Tradeweb has been at the forefront of the development of bond trading for two decades, but it hasn’t stopped evolving as it works with dealers and institutional investors to meet the growing demand for electronification. The SSA market has been a big beneficiary, with rapid take-up of automated trading tools and ever more liquidity available on the platform.
The firm has seen a big increase in the use of its Automated Intelligent Execution (AiEX) tool in SSA trading. The number of SSA tickets traded using AiEX has grown to around 45%, with the efficiency gains available from automated trading being particularly strong for smaller ticket sizes. As much as 70% of SSA tickets smaller than $500k, for instance, are traded through AiEX.
“The efficiency benefits for these small tickets are clear, as we see clients consistently trading through mid using AiEX functionality,” says Tom Britton, managing director at Tradeweb responsible for the SSA product.
Improvements in dealer axes have combined with the increasing use of AiEX to deliver far more automation in SSAs than many other products. Over 40% of Tradeweb’s volume in the SSA sector is now executed via axed positions, one of the largest proportions among asset classes on the platform, while 60% of that number is being executed through API Axes.
“Historically, axes were manually scraped from emails and other communications, but we now have more and more dealers coding to automate their axe contribution,” says Britton. “When a dealer is axed on the platform, it’s a true axe, it’s a valid position of where the dealer wants to trade and, therefore, we get this better-than-mid execution from the system.
“There’s a lot of interest among the buy-side on the quality of axe data at the moment, so these statistics help us prove that axes on the platform are reliable and allow clients to focus on achieving the best possible execution levels.”
Tradeweb’s smart dealer selection tools, such as SNAP, are used across its various asset classes, including in the SSA market. “SNAP enables clients to significantly improve their execution,” says Laura Killalea, product manager for covered bonds and SSAs. “The key is that it selects dealers dynamically based on best axes or pricing, and follows each client’s criteria and workflow preferences. We are trying to make everything customisable to every client.”
While there is an increasing trend towards automation, Tradeweb is particularly proud of what Britton calls collaborative innovation.
“We’re not one size fits all, we don’t offer standard off-the-shelf solutions, whether that’s for dealers or institutional users,” he says. “Everything can be tailored, and when developing tools like SNAP and AiEX, we work very closely with both the buy- and sell-side to expand the kind of services and functionality we provide, ultimately adjusting our platform to how they want to trade.
“It’s very much a collaborative approach, where we’re always talking to our clients across locations and time zones, looking at innovations that allow dealer support to grow, and for us to provide access to as many liquidity pools as possible on the platform.”
Indeed, one clear trend has been the increasing number of niche players using the platform, improving liquidity in pockets of the market — particularly important given that Tradeweb covers 15 currencies with its SSA offering.
“The growth allows us to close liquidity pool gaps in SSAs,” says Britton. “The big global volume houses will always be there, but we have started to see more niche currency liquidity providers coming into the space.”
Tradeweb has also been catering to clients that are rebuilding their SSA trading businesses, he says, with the firm being adopted as core partner to support them through the process. “We’re proud to have been trusted to do that,” he notes.
The SSA platform is facing a new challenge and opportunity this autumn with the start of the European Union’s €750bn funding programme. “Our SSA platform remains best positioned to understand how the market keeps changing and making sure traders have all the necessary tools available,” says Britton. “We also continue to collaborate with clients to use data in new ways and applications, making it easier and faster to complete their transactions.”