Innovative solutions for the entire credit market

Chris Bruner, Head of Credit Product at Tradeweb, discusses how to better leverage trading networks as electronifiction of the credit market continues to evolve. By utilizing intelligence-driven protocols investors are able to zero in on likely counter parties, trade large size, and minimize market and operational risk while capitalizing on the efficiency that comes with e-trading. 

What are the most pressing issues faced by buy-side firms in the current market environment?

Chris Bruner: We have seen record corporate bond issuance over the past few years and increased trading activity as buy-side investors search for yield. Meanwhile, banks have trimmed their balance sheets and streamlined marketmaking in credit to comply with regulations and increased capital requirements. As a result, investors need to cast a wider net to find the liquidity they need to support their positions. As electronification of the credit markets continues – led by market participants seeking efficient ways to access liquidity – clients are using electronic trading to better leverage their trading network. By utilising the range of flexible protocols on the platform, such as electronic trade processing, investors are able to maintain long-standing relationships, trade large size and capitalise on the efficiency that comes with e-trading. Tradeweb, the second-largest electronic cash credit platform in the US according to Greenwich Associates, has continued to introduce innovative solutions that enhance every step of the trading life cycle and help buy-side clients leverage technology to optimise their workflows.

What impact has this environment had on trading efficiency for buy-side firms?

Chris Bruner: Adopting an electronic workflow allows buy-side firms to streamline each step of the trading process. Clients can find the other side of their trade quickly and easily using pre-trade data, execute efficiently using a wide range of trading protocols and use post-trade functionality for an enhanced trading experience. Pairing data science with flexible protocols on Tradeweb allows investors to identify counterparties and discover liquidity using functionality that supports intelligent execution. Clients can leverage data science tools to make informed decisions about counterparties. They can determine where liquidity lies for the trade size needed and seamlessly execute their positions on the Tradeweb platform. The connectivity and integration clients have with Tradeweb help support straight-through processing (STP), which delivers an optimised workflow in addition to compliance and best execution. The industry is on the brink of an evolutionary shift in enabling market participants with more information, faster analysis and strategic execution.

What changes can buy-side organisations make to increase efficiency throughout the trading life cycle?

Chris Bruner: While there is increased adoption of e-trading across fixed-income markets, a significant percentage of trades are still executed via traditional channels such as voice trades. As more market participants begin to use electronic platforms, they will continue to realise the benefits of an automated workflow. Tradeweb has expanded its credit offering to include a broader set of pretrade data and tools to identify liquidity through inventories, axes, runs and other price streams. By leveraging the pre- and post-trade tools on Tradeweb, buy-side clients can improve their overall trading experience. Providing traders with a robust pre-trade view of liquidity in the marketplace allows the platform to deliver meaningful information to aid price discovery, trading with a counterparty that provides them with the best bid or offer and for the size they need. In addition, technology will continue to increase both the awareness and speed with which institutions can trade. Functionality such as automated and sessions-based trading will enable traders to employ trading protocols that allow them to execute their positions efficiently.

How can such tools help address buy-side organisations’ approach to risk management?

Chris Bruner: To hedge interest rate risk on their executed credit trades, investors execute a treasury trade with appropriate size. The price on the trade, along with the agreed-upon yield spread to the treasury, is then used to compute the final execution price traded; this process is known as spotting. Tradeweb has automated spotting on its US credit platform to offer a significantly more efficient way to offset the portfolio risk. By electronifying a historically manual process, Tradeweb has streamlined the steps necessary to quickly secure a spot level by connecting to the electronic liquidity available through its treasury marketplace. Clients benefit from immediate access to competitive pricing, supported by Tradeweb’s leading treasury platform and the strength of its composite workflow. The investment in back-end infrastructure between the credit and treasury desks has also removed layers of protocol that slowed trading between these two complementary asset classes in the past. The integration between Tradeweb and client systems delivers a streamlined workflow and STP, which supports risk management and compliance requirements, in addition to best execution.

What have you done to address the current and future needs of the buy-side market?

Chris Bruner: Tradeweb is well positioned to electronify the broader corporate bond marketplace by delivering diverse innovation and scalable solutions across both the spectrum of credit market liquidity and trader workflows. Each market participant has a unique strategy, so there is no one-size-fitsall solution. However, the range of trading protocols on Tradeweb is helping improve clients’ experience. Tradeweb’s pre- and post-trade functionality enhances trading relationships between counterparties, allowing them to leverage more information with each other and improve the flow of liquidity. Tradeweb is making it faster and easier for clients to find the other side of their trade for both odd-lot trades and larger orders. While request-for-quote functionality remains an effective trading tool, Tradeweb plans to launch advanced all-to-all trading functionality for US corporate bonds in the first half of 2017. The protocol will play an important role in supporting the flow of liquidity and will increase traders’ flexibility in sourcing liquidity from buy- and sell-side participants on Tradeweb. Investors will leverage a greater range of available tools to better navigate the marketplace as they increase their focus on realising the benefits of transaction cost analysis in achieving best execution.