The multifaceted nature of emerging markets means that successful trading platforms need to deliver cutting-edge technology and a deep understanding of different clients’ needs and workflows. MarketAxess excels on both fronts. Combining world-class data and analytics, unique execution protocols, and a consultative, client-focused development strategy, the firm was a clear winner of Best Secondary Market Trading Platform.
A broad range of sovereign and corporate debt is traded on the MarketAxess platform, but emerging market debt is a key business for the firm and its ability to provide liquidity for the asset class is unique. Part of building out a comprehensive offering for emerging market clients is the breadth and depth of that liquidity. MarketAxess has expanded to 28 local currency markets, and in hard currency covers virtually the whole of CEEMEA, Latin America and Asia bonds. Much of the firm’s trading volumes come from international clients, but the pool of local clients in markets like Mexico and Brazil is growing fast.
“With our investments in technology and time spent understanding the dynamics in different markets we’re now seeing more onshore clients embracing the platform,” says Natalie Lowenstein, Emerging Markets Global Product Manager at MarketAxess. “The idea is to be the one stop shop for all of our clients’ emerging market needs.”
These efforts are reflected in strong growth in trading volumes and platform users. EM trading volumes hit a record high in 2022 and have proved resilient so far this year. In Q1 2023, trading volumes reached $192bn – up on the same quarter in 2022 despite lower volumes being traded across the wider market as a whole. The firm’s client and dealer base is increasingly global – Alongside US clients, European and Asian customers now provide over half the flow in EM bonds, with the rest coming from the Americas.
“Client diversification is an important part of the business and it's significant that so many European and Asia-Pacific clients trust us for their EM bond liquidity needs,” says Lowenstein. In onshore markets where electronic trading is in its infancy, the firm is helping clients identify and address their priorities. “We go on the journey with them to solve their technological needs,” says Lowenstein. “Because of this we’ve seen a big uptick in participation from accounts in South Africa and across the whole of South America.”
One of the firm’s key differentiators is Open Trading, its flagship all-to-all trading ecosystem. When it comes to EM, the ability for any client or dealer to trade with any other dealer or client is key given the fragmentation of liquidity across the market and the volume of regional players. Over 40% of all the hard currency trading volume on the MarketAxess platform is done through Open Trading so this allows, for example, a client in Sao Paulo, to transact anonymously with another client in Singapore.
Further differentiation is coming as a result of investments in developing high-touch workflows – helping clients and dealers to trade in larger size. MarketAxess is rolling out enhancements to its block trading protocol Request for Market and using its unique data and analytics to create tools such as Smart Dealer Select, which presents pre-trade analysis on the most appropriate counterparties for a particular bond or set of bonds.
The breadth and depth of the firm’s trading data provides a unique foundation for these tools, helping traders to better understand market dynamics and make more informed decisions. “The depth of our data is peerless, as it is based on unique data from MarketAxess TraX and thousands of EM trades and inquiries per day,” says Lowenstein. “This powers our CP+ pricing engine, which uses sophisticated machine learning to deliver pre-trade prices for thousands of EM bonds. In a sector like EM, anything that can improve transparency, and give greater insight into execution outcomes, is a game-changer for clients.”
Just as important as the data is the firm’s approach to customers and the extent to which their needs are factored into every development decision. MarketAxess understands just how critical it is to ensure that client workflow is enhanced, not disrupted. This consultative approach then helps drive successful product evolution and overall business strategy. “We work closely with the technology and sales teams along with a multitude of clients on the buy and sell side,” says Lowenstein. “The way we work in partnership with our client base and try to really be thoughtful about how to solve their liquidity and execution needs is what I think stands us apart.”