- Fast Growth Pushes Europe Ahead of U.S. in Corporate Bond E-Trading
- Incumbent Platforms Retain Market Share
Europe’s bond markets are going electronic. Fifty-seven percent of trading volume in European government bonds was executed electronically in 2014—up 14 percentage points since the onset of the global financial crisis according to a new report, European Fixed Income: E-Trading Growth Continues, by Greenwich Associates. Competition remains tight as the marketplace for institutional e-trading stays concentrated in three incumbent platforms, the report concludes.
Based on interviews with more than 1,200 institutional investors, the results of the annual Greenwich Associates European Fixed-Income Investors Study shows that Europe’s bond markets will continue migrating toward a more electronic model, with voice trading more often reserved for less-liquid markets or large-sized trades.
While the shift to e-trading is growing, the list of competing platforms is not. Bloomberg and Tradeweb continue to command the biggest share of European government bond e-trading.
“The two are nearly neck-and-neck,” says Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associates. “Bloomberg’s impressive fixed-income footprint given its terminal distribution and Tradeweb’s strong dealer relationships and longstanding penetration with major asset managers create continued healthy competition.”
Seventy-seven percent of European government bond market participants traded electronically in 2014. “Increasing regulatory pressure for greater transparency and heightened concerns about tipping off the rest of the Street through information leakage could drive current users of electronic trading to execute a greater proportion of their total volume via the screen in the future,” says Greenwich Associates Managing Director Andrew Awad.
Recent and rapid growth in e-trading has propelled the European market past the United States in certain fixed-income products when it comes to electronic execution. For example, in the U.S. investment-grade corporate bond market, only 12% of the volume was traded electronically in 2014 (versus 50% in Europe). The comparison is even starker in the high-yield bond markets, where only 4% of the U.S. marketplace is being traded electronically, compared to 19% in Europe.
The less liquid high-yield bond market has also seen a dramatic rise in e-trading, where the share of market participants trading electronically jumped to 59% last year from just 9% in 2008.
Bloomberg continues as the market share leader in European corporate bond electronic trading, with MarketAxess and Tradeweb also maintaining a strong presence.