Trading: Automation Update

So, I've been in bond trading for around two years now and, while its obvious why equity trading is becoming automated, I don't understand why people think the bond market is going to become automated in the same fashion... "Traders are a dying breed", "S&T isn't going to exist". 


In bonds, other than the treasury market and primary dealers auto-market-making, and maybe some interest rate derivatives or those running massive corporate inventories managing constant bid-ask spreads, I don't see a whole lot of automation. I'm also quite young and possibly naïve. Hear me out. I agree that trader headcount does not need to be as large as it used to be... but those who aren't players in this this market (non-bond traders), please understand a few things:

  1. Not every bank plays in the same market

  2. Every bank has different client demographic

  3. Aside from govt, agency, and corporate markets, there can be limited market and price transparency

  4. Most bonds don't exist into perpetuity and often include large block size, illiquid markets (regarding participants, not trading software), and require extreme due diligence in some products

  5. As a trader, from a top-down perspective, where you operate in the primary/secondary markets is everything; primary dealer bidding tsy auctions, printing agency deals, putting on swaps, writing/structuring derivatives, underwriting corps and munis, providing all flow for a few different products, pure speculation, the list could go on depending on client needs and how your shop is set up


Its not about deal flow necessarily, but certainly is about volatility and transaction volume. I think its recently become obvious that just because some computer science people can write code to make different platforms interact and perform transactions autonomously, does not mean the bond market is going to become automated. In fact, I believe most of the deals and large transactions that occur in the bond market are relationship based and the street or greater public might not even know they happened. 


What do you think? More experienced traders, do you agree with any of the above comments? 

 
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