| Abstract: |
The subject of our study is the trading infrastructure of government
securities markets, which has undergone fundamental changes driven by the
appearance of non-exchange electronic platforms and the rapid rise of their
share in the trading volume of developed markets. The summary of the relevant
literature indicates that improved trading transparency clearly increases the
efficiency of the market (its role in price discovery). Its effect on market
liquidity, however, is less clear-cut. While the loss of anonymity most likely
decreases liquidity, transparency on the quantity and price of concluded
transactions enhances liquidity. The emergence of electronic trading on
developed government securities markets has not changed the fundamental
structure of trading, which continues to take place in two segments: between
dealers (B2B) and between dealers and clients (B2C). There is, however, no
interbank trading platform on the Hungarian government securities market,
although data vendors and other platforms serving clients have sprung up.
Nonetheless, more than 90 per cent of trading takes place through traditional
OTC channels. Consequently, actors which are interested in market processes
and prices, but do not actively trade on the Hungarian market have trouble
accessing high-standard, quasi-real-time price information. The MiFID
initiative – launched at the European level – may contribute to improving the
Hungarian market’s transparency by engendering the regulation of the bond
market similar to that of the equity market. Introduction of the euro in
Hungary will fundamentally change the country’s market structure. The
sovereign debt manager’s leeway will increase, and the key direct actors on
the government securities market are expected to be the major international
actors, which are interested in the centralisation of government securities
trading by currencies. Based on the broad electronisation of the
euro-denominated government securities market, it is likely that electronic
platforms will also gain ground on the Hungarian market, following the
introduction of the single currency at the latest. |