11.22.2011
By Terry Flanagan

Investors Turn to Fixed Income

Market participants are increasingly turning to the trading of bonds and other fixed income securities during times of market volatility.

“My hunch is that there is equity market fatigue,” Chris Shayne, senior market strategist for BondDesk, told Markets Media. “There are people using fixed income to dampen the volatility of their own portfolios. For the people who buy fixed income and bonds as opposed to funds or ETFs, the benefit is if you buy and hold, the return is certain. People have been doing that in greater numbers because of the volatility. The best way to dampen volatility is to hold bonds.”

With volatility remaining constant since the mid-summer, many investors have turned to trading in securities aside from equities, including options, futures and fixed income, in a move to hedge risk.

BondDesk recently announced the formation of a partnership with Trade West Systems, whereby liquidity from competing fixed income trading venues can be aggregated and traded on its own platform. Prior to the partnership, BondDesk gave access to about 97% of the overall bond inventory. The company asserts that the deal with Trade West will help to shore up gaps.

Founded in 1997, BondDesk operates the largest retail bond trading venue in the U.S. The company executes about one-third of the trading in the retail bond market. It also provides enterprise-wide fixed income trading technology, software and analytical tools to the broker-dealer community. BondDesk ATS, run through an affiliate, connects broker-dealers through a centralized marketplace by offering a diverse pool of liquidity for odd-lot fixed income securities in multiple asset classes. The ATS executes about 20,000 transactions daily, worth more than $1 billion, for a network of 2,000 broker-dealers.

Trade West Systems is a provider of technology that automates the delivery of securities prices and trade data to and from electronic trading platforms. It operates as an affiliate of MarketAxess, which handles the trades of corporate bonds, emerging market bonds and other fixed income securities.

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