Can e-trading revive secondary bond liquidity?

Author: Gemma Varriale | Published: 9 Dec 2014

Electronic platforms could save corporate bond trading from a liquidity drought. But will they usurp banks?

Paul Reynolds left his desk at Citi in 2012, after 25 years trading bonds. The reason: trading in the traditional way, where banks act as intermediaries for investors seeking to buy or sell corporate bonds, was no longer profitable.

The financial crisis has changed a lot for fixed income traders like Reynolds. Seven years after the collapse of Lehman Brothers, Basel III and Dodd-Frank – the trans-Atlantic pillars of the new regulatory order – are changing the face of banking as we know it.

"Those regulations profoundly limit what a trader can do within a bank," says Reynolds. "I stopped my job as a trader because it would have been extremely difficult to make money in quite the same way as I had been able to in the past."

That banks, in their quest to preserve...