Clive Bastow, Senior Consultant,

In recent months a growing number of Alternative Trading Venues have appeared, particularly for traders of Corporate Bonds. To an extent this is an inevitable evolution of what has traditionally been a voice brokered market. It is merely following the path laid out by equities over the last 10 years or so. In the field of equities unchecked growth of alternative venues led to instances of platforms paying for prices, providing preferential access to certain customer types, and allowing increasing numbers of complex and potentially abusive order types. We would hope that lessons have been learned from the mistakes of the past. Controllers at Financial Institutions need to examine whether trading on Alternative Trading Venues have been captured by their New Product Approval processes or similar. They need to ask themselves what controls they have in place to prevent traders from influencing valuation processes such as IPV and collateral valuation, and whether contributing prices to these venues could result in a benchmark contribution. Does the accessibility of Alternative Trading Venues provide opportunity for their traders to side step Trade and Transaction Reporting obligations and therefore suppress their trading activity from the wider market place?