By all measures, Portfolio Trading (PT) as a protocol has reached maturity, accounting for 20% to 25% of all US electronic credit trading. We investigate what comes next for the protocol, which remains concentrated on the dealer side.
Analytics, automated workflows, and residuals management should bring structural changes rather than incremental volume changes, according to our interviewees at credit trading platforms MarketAxess, Tradeweb and Trumid.
Crisil Coalition Greenwich, using Tradeweb data, puts PT at 21% of electronic US corporate bond trading (10.4% of total credit trading and 16.3% of dealer-to-client US credit trading).
For Trumid, Paris Pender, head of portfolio and macro US credit trading, the protocol is so mature that its next evolutions will have to be structural, not just incremental.
About Trumid’s own effort in PT, Crisil noted that it saw the largest percentage gain in PT share last year and said: “Trumid’s portfolio trading is well loved by many on the buy side”.
He told The Desk: “I think the PT space has reached a level of maturity that feels high enough and advanced enough that it must evolve. This feels like the right time for an inflection point. We expect risk recycling to become increasingly important, setting new efficiency metrics for balance sheet turnover, while analytics grow more sophisticated, ultimately driving the emergence of new market constructs.”
PT’s footprint in overall credit trading is particularly notable in dealer-to-client flow. For Pender, the protocol represents 20% to 25% of flows. He said to The Desk that “The top dealers see the vast majority of the flows”.
Data sourced from Tradeweb’s own dealer counts reinforce the point from a participation angle. The platform says that in US credit it has 121 liquidity providers live for RFQ versus 26 dealers live for PT. In Europe, the ratio is 62 RFQ-enabled participants versus 18 for PT. While RFQ dealers are numerous, PT remains concentrated.
Taking this concentration into consideration, Tradeweb’s Iseult Conlin, the head of US institutional credit, told The Desk: “Some people look at portfolio trading as a percentage of the overall market, which ranges between 10% and 11%. However, I tend to look at PT market share from a dealer-to-client perspective, and that’s where we see 15% to 16% adoption.”
The protocol may be “mature” overall, but not every segment is at the same point on the curve. On MarketAxess’ latest earnings call, CEO Chris Concannon described IG PT as having reached an equilibrium range, saying it has “flatlined anywhere from 10% to 12% of the overall market.” He contrasted that with high yield, where PT has moved “up closer to 15% of the overall market,” versus “5% and 6%” a few years ago.
Why credit traders adopted PT so aggressively
For our interviewees, a key reason PT scaled so fast in credit is that it did not go against the dominant trading habits of credit traders. Pender said: “RFQ is the bread-and-butter market structure for credit because the client shows their hand first… and then the dealer comes back with pricing on everything.”
PT fits that logic. Clients still ask dealers to price what the client presents, but it does so at portfolio scale, allowing traders to solve the economics of each PT deal for exposure, liquidity access and operational efficiency in one decision.
The protocol’s growth also aligns with how credit risk is increasingly packaged and measured. Morgan Stanley research explicitly has “buy/sell portfolio in exchange for ETF” as a driving force of PT use case adoption, as more and more investment is directed towards passive index exposure in credit. Portfolio Trading matches the need of ETF providers and traders to rebalance their underlying basket of bonds.
Read more: European bond trading impacted by 84% of flows to active open-ended funds
This is also where ETF-linked analytics matter to PT traders. Dealers do not just need to win trades by pricing tight; they need to effectively deal with their ensuing inventories.
Platforms have understood that need. Tradeweb, for example, says it provides analytics that map portfolio exposure via ETF overlap and dislocation measures, including premium/discount views, helping dealers decide what residual risk to keep, hedge, or recycle, as well as how to price their baskets.
ELPs: systematic participation is rising, but banks still dominate deals by a wide margin
Because in equities large ETF market makers and systematic firms have become such dominant liquidity providers, a lot of questions surround the current ETF market makers’ involvement in PT.
Amongst electronic liquidity providers, in 2024 Jane Street alone handled 24% of all US primary ETF dealing as well as 17% of secondary trading. This has market participants wondering how large a chunk they represent in ETF-related portfolio trading.
Read more: Jane Street took 10% of US equity market in 2024
Credit has not got the same market structure, and the market share of ELPs is not as relevant, yet. For Pender, “On the ELP front, engagement is building, with substantial room for further growth. Systematic participation in credit is clearly rising, and fully or highly systematic firms are achieving levels of success in ways that weren’t as observable or prominent six years ago.”
Tradeweb’s Conlin similarly describes non-banks as additive, often in niches (including ETFs or specific curve segments), while banks still dominate the centre of gravity.
Residual recycling, workflow automation and analytics
If PT is mature as a protocol, dealers The Desk approached said that managing residuals effectively could still yield further price improvement for clients. To this purpose, Trumid’s Pender looks to offer “new efficiency metrics for balance sheet turnover”. He also expects risk recycling to become increasingly important.
Tradeweb is also pushing into residual workflow. Conlin said: “We recently launched a solution called Target Trades in the US for the dealer community to recycle residual liquidity from portfolio trades,” and added: “It’s very hard to estimate the amount of TRACE attributed to these residual trades and could be an even larger universe than we would expect.”
The future evolutions of PT seem less about large increases in market share but more about democratising who answers PT requests.
As Pender notes, the direction of travel is towards “more sophisticated” analytics and “new market constructs”, from pre-trade screening against constraints to automated duration hedging, via systematic recycling routes that make tight covers more sustainable for a larger number of dealers.
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