come together to share cost of MiFID and research, SEC turns up the heat on U.S. investment advisers, India's Sebi asks hedge funds to report investments in commodity derivatives[more]

    David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge From CNBC.com: David Stockman is warning about the Trump administration's tax overhaul plan, Federal Reserve policy, saying they could play into a severe stock market sell-off. Stockman, the R

  2. North America - Puerto Rico rejects loan offers, accusing hedge funds of trying to profit off hurricanes[more]

    From TheIintercept.com: Puerto Rico has rejected a bondholder group's offer to issue the territory additional debt as a response to the devastation of Hurricane Maria. Officials with Puerto Rico's Fiscal Agency and Financial Advisory Authority said the offer was "not viable" and would harm the islan

  3. Investing - WPP targeted by short-selling American hedge fund, Sun co-founder sells secretive hedge fund on big chip trade[more]

    WPP targeted by short-selling American hedge fund From Cityam.com: An American hedge fund has mounted a bet against WPP, the world's largest advertising group, with a trade worth almost £90m. Lone Pine Capital has built a short position worth 0.51 per cent of the FTSE 100 company,

  4. Hedge funds up as industry adjusts to rising rates[more]

    Komfie Manalo, Opalesque Asia: Hedge funds have reshuffled their portfolio after nearly four weeks of rising rates as the Lyxor Hedge Fund Index was up +0.2% from 19 September to 26 (+1.1% YTD), fuelled by strong results of global macro funds, Lyxor Ass

  5. Manager Profile - How the world's hedge fund king used 'idea meritocracy' to become a billionaire[more]

    From Forbes.com: In 1982, Ray Dalio made what he calls the biggest mistake of his life. He made a bet that there would be an economic collapse stemming from a debt crisis. And he was wrong. He lost money. He lost his client's money. He had to let people go from his firm and borrow money from his dad