All elite things are either going through a backlash or losing their sheen on their own.
One such is the most elite bond trading system – Fed and Primary Dealers. There was a time when firms would compete/fight to be a part of the system. Now they are just giving up:
To see how far the prestige of the U.S. Treasury market’s primary dealers has declined, consider the case of Credit Agricole SA.
For years, France’s third-largest bank courted the Federal Reserve Bank of New York, supplying trade and flows data to demonstrate it was worthy of joining the $13.6 trillion market’s middlemen. The bank also expanded its Treasuries business by adding traders and sales staff and sought out new institutional clients.
By last year, the efforts had brought a primary dealership within reach for a bank thatagreed in October to pay $787 million to U.S. regulators to resolve allegations it violated sanctions aimed at Iran and Sudan.
Post-crisis regulation and evolving technology are changing the landscape in the benchmark market for global borrowing. Banks once champed at the bit to become primary dealers. Now the role’s perceived benefits have diminished. Today, a handful of firms dominate trading, and a growing share of auction business bypasses dealers altogether. Last year, 10 percent of new Treasuries went to investors who bid directly with the government, up from about 1 percent in 2006, data compiled by Bloomberg show.
Interesting bit. Years of hubris just catching up…