European investors refuse to budge in move to electronic trading

Incoming rules on electronic swaps trading have yet to persuade institutional investors.

By Joe Parsons January 28, 2016 10:50 AM GMT

The majority of European institutional investors are still unconvinced to move to electronic platforms for their interest rate swaps trading.

According to a report from Greenwich Associates, of 200 investors surveyed nearly 80% said their preferred choice to trade was over the phone. 

It also found only 20% of notional volume from institutional investors was executed electronically last year, and less than 40% of investors utilised e-trading tools.

Incoming rules in Europe will move trading to new electronic platforms called organised trading facilities (OTFs) or multilateral trading facilities (MTFs), as a way to increase transparency and regulate the swaps market.

However, Greenwich’s Kevin McPartland, head of research for market structure and technology, and author of the report, says clients are still placing high value on support provided by swaps salespeople on the phone.

“Even in the US where electronic trading is required, recent Greenwich Associates research showed that swaps salespeople are still critical for executing complex and large trades,” says McPartland.

“These trades often require white glove treatment, and clients work with dealers that are best at limited market impact and providing the support needed to get the trade done.”

The results will certainly deal a blow to operators such as Bloomberg, Tradition and interdealer broker ICAP, which have invested heavily in building these electronic trading platforms.

In November last year, ICAP sold its voice brokering business to Tullett Prebon for £1.11 billion, as it looks to focus purely on electronic trading and post-trade services.