Monday 29 April 2013 by Legacy

Liquidity in Over the Counter Debt Markets

Please note that the figures mentioned in this article are no longer available.

Equities are traditionally traded on a public exchange, the vast majority of debt products in Australia are traded via over the counter markets, which provide substantial liquidity even in institutional volume.

The Australian Financial Markets Association provides annual reports on the breadth and depth of both OTC and listed markets. The below table provides a summary of total turnover for the 2012 financial year, highlighting the relative liquidity provided by the ASX and OTC markets.

OTC non-government debt has almost half the turnover of all ASX securities, and over 100 times the turnover of ASX listed interest rate securities.

FIIG acts within this OTC market alongside domestic and international institutional counterparties who traditionally transact in $500,000 minimum parcels, allowing for liquidity in volume; intermediaries like FIIG provide further liquidity in sub-$500,000 parcels.

While FIIG represents only a small part of the entire OTC market, it alone provides comparable liquidity to the ASX.

Keeping in mind that the many listed interest rate securities are either hybrids or convertibles which have significant equity-like features, the following graph shows FIIG’s total monthly turnover to that of all ASX listed interest rate securities, and ASX listed interest rate securities excluding hybrids and convertibles.


In the 12 months to February 2013, turnover for FIIG totalled $5.51 billion, which compares to the ASX’s total interest rate security turnover of $6.9 billion and turnover in interest rate securities excluding those with equity like features of $2.99 billion.