Pre-trade information on bond pricing is currently non-standardised and often misunderstood. The term ‘axe’ is used in fixed income trading to represent a sell-side advertising buy or sell bond interests.
These are
traditionally tied in some form to the sell-side’s book but can also be
driven by client orders and even a trader’s market view or valuation.
There
is keen interest in how these axes are distributed because they are a
vital source of data for bond traders. Counterparties use axes to source
liquidity, as well as to negotiate improvements in quotes received,
potentially bringing the traded price inside the bid-ask spread.
Even
though axes (pre-trade bond pricing information) are important for
traders, the way in which they are distributed is not uniform and may
even in some cases have been unintentionally misleading, causing
consternation amongst buy-side market participants. This new Guide to best practice to definitions for bond pricing distribution
aims to set out standards and definitions agreed on by a representative
group of industry participants, which we hope will be adopted by the
market as the basis of further innovation and automation.
The guide to best practice will be updated throughout 2021 and thereafter, reviewed semi-annually.
ICMA
© ICMA
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article