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European government bond trading goes electronic

26 March 2015  |  4880 views  |  0 graph 2

Some 57% of trading volume in European government bonds was executed electronically in 2014, up 14 percentage points since the onset of the global financial crisis according to a new report from Greenwich Associates.

In a report based on interviews with more than 1200 institutional investors, Greenwich predicts that Europe’s bond markets will continue migrating toward a more electronic model, with voice trading more often reserved for less-liquid markets or large-sized trades.

While the shift to e-trading is growing, the list of competing platforms is not, with Bloomberg and and Tradeweb dominating. "The two are nearly neck-and-neck. Bloomberg’s impressive fixed-income footprint given its terminal distribution and Tradeweb’s strong dealer relationships and longstanding penetration with major asset managers create continued healthy competition," says Greenwich's Kevin McPartland.

More than three quarters of European government bond market participants traded electronically in 2014. "Increasing regulatory pressure for greater transparency and heightened concerns about tipping off the rest of the Street through information leakage could drive current users of electronic trading to execute a greater proportion of their total volume via the screen in the future," says Greenwich MD Andrew Awad.

In fact, the European market has passed the US in certain fixed-income products when it comes to electronic execution. For example, in the US investment-grade corporate bond market, only 12% of the volume was traded electronically in 2014, versus 50% in Europe.

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