Coalition Greenwich: Asian bond markets see electronic trading adoption accelerate

Dan Barnes
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New analysis by research firm Coalition Greenwich has found that, while much of the e-trading growth in Asia to date has come via relatively liquid G3 and Chinese Yuan denominated bonds, trading in local market bonds has moved increasingly onto electronic trading venues.

In 2016, Coalition Greenwich data showed that 14% of Asian bonds, including domestic and hard currency bonds, traded by the buy side were executed electronically. At the end of 2020, that percentage more than doubled, with over one-third trading electronically via the major trading platforms, including an impressive 37% of domestic-currency bonds.

“The uptick in e-trading for local currency bonds demonstrates that e-trading growth in Asia is not simply from international firms trading G3 bonds, but is increasingly local,” says Kevin McPartland, head of research in the Coalition Greenwich Market Structure and Technology group and co-author of Electronification and Market Access Drive Alpha in Asian Bond Markets.

The report presents the results of a recent study for which Coalition Greenwich interviewed 700 Asian bond investors trading over US$2 trillion of domestic and hard currency bonds in 2020. It examines the current state of fixed income electronic trading in Asian, roadblocks to progress and areas for growth in the coming years.

Globally, the growth of fixed-income e-trading is not only from increased participation, but also from protocol innovation. For instance, all-to-all trading protocols, such as anonymous request for quote (RFQ) and some auction-style offerings, have allowed the buy side to provide liquidity and, conversely, dealers to send RFQs, neither of which would have been possible a decade ago. Looking ahead, investors in Asia expect to make more use of streaming prices—primarily via multi-dealer platforms, but also from dealers via API for some and, more notably, all-to-all trading.

“Despite clear electronification progress in Asia over the past several years, there remains much more opportunity for growth and increased efficiency beyond the growth of all-to-all and portfolio trading,” says Vignesh Srinivasan, research associate at Coalition Greenwich, and co-author of the report. “Many dealers still have people quoting prices on liquid bonds in G10 currencies, a process that really should no longer need human intervention.”

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