Analysis: Fixed income e-trading platforms still seeing outperformance in March

Dan Barnes

Major electronic bond trading platforms have reported record trading volumes across several sectors of fixed income, supporting the contention that increased adoption last year has moved beyond a response to market volatility.

MarketAxess saw a total credit average daily trading volume (ADV) of US$12.7 billion and total credit trading volume of US$292.6 billion. Its all-to-all Open Trading total credit trading volume reached US$94.4 billion. It also saw US investment-grade total trading volume of US$145.7 billion, high yield total trading volume of US$43.9 billion and emerging markets total trading volume of US$64.2 billion. The total trading volume for Eurobonds was US$36.5 billion.

Analysts at Morgan Stanley estimated MarketAxess’s market share for investment grade was 21% for March, up 75 bps YoY and up 165 bps month-on-month (MoM), while in high-yield market share of 16% for March is up 390 bps YoY and up 185 bps MoM.

Tradeweb’s reported record total trading volume for March 2021 was US$24.7 trillion across rates, credit, equities and money markets with ADV for the month reaching a record US$1.07 trillion, an increase of 7.3 percent year-on-year (YoY).

US credit ADV was up 49.8% YoY to US$6.4 billion and European credit ADV was up 39.3% YoY to US$2.1 billion. Tradeweb reported a record ADV in portfolio trading for US investment grade and European credit, and new clients for both US and European credit began using the protocol. Automated trading continued to grow with record ADV via AiEX in US high yield and European credit.

Morgan Stanley estimates give Tradeweb a market share of 19% in investment grade for March is up 650 bps YoY including 11% fully electronic that is up 675 bps YoY and a high-yield market share of 7% for March which is up 370 bps YoY including 5% fully electronic up 325 bps YoY.

In US government bonds ADV was up 17.7% YoY to US$113.4 billion, and European government bond ADV was down 1.8% YoY to US$31 billion.

Lee Olesky, CEO, Tradeweb
Lee Olesky, CEO, Tradeweb

Lee Olesky, Tradeweb CEO, said, “I believe we are in the early days of a new normal for electronic trading, led by stronger client engagement and accelerated trends in both adoption and innovation. March 2021 trading volumes soared, with monthly ADV handily exceeding the historic level reached back in March 2020. We also outperformed some broader market trends in March, including in U.S. Treasuries where Tradeweb volume climbed 18% YoY as overall volumes across Treasury markets declined.”

Portfolio trading has also proven valuable for Intercontinental Exchange (ICE); although it has not reported full trading volumes it has reported that in the first quarter of 2021, over US$4.2 billion in US-based notional activity was executed at ICE, up from US$1.9 billion in the fourth quarter of 2020, over double the volume of the prior quarter.

Ascendant bond trading platform Trumid reported its average daily volume (ADV) in March was US$2.1 billion, representing a 123% increase year-over-year and a 48% increase month-over-month. It noted platform engagement has been high throughout 2021, including 910 active users on the platform in the month of March, with elevated participation leading to record user success rates for the 550 buy and sell side institutions within the Trumid network.

Kevin McPartland, head of market structure and technology research, Greenwich Associates.

“Trading venues increasingly stand out based on their ability to provide price improvement, which today comes from access to unique liquidity. Unique liquidity can sometimes come from unique liquidity providers—perhaps an emerging nonbank liquidity provider or regional bank,” wrote Kevin McPartland, head of market structure and technology research at Greenwich Associates in his blog on 8 April 2021. “But increasingly, unique liquidity involves unearthing buy and sell interest regardless of firm type. Asset managers, hedge funds and even pension funds can enter the equation when platforms provide more seamless methods to connect everyone with everyone.”

©Markets Media Europe, 2021