Active Bond Crowd - Explained
What is an Active Bond Crowd?
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Table of ContentsWhat is an Active Bond Crowd?How Does an Active Bond Crowd Work?Inactive Bond CrowdAcademic Research on Active Bond Crowd
What is an Active Bond Crowd?
Active bond crowd refers to the name given to the New York Stock Exchange (NYSE) members and the particular bond trading departments which are recognized as traders who engage in frequent trading of active bonds.
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How Does an Active Bond Crowd Work?
The active bond crowd on the NYSE creates liquidity and is capable of influence the price of bonds which are traded on the market in that they usually account for the largest transaction volumes in the market. Liquidity shows the extent to which a security or asset can be speedily bought or sold in the market without having an effect on the price of the asset. In general, the active bond crowd would be able to demand better buying and selling prices of active bonds. These active bonds are either corporate bonds or other fixed-income securities which are often traded largely on the New York Stock Exchange. For some investors, active bonds can be appealing. This is because as fixed-income securities, the bonds' price is usually unaffected by their high volume of trade. Also, active bonds are often rated higher by agencies like Moody's and Standard & Poors. Combining these features, investors frequently utilize active bonds to diversify portfolio or as a somewhat safe investment when the market is volatile. A daily chart is published by many financial publications. This chart shows the ten most actively traded securities which are based on the total face value traded, in each of the three sectors of the corporate bond market: high-yield, convertibles, and investment grade. Investors can utilize this data for comparing the market value of the corporate bonds they are either thinking of buying or the bonds they own. As noted by SIFMA, higher volumes of trade for a specific security typically means better order execution, higher liquidity, and highly active market for buyer and caller connection. The most actively traded corporate bonds of the day might show where the bond investors get the biggest opportunities, as well as, risks in terms of both issuers and industries.
Inactive Bond Crowd
The inactive bond crowd is the opposite of an active bond crowd. This term describes an exchange members' group who buy and also sell bonds which are seldom traded. When an inactive bond crowd places limit orders, it might take a longer time to fill as a result of infrequent trading. Another name for the inactive bond crowd is the cabinet crowd. Before the invention of electronic trading, orders placed by members of the inactive bond crowd usually were kept in cabinets off to the side of the general trading floor. This brought about the cabinet crowd nickname.