There is an increasingly sharp focus on the many new venues designed to facilitate the trading of corporate bonds. Clear guidelines are in place to deal with technology glitches in more long standing electronic markets that are regulated accordingly, such as equity markets, but bond markets do not have such public rulebook standards as their move towards the electronic trading domain is more recent.
A small number of established venues have dominated over the last ten years and have different proprietary standards to fall back on. But as investors turn increasingly to the electronic domain, new floors have opened causing potentially troublesome overlapping between different technology providers.
Soitiris Manderis, Head of eCredit at HSBC, has spoken of the problem of growing market interconnectivity: "We are not there yet, but rules around testing and about how system failures are dealt with need to become more formalised and strict."
For most banks, technological hiccups are an inevitable part of life in today's constantly changing marketplace. But not all parties acquiesce to this approach and concerns remain over contingency measures in the event of an outage on a platform or trades being executed incorrectly.
A major investment bank in the US advises that better standards need to be adopted before a "huge systematic issue in the market" appears. A case in point came last month when MarketAccess employed a stale US Treasury feed which had a knock-on effect on how bond prices were calculated for traders of investment grade corporate bonds. Debt issued by major companies is priced and traded over US government bond yields of the same maturity.
Around 150 traders were said to have been affected and MarketAccess said processes were reviewed and amended as a result. The platform represents around 16 per cent of the market for US investment grade corporate bond trading and sees an average of 5000 daily trades.
A leading trader at a bank in Europe attributed a similar level of importance to the issue, saying the bank's agreements with platforms have protocols for clearing up activity which runs the risk of trades being cancelled.
While some banks want greater safety nets, platforms argue that it would be difficult to cover any more bases. The general counsel for an established platform says that it is hard "to be overly specific about what to do in each scenario."