Greenwich: Fixed-Income Institutions Using More Dealers

August 7, 2003 ( - The United States fixed-income trading market showed significant change in 2003, as traders look for more from their dealers.

In an effort to get the highest quality execution from their dealers, fixed-income investors use an average of 10 dealers across products, up from 8.5 a year ago, and concentrate 60% of their volume with their top three dealers. Further, approximately a quarter of investors conduct a formal review of their dealers, according to a study by Greenwich Associates.

With the increase in the amount of dealers used, the growth in interest of online trading should come as no surprise.   More than half (54%) of US fixed-income investors that use products available for online trading now trade online, up from 45% a year ago.

Institutions also increasingly perceive their business to be of higher value than the cost to dealers of servicing their institution. Investors overall rate the value of their business to be 3.4 (on a scale of 1 to 5, with 5 being highest) while rating the cost of service to their institution at just 2.5.

One aspect of the cost to serve an institution is specialist coverage. While overall demand for specialist coverage declined to 66%, from 75% in 2002, there is still significant preference for specialist coverage, especially among users of less-liquid products.

Money Changers

Looking at what products may be changing institutional hands, the Greenwich research found a mixed bag.   Trading volume by institutions increased year-over-year in products such as syndicated loans, mortgage-backed securities, and short-term fixed income, while decreasing in commercial mortgage-backed securities, asset-backed securities, US Agencies, and high-grade corporates.

Additionally, total cash bond trading volume totaled $7 trillion, with three-quarters of that volume remaining concentrated with the largest 10% of institutions. Overall cash bond assets under management totaled $6.5 trillion.

It is a market undergoing significant change. “This is in large part because of transparency issues, dealer reviews, feedback mechanisms, and natural asymmetries inherent to this business,” Greenwich Associates consultant Tim Sangston said in a statement.

Evidence of the increased scrutiny on the dealers, half of all investors indicate they are concerned about conflicts of interest with their dealers, with larger institutions demonstrating more concern than their smaller peers.  


Overall, the total cash compensation – salary and bonus – of US fixed-income investors was up 3% in 2002 to $321,000.   Breaking it down, bonuses increased by 2% to $178,000, while salary spiked slightly higher, 4%, to $142,000.

The report was compiled based on interviews conducted from March to May 2003 by Greenwich Associates with 1,448 institutional investors in the United States.