E-trading on the rise for US emerging market bond traders

Research suggests emerging market bond trading will rise next year, with a portion of that volume tipped to be executed electronically.

Emerging market bond traders in the US have predicted an increase in trading volumes over the course of the next year, with a growing share due to be executed via electronic protocols.

A poll of almost one-third of all asset managers and half of hedge funds based in the US, carried out by Greenwich Associates, found that based on current trends 70% of those investors will execute some portion of those trades electronically.

Institutional investors surveyed executed 14% of their emerging market fixed income trading notional volume through electronic platforms between 2017 and 2018. Greenwich said that as electronic trading has increased access to data and markets in the developed world, the same is now being seen in emerging markets.

“Technology is increasing the flow of information, removing the language hurdle and connecting disparate brokers and investors from all over the world, allowing trades to consummate that only a few years ago would have been too expensive, if not impossible, to get done,” said Kevin McPartland, head of research for Greenwich Associates market structure and technology, and author of the report.

The report from Greenwich also showed emerging market investors have broadened their access to liquidity providers in recent years, and directing less of their trading to their top dealers.  The top five emerging market dealers handled 65% of emerging fixed income in 2014, but today, the top five dealers handle 54% after losing share to regional dealers globally.

Greenwich concluded that emerging markets are as diverse as the cultures of the countries and firms that issue the debt, and those nuances must be recognised by electronic platform providers and their users to ensure progress.