There is a trend to electronic trading and there is certainly pressure on margins on many products. The response from the industry has really taken two tracks.


The first is to get big or get out. In many areas such as FX, bonds and other commoditized areas, only the largest players can really thrive. Lower margins naturally mean that higher volume is needed.


The second is to cross-sell. Of course, just because you're not making much money trading FX, doesn't mean you can simply pack up and go home. The real money is in the more structured, exotic products but you're never going to get that business unless you first do the plain vanilla stuff so its really a loss leader in some ways. THe whole focus of the sales force is much more focused on derivatives. Its one thing to recommend a simple spot EUR/$, quite another to sell a binary range forward with double knockout or something like that.


Regarding the flows... the reason i mention it is because often in the fixed income market large players can and will move the market. So you can look at all the charts you want and analyze economic fundamentals but on any given day, 10 year volatility might go up just because XYZ came in and bought in size. Then all the analysts go and conjure up some explanation trying to justify this.


About the e-trading platforms... i work in research so i don't really deal too closely with that aspect but from what i gather, the traders aren't really concerned about "giving away information" through their e-trades. The size on the those trades is quite small comparatively so you definitely won't get the same price on the larger volume trades. And i don't think we're very concerned about competitors pennying us. Don't know about equities but in fixed income 90% of the revenues are generated by about 10% of the clients so if we lose a little business here and there on the e-trades its not a big deal.


So, thats my impression of the state of affairs in fixed income. Its still an area which is dominated by larger players with little to none in the way of retail volume. Not sure about the story in equities, but even there i'm sure our main clients are mutuals funds, pension funds, etc... the usual suspects, so i have a feeling the story won't be all that different.