MarketAxess enhances dealer value through its new DealerAxess service

MarketAxess won the Best sell-side trading network category in this year’s Sell-Side Technology Awards, thanks largely to its recently launched DealerAxess offering. Patrick Bailey discusses the thinking behind the launch, the benefits accruing to sell-side companies using the service and what is on MarketAxess’ radar in terms of future enhancements.

MarketAxess recently launched DealerAxess, a new high-touch, dealer-initiated trading service. What prompted the launch of DealerAxess, what does the move mean for the dealer community, and what are its various trading protocols?

Patrick Bailey, head of open trading and DealerAxess, Emea and Apac, MarketAxess: We launched DealerAxess late in the first quarter of 2024 in response to dealers’ changing demands and their increasing reliance on electronic trading—we wanted to make everything that clients already have available to dealers. We recognize it’s important that our clients are able to build out their dealer growth so, with DealerAxess, we wanted to create more parity for dealers regarding their access to liquidity and their ability to interact with our platform the same way clients do. We believe that, with the launch of DealerAxess, we are now meeting that demand.

The initial focus of the DealerAxess expansion revolved around two core protocols: Dealer RFQs—dealers taking liquidity—and Mid-X, our mid-market matching session. There have been request‑for-quotation (RFQ) protocols available to dealers for years, but the key differentiator for MarketAxess is its Open Trading network, which provides the best chance of optimizing execution. Traders have the ability and discretion through Open Trading to connect with clients and dealers, allowing them to access liquidity sources in multiple jurisdictions from anywhere in the world, on demand.

If we’re going to be the number one counterparty, we’re going to have to provide the number one counterparty level of service—and that’s what DealerAxess sets out to achieve.

Patrick Bailey, MarketAxess

Mid-X is fast becoming a preferred market protocol with dealers. We use CP+, our artificial intelligence-powered pricing engine, as the strike level, which provides traders with the confidence that they are accessing true mid-market prices. We also added advanced risk controls with the growing presence of dealer algorithms, so you can confidently submit large numbers of orders across multiple sectors and maturity buckets.

Having the security of a reliable mid-market price and the risk controls to prevent risk exposure in either direction provides comfort to our new participants, and syncs up nicely with where the matching session market is going. Mid-X is now worldwide, with matching sessions in Asia and Europe, and we are excited to be launching high-grade matching sessions in the US this month. With this, traders are able to have a “follow the sun” approach to mid-market matching sessions at the click of a button.

DealerAxess is built on Open Trading’s liquidity network and combines advanced technology with a “white-glove service”. How can Open Trading be beneficial to the sell side, and why did MarketAxess feel that the interdealer broker (IDB) market needed to be disrupted?

Patrick Bailey: In Open Trading, inquiries and trades are anonymized and they settle facing MarketAxess, allowing us to scale up the potential of trading to a level that is unmatched. As a result, the number one counterparty on the platform for the vast majority of clients is Open Trading, although it’s often a top counterparty for even the largest bulge-bracket dealers, too. If we’re going to be the number one counterparty, we’re going to have to provide the number one counterparty level of service—and that’s what DealerAxess sets out to achieve.

With DealerAxess, we wanted to level up the experience dealers have with their more traditional sources of liquidity, such as sales desks and IDBs. We wanted to create a familiar trading environment for the dealers that they can engage with on a daily basis. We looked at how sell-side traders access their trading—if they’re trading with clients, they often talk to clients on chats throughout the life cycle of the trade and, if they’re trading with IDBs, they’re often on the phone with that broker throughout the trade. We’ve recreated that environment by having a desk-anchored service that provides point-of-trade support as well as pre- and post‑trade support. DealerAxess gives you real-time feedback at the point of trade, keeping dealers connected throughout the trade process.

As a result, dealers can confidently partner with the DealerAxess team, leveraging a significantly larger network that spans multiple regions and jurisdictions, and scale their business to levels previously out of reach. We also understand that errors can occur during trading, and resolving them can be challenging when counterparties remain anonymous—our team brings extensive experience in handling these situations seamlessly. We have decades of direct market experience among the staff on our desks, as well as our Clearly Erroneous Trade Policy, which allows us to act quickly with impartiality.

What’s next for DealerAxess and what new innovations can the market expect from MarketAxess?

Patrick Bailey: MarketAxess has always been about creating a one-stop shop for traders and, as the landscape continues to evolve, so should we. We’ve made large investments in terms of platform infrastructure, notably the acquisition of Pragma, which will markedly increase trading velocity and versatility by modernizing the infrastructure behind our protocols. Automation will continue to evolve, especially on the dealer side. We’ve already launched automated client solutions, which help automate protocol selection to optimize execution. That will bring a number of advantages to dealer-algorithm trading desks as the volumes and numbers of ticket inquiries continue to rise.

We’ll also be looking at cross-pollination of protocols, as we see the rise of portfolio trading and broader algorithmic trading from dealers. The ability for those traders to offset the associated risk—through on-demand dealer RFQs or Mid-X matching sessions, to the US where they can post to our central limit order book—should be quick and accessible for all dealers.

One protocol we’re particularly excited about is Disclosed Open Trading, or DOT, which allows firms to isolate trading counterparties on a name give-up basis within the Open Trading network by reducing it to as low as a single dealer. So, it’s really a disclosed protocol that utilizes our Open Trading settlement facility. This provides huge potential for client and dealer panel management, and it reduces know-your-customer and onboarding overheads, which we acknowledge are huge expenses for clients and dealers. So, there are lots of applications for that protocol, and it’s something we think will become even more relevant in the future.

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