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E-trading picks up pace in corporate bond market

Latest research from Greenwich Associates shows electronic trading continues to grow as providers add data and analytics tools to draw in investors.

By Hayley McDowell hayley.mcdowell@strategic-i.com October 31, 2017 4:04 PM GMT

The use of electronic trading for corporate bonds has surged significantly over the past few years, with MarketAxess being the preferred e-trading platform according to new research.

A study from Greenwich Associates revealed 84% of investors now trade corporate bonds electronically as of this year, compared to just 69% in 2013.

Similarly, the overall corporate bond trading volume on a notional basis traded electronically has surged from just 8% in 2013 to almost 20% this year.

“The increase in usage from just 69% in 2013 shows how quickly investors are adopting electronic trading and how rapidly electronic tools and venues are maturing,” the report explained.  

High-yield bond trading has seen an even greater surge in electronic trading activity, with almost three quarters of investment firms stating they use an electronic platform this year, up from just 44% in 2013.

It also found 95% of investors that trade electronically - including hedge funds, banks, funds and advisors - have MarketAxess on their desk, which is used to execute 85% of their electronic trading on a volume-weighted basis.

The research explained the surge is partly due to bond trading providers launching new and enhanced data and analytics products, which are acting as a draw for investors.

“In coming years, we will see bond trading venues morph into data and analytics providers, with their liquidity pools as the mere foundation of the business,” said Kevin McPartland, head of Greenwich Associates market structure and technology research, and author of the report.

“The additional insights available to the buy side will help not only traders, but also compliance teams become increasingly comfortable with all-to-all trading, and even, eventually, the idea of buy-side price making.”