Half of firms trading more bonds electronically – survey

Regulation seen as major driver in electronification of bond trading.

Asset managers are increasingly trading fixed income securities on electronic venues, according to a survey conducted by Liquidnet.

The poll of 52 asset managers across North America, Europe and the Asia-Pacific, found that more than half of asset managers have seen an increase in fixed income electronic trading over the past year. Half of respondents also said liquidity conditions in fixed income have improved in the same period.

The survey also found a significant difference in attitude towards electronic fixed income trading between Europe and the US, largely due to MiFID II.

Liquidnet found 86% of European traders believe the regulation is driving more corporate bond trading onto electronic venues, while just 39% of US traders thought the same. Firms in Europe are, not surprisingly, far more pro-active on MiFID II with 91% of traders saying they were aware of their firm’s plans around the regulation, compared to just 25% in the US.

“MiFID II is driving global standards: As the January 2018 deadline draws closer, the implications of the European-based legislation has attracted interest from a global audience with gaps emerging between US and European traders,” Liquidnet said.

OMS integration is seen as a crucial factor in supporting electronic trading of fixed income, with 58% of respondents saying it was an important issue when selecting a trading venue. Venues having a “critical mass” of liquidity was also a major concern.

Mark Pumfrey, head of EMEA at Liquidnet, said: “Although a European regulation, MiFID II has far reaching implications as global trading firms start to deploy best practices around compliance, transparency, and audit trails across both Europe and the US.

“As discussions with our members around the impact of MiFID II evolve, we expect the gap between US and European markets to narrow, with the US increasingly directing more volume toward electronic venues.”