03.08.2017
By Rob Daly

When All-to-All is Not Enough

The US Treasury market has gained yet another electronic trading model that splits the difference between the dealer-centric peer-to-peer and all-to-all trading models.

Trading platform operator LiquidityEdge launched its LiquidityEdge Select many-to-many market in mid-October 2016 with to address what it views as the shortcomings of the anonymous all-to-all model.

In its many-to-many model, users can choose among liquidity sources that are identified by the firm’s name or by a LiquidityEdge-assigned numeric identifier while maintaining their existing relationships.

“The key is that they still have control over who they are trading with,” said Hirak Biswas, head of product and strategy at LiquidityEdge.

In an anonymous all-to-all model buy-side users may gain access to new sources of liquidity at the expense of giving up the benefits of existing relationships, he added.

“The tier 1 real money and hedge funds are usually the ones that take advantage of the value-added services such as research, so would prioritize trading with the primary dealers.”

LiquidityEdge Select also uses Cantor Fitzgerald as its clearing intermediary for the new platform and is in the midst of adding a second clearing intermediary.

The presence of clearing intermediaries allows liquidity providers who can only participate via intermediaries to participate as well, according to Biswas.

Access to additional liquidity sources also has changed many of the buy-side end-users into the new role of price markets, he also noted.

“In a way, larger end-user accounts become price makers to primary dealers with reduced balance sheets,” Biswas explained. “They don’t provide two-way real-time prices to an exchange. Will there be a hedge fund that will make the stacks in off-the-runs stronger on a platform like ours? Yes, I think so.”

The platform is the second Treasury trading platform that LiquidityEdge has launched. The firm opened its peer-to-peer LiquidityEdge Direct for symbolic trading in 2015 with the goal of connecting professional trading groups, formerly known as high-frequency traders, to the primary dealer community.

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