This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bond Trading Sees Rise of the Machines

Stocks in this article: GS MS BLK

NEW YORK ( TheStreet) --Bonds are the new stocks, at least where Wall Street spending is concerned.

A few years ago, being a fixed income trader was a reliable path to riches on Wall Street. That has changed, even as financial institutions are upping their spending on fixed income trading technology.

A report released Tuesday by consulting firm Greenwich Consultants provides the latest evidence of the latter trend. In a survey of buy-side institutions, Greenwich found that fixed income desks are the most likely to increase spending on technology.

"Several factors are driving the desire to evaluate current systems for potential change, including the need to keep pace with new regulations that are changing the market structure in derivatives and imposing taxing new compliance demands across asset classes. With the fixed-income market arguably undergoing the most change at this point in time, it comes as little surprise that buy-side investors in this asset class are both more likely to be looking into ways to improve systems and to be spending more on technology," the report states.

What's interesting about this technology spending increase is it comes just as pay for fixed income traders is down. Compensation for fixed income traders likely fell between 0-15%, the worst performing of 13 categories in a November report from compensation consultant Johnson Associates 

Fixed income markets have long offered less transparency than equities markets, but new regulations are changing that dynamic. Fixed income securities such as swaps must increasingly be routed through central clearing facilities. While part of the spending increase is merely to connect institutions to those new facilities, firms wouldn't make those expenditures if they didn't continue to see potential profits in fixed income.

But where the profits come from is likely changing in the face of greater oversight. When prices of fixed income securities were difficult to determine, it was easier for big institutions like Goldman Sachs  (GS) and JPMorgan Chase  (JPM), as well as their buy side counterparts like Pimco and Blackrock (BLK), to gain an advantage. If anyone knew the price, they did, and that knowledge often translated directly to trading profits. But as prices become easier to see, as is the case in equities markets, being able to trade faster is the only way to get an edge. And to trade faster, you need faster technology.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs