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HOUSE_OVERSIGHT_014375

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electronification is something that pays dividends, these benefits occur over time. That said, general sentiment from asset managers is that electronification is something they want as it leads to efficiency. Chart 90: As you think about corporate strategy for asset managers, how open is your firm with embracing new technologies/electronification in the fixed income space? 60% 52% 50% 40% 29% 30% 19% 20% 10% 0% Top priority in corporate Modest priority in corporate Low priority in corporate strategy strategy strategy Source: BofA Merrill Lynch Global Research = ETF market for fixed income securities expected to grow significantly. Unlike in the equities market where ETFs are 7% of the volume traded, fixed income ETFs are still sub-1% (0.8% at YE15). As the market continues to grow, particularly in the asset classes where the underlying bonds aren’t that liquid, Mr. Callahan noted seeing increased liquidity in the ETFs for liquidity reasons. Following in the footsteps of the equities market, Mr. Callahan expects the fixed income ETF market to grow significantly and be very impactful to the overall market structure. = Greater concern around speed at which liquidity can change vs. liquidity in the market. There is a lot of concern around liquidity in fixed income markets. That said, Mr. Brown is more concerned with the speed at which liquidity can change. There has been growing evidence that the market is going to adjust greater and faster than the underlying fundamental reasons for the correction. As such, this is causing participants to revisit how they look at risk management. Now market participants need to take into account not only their behavior, but their reaction to other participants’ behavior (i.e. contagion effect). = Fewer, well-established platforms reduce overall risk within system. Eighty-nine (89%) percent of the audience polled prefer to conduct business with a few, well- established platforms to diminish risk within the system. Using the government b

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