Electronic trading platforms capture more volume in US bond trading

Source: Greenwich Associates

Electronic trading platforms are on pace to capture 20% of U.S. investment grade corporate bond trading volume in 2015—a 25% increase from 2014.

As e-trading increases in importance, Wells Fargo has leapfrogged over some long-established players to become the most commonly used dealer for the electronic trading of investment grade corporate bonds.
Those are among the key findings of a new report from Greenwich Associates entitled, The Continuing Corporate Bond Evolution. The report presents results from the Greenwich Associates 2015 U.S. Fixed Income Investors Study. Among the key findings presented are the following:

  • High yield bonds are the next electronic trading frontier. Although only 6% of high yield trading volume is executed electronically, bonds that fit into the illiquid category are the focus of several new bond trading platforms now in expansion mode. Throw in an insatiable appetite for yield in this low-rate environment and the path to more high yield electronic trading is clear.
  • Liquidity in in corporate bonds is improving—slightly. The number of investors that believe executing orders over $15 million in notional volume is either difficult or extremely difficult dropped from 81% in 2014 to 71% in 2015. “Clearly trading large blocks of corporate bonds is still no walk in the park; however any easing of this burden should be seen as a step in the right direction,” says Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associates.
  • Wells Fargo Establishes Itself as No. 1 for e-trading of investment grade corporate bonds. Wells Fargo’s climb to the number-one spot in terms of market penetration in electronic investment-grade corporate bond trading marks the first time the bank has topped the traditional dominant players in the broader bond market.
  • Investor interest in “all-to-all trading platforms” increased from 38% in 2014 to 43% in 2015. This shift points to a growing appetite among investors for trading anonymously with any market participant that is offering the right security at the right price and size.

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