US buy-side eyes additional execution platforms for fixed income

Liquidnet’s fixed income platform tops ‘wish list’ for over half of US credit investors.

Fixed income participants in the US are planning the adoption of new electronic trading platforms, with Liquidnet topping the list of platforms they plan to use.  

A study authored by Greenwich Associates found 51% of credit investors based in the US are hoping to add new venues, although few are looking to replace.

Of those planning to adopt a new platform, 55% opted for Liquidnet as the preferred execution platform.

Greenwich said investors are drawn to Liquidnet’s platform’s ability to seek out natural matches via blotter scraping, which enables traders to see benefits without additional effort.

Since the launch of Liquidnet’s fixed income platform in September 2015, 230 active firms with over 540 users have signed up to be a part of the community.

A total of $4.5 billion of corporate bond trades have been executed on Liquidnet’s platform, which it says occurred “efficiently, anonymously and with minimal market impact.”

Speaking to The TRADE about the Greenwich Associates survey, Jonathan Gray, head of fixed income for EMEA at Liquidnet, explained the technology is behind the platform’s success.

“Technology like targeted invitations, which gives traders the capability to access liquidity that was previously in the pool, is a game changer for this space as evidenced by the increases our dark pool has seen in engagement, match rate and trades,” he said.

Gray added: “We’re continuing to build critical mass, as the buy side seeks to unlock liquidity and take control of the ability to directly source the block trades they are looking for.”

Incumbent electronic trading platforms have brought liquidity intelligence to the fixed income market, using data systems to help execute trades. 

Bloomberg, MarketAxess and Tradeweb platforms include these features and are currently the three biggest corporate bond trading venues in the US and for European credit investors.

A recent blog post - authored by John Greenan, a front office trading technology consultant - found there are now 128 fixed income platforms in the market.

Between November 2016 and this month, 14 new bond trading platforms were added to the list of ever-growing execution venues.

Fixed income is overcrowded with venues as regulation forces the structure of bond markets away from a centralised model – mostly due to bank balance sheet constraints - towards a decentralised model.

Market participants have said the explosion of venues is causing fragmentation and a ‘liquidity drought’ in global bond markets.