The STP Flow of Debt Instrument Trades

This chapter discusses the straight‐through‐processing (STP) flow of debt instrument trades. Most trades in debt instruments are executed by sell‐side firms as principal as there is no stock exchange involved. Instead, market makers publish bid and offer prices and compete with each other. Their bid and offer prices are published on Reuters and Bloomberg. Orders may be placed by researching best bid and offer prices and telephoning a market maker directly; or by researching best bid and offer prices and sending orders through hub and spoke services such as Omgeo Oasys or Autex; or by using the electronic bond trading platforms provided by information vendors such as Bloomberg, Reuters and Thomson Financial; or by using the services of a money broker. The sell‐side firm will normally execute the trade as principal and earn its income from the spread between the average price of its position in the securities and the price of the order. As trades in debt instruments are normally executed in a principal capacity, no commissions or other fees are usually charged on trades in these instruments.