Electronic trading platforms are on target to capture 20 per cent of US investment grade corporate bond trading volume in 2015 – a 25 per cent increase from 2014, according to a new report from Greenwich Associates.
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, which presents results from the Greenwich Associates 2015 US Fixed Income Investors Study, also reveals that as e-trading has increased 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.
The report suggests that liquidity in in corporate bonds is also improving, albeit slightly. The number of investors that believe executing orders over USD15 million in notional volume is either difficult or extremely difficult dropped from 81 per cent in 2014 to 71 per cent 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.
According to the report, high yield bonds are the next electronic trading frontier. Although only 6 per cent 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.
The report also says that investor interest in “all-to-all trading platforms” increased from 38 per cent in 2014 to 43 per cent 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.
