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Passive investing has had a large impact on equity markets. Though growing fast, its impact on fixed income markets has been much lower. Key barriers to adoption have been the lack of name brand indices (no well known index = no ETF to sell) in the space & >illiquid markets. 
To date, fixed income trading has primarily been monetized by the existing exchanges via their data / analytics business. The most valuable piece of data to control = an index & the corresponding data that is owned by the index operator.
ICE has most comprehensive FI data service & has integrated the leading (by AUM) bond index business into that (Bloomberg has done the same, just smaller). ICE also sees CBOE owning VIX & how controlling an exclusive product brings both >trading volume & >data to its exchange.
For fixed income markets to get more liquid, theyre going to need simpler to understand and trade products... ETFs can fix that. Theyre also going to need more retail participation... name brand indices & electronic trading venues can fix that.
If only there were existing, branded, household name, credit ratings businesses that could lend their names to newly created, passive bond indices and ETFs...
The winning biz model for a fixed income exchange operator
1 own & control its own index products
2 have most robust data offering
3 those attract investors to the exchange & drive >trading volume & liquidity
No 1 co has put these together yet, though they are trying.
1 own & control its own index products
2 have most robust data offering
3 those attract investors to the exchange & drive >trading volume & liquidity
No 1 co has put these together yet, though they are trying.
Why should MCO not acquire MKTX? MCO can create fixed income ETFs exclusive to its newly controlled exchange. MKTX's data biz is under monetized & MCO can combine w its own analytics biz. Both of these create more liquidity at the exchange, making it more attractive to passive.
