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Electronic trading platforms in an evolving bond market: An overview.

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Autor: email hidden; JavaScript is required">Brian Mattmann

 

A variety of transformative forces has changed the structure of global bond markets considerably in the last two decades. Bond markets have historically been a combination of a centrally organised market structure with dealers at its core, providing market-making to a fragmented network of clients; and an interconnected inter-dealer market allowing dealers to source liquidity bilaterally or through inter-dealer brokers. Voice-based trading was the common medium of trading in the dealer-to-client market, intermediation between clients was nearly non-existent.

This traditional market structure experienced a major shift starting before the turn of the century with the rise of electronic trading and the increasing introduction of trading platforms. In the inter-dealer market, electronic communication networks were starting to gain traction in the late 1990s – examples are eSpeed (launched by Cantor Fitzgerald), BrokerTec (launched by a consortium of Wall Street banks) or EuroMTS in Europe.

In parallel with the rise of electronic trading in the inter-dealer market, there were initiatives in the dealer-to-client market introducing electronic trading platforms (ETP). Those platforms mainly took two forms: Single-dealer (SDP) and multi-dealer platforms (MDP). Whereas SDPs allow clients to trade only bilaterally with one single liquidity provider, MDPs allow investors to query orders to multiple dealers electronically. Major landmarks in the multilateral trading was the introduction of MDPs launched by Tradeweb (by Thomson Reuters and 11 banks), Bloomberg (BondTrader BBT), MarketAxess or BondVision.

In the aftermath of the financial crisis, the transformative forces in the bond market have been reinforced by a combination of regulatory initiatives, changing policy environments and establishing innovations. Since then, bond market liquidity has started to narrow, many market participants express increasing difficulties in sourcing liquidity. An argument for explaining this liquidity shortage is the shrinking liquidity provided by sell-side firms (e.g. banks, brokers). In this evolving environment, all-to-all (A2A) trading platforms have recently gained traction and attention. Platforms offering A2A protocols connect dealers, investors and other market participants on a centralized venue. Trading can take place between all platform members, irrespective whether a participant is a buy-side or a sell-side market player. Major A2A providers are MarketAxess (Open Trading), Tradeweb (Tradeweb Blast A2A), Trumid (Trumid Market Center) or Liquidnet (Liquidnet Fixed Income). Some A2A platforms allow buy-side investors to actively provide liquidity to the venue and hence they invert the traditional way bond markets have historically been working: Sell-side firms provide liquidity to buy-side investors. It seems that the functional structure of bond markets are changing and the lines between liquidity-takers and liquidity-makers are blurring.

Today, the number of bond trading platforms available is extensive; platforms are being shut, merged or acquired regularly. In this evolving environment, keeping the overview about all existing platforms is rather challenging. To overcome these difficulties, we try to make use of the intelligence of the crowd – YOUR intelligence! We made an effort to collect currently available electronic bond trading platforms/systems (SDP and exchanges are not included). The list consists of 42 platforms. We encourage you to have a critical look in the list: Did we miss a platform? Do you have knowledge to complete or amend the list?

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The “updated” list will be included in an applied research study examining the trading infrastructure and trading habits of Swiss (buy-side) investors (e.g. banks, securities dealers, asset managers). The report will be published by the end of Q1 2018.

Our research in that field is supported by Diem Client Partner AG and Saxo Bank (Schweiz) AG.

 

Platform Name Description Type of platform Trading method Eligible participants
Algomi Through their Honeycomb, Synchronicity and Algomi ALFA technology, Algomi creates a bond information network that enables all market participants to securely and intelligently harness data to make valuable financial trading connections. Electronic trading system Sourcing, aggregation and/or matching detection platform Dealers, institutional investors
AxeTrader AxeTrader provides banks, broker-dealers and buy-side firms with a complete picture of fixed income liquidity including axes, runs and quotes – sourced across electronic venues, messaging platforms and voice channels. Electronic trading system Sourcing, aggregation and/or matching detection platform Dealers, institutional investors
B2SCAN B2SCAN is a tool designed to help Asset Managers search and identify the sell side’s bond axes. It collects market information and carefully controls who accesses the data. It adds liquidity to the market and increases the flow of business. Electronic trading system Sourcing, aggregation and/or matching detection platform Dealers, institutional investors
BGC Trader BGC provides electronic trading services for various financial products through BGC Trader, a multi-asset hybrid offering for voice and electronic execution. Products supported include government and corporate bond markets. Electronic trading platform D2D Dealers
Bloomberg ALLQ The Bloomberg ALLQ platform provides a full view of dealer liquidity available in the market. It allows end-users to compare and trade live streaming prices from multiple dealers. These are aggregated prices pulled from single dealers. Electronic trading platform D2C Dealers, institutional and retail investors
Bloomberg BBX Bloomberg Bond Cross (BBX) allows buy-side and sell-side participants to access European bond market liquidity. State Street will act as an impartial counterparty for each trade. As a result, participants minimise information leakage and retain anonymity throughout the execution process. Electronic trading platform A2A Dealers, institutional investors
Bondpoint Virtu BondPoint delivers centralized liquidity and automated, cost-efficient trade execution services for fixed income securities. Buy and sell side traders enjoy efficient, direct market access. The electronic marketplace links more than 400 financial services firms to 200’000 live and executable bids and offers. Electronic trading platform D2C Dealers, institutional and retail investors
BrokerTec BrokerTec is an anonymous dealer-to-dealer electronic trading platform for the fixed income markets, providing innovative technology solutions across a wide range of products. BrokerTec facilitates trading solutions for many US and European fixed income products. Electronic trading platform D2D Dealers
BrokerTec Direct BrokerTec Direct offers a disclosed trading execution platform. It is a dealer-to-client platform that offers relationship-based electronic trading for fixed income instruments. Electronic trading platform D2C Dealers, institutional investors
Candeal CanDeal has assembled Canada’s deepest liquidity pool for Canadian debt securities. Institutional investors from around the globe leverage CanDeal to gain direct access to their dealer network, including all of Canada’s primary dealers. Electronic trading platform D2C Dealers, institutional investors
CastleOak DirectPool The DirectPool platform from CastleOak connects price-makers and price-takers and optimizes the price and minimizes the leakage of information. Electronic trading platform D2C Dealers, institutional investors
Clarity BidRate The Clarity BidRate alternative trading system creates an opportunity in the variable-rate securities market that is designed to level the playing field for issuers, investors, banks and broker-dealers. The platform gives full pricing power to investors who will be able to bid for bonds priced through a competitive bid process. Electronic trading platform A2A Dealers, institutional investors
Dealerweb Tradeweb’s Dealerweb offers liquidity solutions for traders in the interdealer broker marketplace. It offers a fully electronic solution that replicates the existing voice broker process for U.S. markets with anonymous central limit order book matching between dealers and market makers. Electronic trading platform D2D Dealers
EMBonds As an electronic trading venue dedicated to the emerging market fixed-income space, EMBonds was launched in 2015. Employing an all-to-all model with a central clearing counterparty, the platform has a global client base ranging from hedge funds to specialist emerging market banks. Electronic trading platform A2A Dealers, institutional investors
Euronext Synapse Euronext signed a partnership with Algomi. Combining Euronext’s experience and Algomi’s innovation technology, Euronext Synapse connects pools of liquidity and market participants anonymously in a centralised market place. Electronic trading platform D2D Dealers
HSBC Credit Place HSBC Credit Place is a D2C and C2C electronic liquidity aggregator. The platform displays streamed prices from various sourced (e.g. indications of interest from dealers and clients). Trading execution does not take place on the platform but outside through existing channels. Electronic trading system Sourcing, aggregation and/or matching detection platform Dealers, institutional investors
ITG POSIT FI ITG POSIT matches marketable orders on a size pro rata basis. POSIT provides a crossing solution to source quality liquidity anonymously while minimizing market impact. Electronic trading platform A2A Dealers, institutional investors
Liquidity Flow Liquidity Finance has an in-house web based electronic trading platform called Liquidity Flow. It offers transparency of prices, greater control, speed of execution and full anonymity to its participants. It is a buy-side trade matching and pre-trade axe investigation platform. Electronic trading system Sourcing, aggregation and/or matching detection platform Institutional investors
LiquidityChain LiquidityChain provides an information and crossing network that anonymously searches and mines client IOIs (Indication of Interest) to a pairing engine. Once an opposite match is lit, it is flagged to an execution desk whose aim is convert these matches into trades. Electronic trading system Sourcing, aggregation and/or matching detection platform Institutional investors
LiquidityEdge Direct LiquidityEdge is a trading venue that facilitates genuine liquidity for US Treasuries. LiquidityEdge Direct provides bilateral and customisable peer-to-peer streaming on a fully disclosed basis. Electronic trading platform A2A Dealers, institutional investors
LiquidityEdge Select LiquidityEdge is a trading venue that facilitates genuine liquidity for US Treasuries. LiquidityEdge Select provides anonymous trading facilitated by a fully-disclosed clearing counterparty. Electronic trading platform A2A Dealers, institutional investors
Liquidnet Fixed Income Liquidnet Fixed Income offers two distinct yet complementary ways of efficiently accessing liquidity: A buy-side focused dark pool for liquidity that matches passive indications, and a lit pool that allows all participants to post firm and executable prices and exchange liquidity with each other. Electronic trading platform A2A Dealers, institutional investors
MarketAxess MarketAxess‘ electronic trading platform enables institutional investors and broker-dealers to efficiently trade corporate bonds and other types of fixed-income securities. They offer a global all-to-all institutional credit trading marketplace. MarketAxess‘ Open Trading allows investment managers, broker-dealers and other market participants to trade directly with one another electronically on an anonymous basis. Electronic trading platform A2A Dealers, institutional investors
MTS Bonds.com MTS Bonds.com, previously known as BondsPro, is an electronic trading platform that offers access to liquidity and real-time execution on its anonymous, all-to-all order book. It supports USD and a wide range of non-USD denominated corporate bonds and emerging market debt. Electronic trading platform A2A Dealers, institutional investors
MTS BondVision MTS BondVision is a regulated and secure multi-dealer-to-client trading platform for government bonds and credit that connects investors to dealers across Europe and the US. Electronic trading platform D2C Dealers, institutional investors
MTS Cash MTS Cash offers a liquid, transparent and efficient European interdealer bond marketplace. Electronic trading platform D2D Dealers
Neptun Neptune delivers bond market data from sell-side banks to buy-side clients. Their technology enables real-time connectivity between banks and investors which leads to conversations, satisfying the immediate requirements of each party and ultimately, increasing trade volumes. Electronic trading system Sourcing, aggregation and/or matching detection platform Dealers, institutional investors
OpenBondX OpenBondX operates an all-to-all trading platform for trading US treasuries and corporate bonds. The platform enables subscribers either to disclose themselves to particular parties, or remain anonymous when initiating orders. Electronic trading platform A2A Dealers, institutional investors
OpenDoor Trading OpenDoor is an all-to-all session-based trading platform and fills the liquidity vacuum for Off-the-Run US Treasuries and TIPS. Customers include asset managers, central banks, primary dealers, hedge funds, and trading firms. Electronic trading platform A2A Dealers, institutional investors
Saxo Digital Bond Offering Saxo Bank’s digital bond trading solution eliminates manual processes. It gives investors direct access to a universe of over 5’000 bonds. Orders are routed straight to an optimised dealer auction where the top end of 40 liquidity providers compete for orders. Electronic trading platform D2C Institutional and retail investors
SGX’s Bond Pro platform Singapore Exchange (SGX) has launched an over-the-counter (OTC) trading platform dedicated to Asian bonds. The SGX Bond Pro trading venue aims at tackling institutional liquidity challenges within the secondary Asian bond market by re-aggregating liquidity, providing increased protection to institutional investors and facilitating greater trade sizes. Electronic trading platform D2D, D2C Dealers, institutional investors
SIX Corporate Bonds SIX Corporate Bonds is a credit trading platform that allows credit traders to efficiently source liquidity in large ticket sizes with minimal information leakage to the broader market. Algomi was selected as the technology partner. Electronic trading platform D2D Dealers
Spain SENAF SENAF (Sistema Electrónico de Negociación de Activos Financieros) is the Bolsa de Madrid’s (BME) electronic trading platform for Spanish Public Debt, reverse repos and specific securities registered on AIAF. Electronic trading platform D2D Dealers
Tradeweb Blast A2A Tradeweb Blast A2A solution allows clients to send a request for quote to a larger and more diverse network, also integrated with the Tradeweb Direct liquidity pool. Buy-side firms can participate in the Blast A2A as well. Electronic trading platform A2A Dealers, institutional and retail investors
Tradeweb Direct A electronic fixed income marketplace for financial advisors, registered investment advisors, traders, and buy-side investors. Tradeweb Direct offers a full range of front-end and workflow solutions, providing users with pools of liquidity and the tools they need to manage order flow, ensure competition, and mitigate risk. Electronic trading platform D2C Dealers, institutional investors
Tradeweb institutional platform The Tradeweb institutional platform grants global access to leading dealers. The multi-dealer platform puts dealers in competition; trading protocols are tailored for each marketplace. Electronic trading platform D2C Dealers, institutional investors
TransFICC TransFICC offers a solution that enables investors to connect and trade on multiple FICC trading venues. They translate the various trading venue API’s into the format used by TransFICC, to allow for single integration. They centrally collect data in the fragmented fixed income market. Electronic trading system Sourcing, aggregation and/or matching detection platform Dealers, institutional investors
Trumid Market Center The Trumid Market Center is an all-to-all electronic trading network and market intelligence platform for corporate bonds. The acquisition of Electronifie is expected to give Trumid 60 new customers. Electronic trading platform A2A Dealers, institutional investors
TS TradingScreen – TradeCross TradeCross allows members to post their liquidity anonymously in a central place. TradeCross is completely anonymous, and protects members from counter-party risk. TS is in a unique position to provide a fair and efficient crossing environment where all participants can interact with each other.. Electronic trading platform A2A Dealers, institutional investors
TS TradingScreen – TradeSmart Fixed Income TradeSmart FI addresses the buy-side’s data fragmentation issue and provides tools to decide how to execute trades. TradeSmart FI comes with all the connectivity to allow accessing an aggregated feed to more than two million corporate, financial, and government bonds on one screen. Electronic trading system Sourcing, aggregation and/or matching detection platform Dealers, institutional investors
UBS Bond Port UBS Bond Port is a matched principle trading venue where clients can access various sources of liquidity: From other UBS clients, other third-party venues and investors. Electronic trading platform C2C Institutional and retail investors
Yieldbroker Yieldbroker operates an electronic exchange for Australia’s interest rate market. It’s a place where banks, asset managers, insurers, central banks and governments go to trade local debt securities and derivatives. Electronic trading platform D2D, D2C Dealers, institutional investors

Source: Description from company websites

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