Investigate and Analyze the Impact of Electronification in Fixed Income Bond Markets and Equity Stock Markets via ARIES Framework

Abstract

Electronic trading continues to increase and evolve within and across financial markets globally. This growth is primarily driven by market participants searching for greater transparencies, operational efficiencies, and regulatory compliant trading solutions. Following tremendous growth in the equities domain electronic trading is gaining prominence in the fixed income markets and is contributing to changes in its market structure, price discovery mechanisms, and strategies to access untapped and alternative liquidity sources. New electronic trading platforms, venues, and entrants have emerged that prioritize in providing clients and investors with modernized trading solutions that are competitive and cost-effective in nature and challenge the status quo. Technological advancements empowered by data and analytics are enabling rapid dissemination of pre-trade, at-trade, and post-trade information in the financial ecosystem leading to more integrated and efficient markets with reduced fragmentation. Electronic trading is also promoting greater use of algorithmic trading and is introducing numerous workflow automation technologies into various stages of the trading lifecycle. Innovative trading protocols supporting best execution for clients have come into existence and serve as strategic tools to attract and retain market share. Although electronification has a lot to offer, it still might be offering challenges or operational resistance to some market participants.

Through literature review and a series of semi-structured interviews this thesis investigates the emergence and impact of electronification in the fixed income bond markets and equities stock markets. It explores, examines, and discusses the value-propositions, drivers and motivations for transformation, challenges inhibiting growth and adoption, and the future outlook subject to electronification in bonds and stock markets. This thesis further applies key elements of the ARIES framework to generate unique perspectives and assess the impact of electronification, in its current state, across these select asset classes and instruments.