Question-111: Which all are the trading models exists for the Fixed Income trade?

Answer: There are following types of trading models available and most prominent are below three

• Request for Quote
• Order Driven
• Auction System

It is not necessary a single platform support only one trading model. There could be more than one trading model supported by a single platform.

Question-112: Can you please explain the Request for Quote trading models in Fixed Income?

Answer: Using Request for Quote a buyer/seller can request pricing on a bond or more than one bonds and from pool of dealers which are part of that platform. Hence, you see RFQ is usually supported by the multi-dealer client system only. Once the quote request received by all of the dealers, dealers can respond with their own price quotes (It depends on trade is requested for buy or sell). They are generally coming with the time limit as well like 2 min. Requestor can wait upto 2 mins for getting the price from all the dealers. Once quotes are received that can then be acted upon and an execution occurs if a bid is hit or an offer is lifted.

Question-113: Can you please explain the Oder Driven Fixed Income Trade Execution Model?

Answer: In the order-driven model a participants/client (Liquidity Taker) place an order against whatever price quotes was provided by another participants/client. This other party is known as any of the below

• Price makers
• Liquidity providers
• Market makers.

Trade Executions happens if orders submitted are matched against price quotes from other participants like Price Makers. If order matches, then an execution message is generated for both the party liquidity provider and liquidity taker. Usually, odd-lot trading systems are order-driven systems.

Question-114: What are the Auction Systems in Fixed Income Trading?

Answer:  Usually. Auction systems are used for the new issue or any book-building activities. And issuer or issue manager would post the offering details with the information which include

• Name of Security
• Size available
• Any applicable rules of the auction

Participants shows the indications of interest and for the placed orders are allocated when auction is closed.

Question-115: Why Fixed Income trading is moving towards the API(Application Programming Interface) based rather than Graphical Interface?

Answer:  Because Fixed Income trading has increased its volume number of transactions and information is not available on single platform for all the transaction done. And API can help in programmatic aggregation of information from multiple and from the electronic platforms, which are competing with each other.