In days past, trading technology was stifled by limitations that gave little scope for competitive pricing. Today, electronic trading platforms enable firms to access vast pools of liquidity, connect with various market participants, and benefit from transparent pricing. This value speaks loudly, especially at a time when the industry has witnessed significant regulatory reform, particularly with the introduction of the revised Markets in Financial Instruments Directive (Mifid II), which requires buy-side firms to provide regulators and their clients with evidence that their best execution mandates have been met.
MarketAxess has made significant strides to tackle these issues in the credit markets with its Open Trading electronic all-to-all marketplace, and this year its hard work has paid off as it snatches the best buy-side execution venue title from Liquidnet.
MarketAxess has dedicated years to building out Open Trading’s functionality and market data capabilities since the platform’s launch in 2012. Today, it connects a global community of over 1,400 institutional firms trading credit instruments. The firm has also enhanced its workflow capability, providing dealers with more efficient access to Open Trading liquidity pools by allowing them to respond to anonymous pricing inquiries in the same way as disclosed inquiries, whether it is done using the platform’s workstation or through its application programming interfaces.
“What we saw was a significant increase in the number of responses we received from dealers, so it was a pretty interesting thing,” says Richard Schiffman, head of Open Trading at MarketAxess. “It showed that traders will respond when they are shown an inquiry that’s of interest to them, and that knowing who is on the other side [of the trade] is of relatively less importance than what bond they are being asked to price.”
From July 2017 to June 2018, Open Trading has saved liquidity takers over $100 million in transaction costs, according to the New York-based firm. It has also seen a jump in its daily volume activity to $1.4 billion, an increase of 54 percent from the same period in 2017.
In March this year, MarketAxess expanded its presence in the Asian credit markets through its partnership with BlackRock. In the coming months, it will continue to develop the platform and its list of trading protocols beyond request-for-quote, including one called Client Axes, in which Schiffman describes as a bulletin board/order book-style for buy-side and sell-side firms to share their interests, where parties can bilaterally engage and trade with each other. “This is the first time that a buy-side firm can advertise their interest out into the market and then trade directly with those other parties who might be interested,” he claims.
Bryan Cross, who heads UBS Asset Management's QED group, joins to discuss alternative data and AI.Subscribe to Weekly Wrap emails
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