Collaborative innovation drives trading growth
Tradeweb: Best Trading & Execution Platform – Institutional investors are trading electronically more than ever before as they fully grasp the benefits of this fast, efficient and stable way of accessing liquidity. This bodes well for the outlook on further electronification in the hedge fund arena.
“Even though this trend was evident before, it truly accelerated last year. The proof is the record volume we saw across our rates, credit, money market and equity marketplaces. We traded nearly USD 838 billion on average every day in 2020, and over a trillion in January and February this year,” says Bhas Nalabothula (pictured), head of European institutional rates at Tradeweb.
One of the advantages of electronic trading is that every step is recorded and therefore it’s easy to prove best execution. In addition, the space is home to innovation such as portfolio trading. Nalabothula comments: “When market conditions were highly volatile last March, credit traders turned to electronic portfolio trading as a way to increase their certainty of execution, and transfer risk quickly and effectively. We’ve already seen over USD 227 billion in portfolio trades since we first launched the solution in January 2019, and client feedback has been really positive.”
Tradeweb sees significant potential for more electronification in the hedge fund industry. “The disruption caused by the pandemic and the subsequent shift to remote working has further highlighted the benefits of robust, resilient and efficient digital markets.
“We believe hedge funds will look at technological innovation and the use of data as a means of improving their infrastructure to be better prepared for future market extremes. We have worked closely with firms from across the hedge fund community to solve for a multitude of trading needs for different strategies including macro, relative value, and systematic,” Nalabothula outlines.
The firm’s hedge fund clients are among the most ardent adopters of its rules-based Automated Intelligent Execution (AiEX) tool, particularly in swaps. They have provided Tradeweb with invaluable feedback over the years, which has allowed the firm to evolve AiEX into a solution that helps trading desks react to market conditions with greater speed of execution and capitalise on strategic trading opportunities.
Nalabothula explains Tradeweb builds all its new products and tools together with its global client network of more than 2,500 institutions: “Everything is tailored to their exact requirements, and there is currently demand for more choice and flexibility in trading protocols and counterparties. For instance, clients are increasingly adopting our Request-for-Market protocol, not just in swaps but also in government bond trading. Not disclosing their direction, helps them prevent information leakage, which is particularly important when executing in larger size.”
Looking ahead, Nalabothula anticipates this could be another transformative year for electronic trading: “We’re focusing our efforts on digitising parts of the market that remain largely manual. Specifically for interest rate derivatives, we just executed the first ever fully automated end-to-end EUR swaps versus Eurex Bund futures trade. This follows the market’s first electronic execution of SONIA swaps against Gilt futures on Tradeweb last year.”
Bhas Nalabothula, Head of European Institutional Rates, Tradeweb
Bhas Nalabothula is head of European Institutional Rates at Tradeweb, overseeing product management for European government bonds and European rates derivatives. Bhas joined Tradeweb in 2013 to help develop the interest rate swaps business for the firm’s Swap Execution Facility. Since then, he’s been working closely with buy-side clients and liquidity providers to develop electronic trading protocols and workflow solutions. In 2018, Bhas relocated to Europe to lead the Tradeweb effort in the European interest rate swaps market. Prior to joining Tradeweb, he was a member of the US Interest Rate sales team at Citigroup, where he covered institutional derivatives clients. Bhas holds a Bachelor of Science in Computer Science from Carnegie Mellon University.