Fintech is speeding up "unprecedented" changes that are underway in Europe’s bond markets.
Technological advances are accelerating the automation of bond trading, according to a report by the International Capital Market Association (ICMA).
Regulatory pressures are also reducing the capacity for broker-dealers to hold, finance or hedge trading positions, the traditional source of bond market liquidity.
"Many believe this transformative pathway will be a painful one as regulation and technology are already proving disruptive influences on the established market structures," it said.
"However, it is also supposed that this next stage of evolution in the cash bond markets will create opportunities through innovation."
It added that fixed income is moving away from a "quote-driven" market structure in which prices are given by dealers, and relevant businesses must adapt in order to remain competitive.
"Technology is the ‘forcing mechanism’ speeding up this change in fixed income trading," it said.
"Technology is starting to create a more efficient, rationalised model of trading and some say ‘smarter’. However, before this optimised model of fixed income electronic trading is realised, a journey of natural selection has to be undertaken."
"Like equities, fixed income trading will have its successes and failures or as Darwin puts it: 'survival of the fittest'."