Question-76: Do you agree with that statement “Defaulted bond had no correlation with investment-grade bond but significant correlation with high-yield bond issue”?

Answer: Yes.

Question-77: What all are the participants, you can think of for the Bond market?

Answer: Following are the usual and major participants for the bond markets.

• Trader (Front office)
• Back office to the trader
• Money manager
• Investment advisor
• Regulator
• Retail investor.

Question-78: Which are three major section in which you can divide fixed income market participants?

Answer: You can divide fixed income market participants in below three major groups based in functions

• Issuer: Their primary role is to issuing debt for financing. And the participants are
  • Governments
  • Corporations
  • Banks
  • Municipalities
• Intermediaries: The debt is underwritten, distributed, and traded in the secondary markets by intermediaries. Which includes following participants
  • Investment banks
  • Commercial banks
  • Interdealer brokers
• Investor: who buy fixed income, which includes following participants
  • Governments
  • Mutual funds
  • Insurance companies
  • Commercial banks
  • Corporations
  • Retail investors.

Question-79: Why it was considered that central electronic trading is difficult for fixed income securities, like equity?

Answer: Because usually in the fixed income trade it has a number of mobile/telephone call exchanges among

• Buyers
• Sellers
• Intermediaries such as brokers and dealers.

Which can lead to inefficiencies and errors as most of the things are manual like

• Pricing
• Execution
• Manual corrections

Question-80: What are the major reason which cause of electronic trading preference over traditional trading?

Answer:

• Efficiencies: It is more efficient and value added.
• Regulatory requirement: In fixed income market rigorous oversight have been introduced by regulators.
• Pre and post trade services are efficient and reduced manual error exorbitantly.