MarketAxess has said its deal with BlackRock's Aladdin Trading Network (ATN) to develop a platform for the US$14 trillion US credit market will increase the market's focus on a single set of open-platform solutions despite a likely increase in competing venues.
CEO Rick McVey indicated in a call with analysts Wednesday that the firm had been in discussions with BlackRock about a move to open trading since it launched the Aladdin platform last year.
McVey said he anticipated an increase in trading in the credit space. "We're not back to where we were when there were 60 platforms in the market but we are seeing new venues," he said. Meanwhile, BlackRock is understood to believe the market requires a change in behaviour from institutional investors used to acting as price takers rather than price makers.
One key concernis whether MarketAxess clients using the platforms il post trades openly - i.e. letting other participants see their order books - or anonymously, which one MarketAxess client said could be raise concerns over visibility of buy-side activity on the platform.
"Conceptually it's a good idea but the devil is in the detail and the detail they've given so far doesn't tell me how it's going to benefit me," said Adrian Fitzpatrick, head of investment dealing at Kames Capital. "If it enhances pricing for BlackRock clients, good – but I'm not here to make their lives easier."
He added: "The question is, how does it work and who's on the other side? Conceptually, putting pools together is a good idea, but MarketAxess clients are not going to want to open their books to BlackRock on a one-way basis. BlackRock's pool is vast and huge – but it would have to be an open architecture that allows both sides to access pools on the same basis. I want to know who sees what."
A spokesperson for BlackRock confirmed participants would still be able to post anonymously or openly. MarketAxess claims around 70% of high-grade US orders in March were made publically.
Asked about overlap between the two parties' clients – Aladdin's 60-odd clients are among the 1,000 institutional investors trading on MarketAxess – McVey said BlackRock would help it target potential new participants for the platform. Aladdin clients account for 30% of publically traded debt in the US market.
"The plan is for deeper integration between the systems. We can make it easier and more efficient for clients to transact on the platform and accelerate adoption rates," said McVey. "It's really about a seamless workflow between the two platforms – to bring the industry together around open-ended solutions."