In a market defined by capital requirements and increased regulations that squeeze margins, as well as truncated trading volumes and historically low interest rates, the primary solution to preserving fixed income trading revenues and profits has been the use of sophisticated technology, such as that which supports electronic trading. For about 10 years now, only the handful of banks that had the depth of pocket to make strategic investments in technology are the ones that have dominated the market. Their hundreds of millions in tech spend enabled them to build systems that allowed for, for example, high frequency trading, auto quoting, the internalization of trades, immense analytic capabilities, and the use of low-touch hedging tools. This, in part, explains why the top U.S. government bond dealers continue to handle nearly 60% of client trading by volume.
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