Richard McVey, Market Axess

What were the top three trends in the fixed income marketplace in 2000?

In my opinion, the top three stories in 2000 for fixed income markets were the continued consolidation in the dealer community (JP Morgan/Chase, CSFB/DLJ, UBSW/ PaineWebber); generally low liquidity in spread markets; and the rapid progression of electronic trading. I also feel the three trends are related.

Fixed income participants are demanding change. Institutional investors need improved liquidity, dealers are under pressure to improve risk adjusted returns on capital, and regulators want improved transparency and a leveling of the playing field. As a result, electronic trading and more open markets are strategically important, leading to a proliferation of new entrants offering bond trading platforms. The bond business is going through an important transformation and there has been no shortage of capital to fund new businesses.

I don't believe fixed income markets can support the 80-plus trading systems currently competing for a place in the online market. I expect rapid consolidation in the electronic trading market with the winners likely to be those backed by significant dealers. Industry analysts are focusing on two or three likely winners in 2001, including Market Axess. Not surprisingly, I agree!

It looks as though the Fed is in the early stages of engineering a successful soft landing. Lower interest rates and moderate growth in the economy should be good for corporate credit quality and spreads. I look for an improved environment for credit products, including distressed areas such as high yield and emerging markets.

In 2000, Market Axess successfully transitioned from vision to reality. We announced our plans in January, and successfully launched secondary trading, research and new issue capabilities in the fourth quarter. We have created first mover advantage in credit products and intend to build on our leadership position in 2001. Look for additional products, regions, dealers and services on Market Axess in the new year.

Market Axess is emerging from the pack due to our unique combination of research content, liquidity and product breadth. All three areas are critical in less liquid credit markets. To date, we are the only platform to aggregate the leading full service capabilities of eight global dealers and deliver them to clients through one secure Internet site. In just our second month of trading, we offer tradeable prices on over $16 billion in corporate bonds, 2,000 securities and 40,000 research reports. Look for much more as we expand into new markets and new regions in 2001.