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Asia makes strides in adoption of automated trading tools

| Workflows/Technology
Li Renn Tsai headshot
Li Renn Tsai
Head of Product and Sales, Asia, Tradeweb
This article originally appeared on FinanceAsia here.


Automated trading makes up a growing percentage of transactions executed on Tradeweb, and Asia-based investors have been quick to embrace the benefits it can afford buy-side traders wishing to streamline their workflows.

Tradeweb’s head of Asia, Li Renn Tsai (pictured), explains in this Q&A why the firm’s Automated Intelligent Execution (AiEX) tool has resonated with clients in Asia, particularly within the local operations of global institutions, over the last 12 months.

Q How has adoption of AiEX evolved in Asia compared to other regions?

A A wide range of market participants have been highly receptive to automating their fixed-income transaction flows via AiEX, whether inbound, outbound or within Asian markets. This started with a successful roadshow in the first quarter of 2018, which quickly led to the first Asia-based users of the service going live last September. Demand really picked up throughout the first half of this year and continues to strengthen.

If we compare full 2018 versus data from the first half of 2019, the total traded volume executed via AiEX has risen more than seven-fold. This suggests that firms tend to execute larger trades on AiEX once they see the benefits of their initial usage and become more familiar with the solution. The new business pipeline for the rest of the year also continues to be highly promising.

This reflects global trends. AiEX accounted for more than 24% of all Tradeweb institutional tickets globally in the second quarter of 2019, including 26% of all US Treasury tickets, 42% of all European Credit and 57% of all European ETFs.

Q Why is automated trading popular among Asia-based investors?

We have observed a marked acceleration in Asia clients’ embracing of new tools and processes, when it comes to automated solutions and electronic workflows. AiEX has been well received by local firms, as well as within the Asian trading operations of global institutions. We would attribute much of this strong demand to the specific appeal of the AiEX solution, namely the combination of increased trading efficiency with regulatory compliance.

In a number of jurisdictions, it has long been common practice for buy-side dealing desks to physically document their adherence to best execution on a post-trade basis, with all the delays, errors and risks that manual processes can entail. With trades executed via Tradeweb AiEX, this is no longer necessary, because compliance with local execution rules and regulations can be built into the automated process.

Q What are the practical aspects of using AiEX?

AiEX essentially offers the ability to trade directly from your order management system (OMS) to a set of pre-defined rules, which can be tailored to suit each product’s unique requirements. Typically, a Tradeweb user brings up a ticket, places dealers in competition, sends the orders to request for quote (RFQ), evaluates the responses, then hits or lifts the trade. This frees the buy-side trader to handle value-added flow, which needs more time and effort. The sell-side have been auto-quoting for a very long time; AiEX allows the buy-side to auto-submit, effectively creating a mirror image.


Once an order is submitted and tagged as automated, a scope is established to validate which orders can be made on a security, asset class, size or real-time liquidity basis. Following acceptance, the order will be subject to counterparty selection criteria. Clients can choose counterparties on relationship or sector strength, but selection also incorporates real-time identification of liquidity, either pricing or axes, to determine the optimal panel for each order.

Orders may go to RFQ instantaneously or at a pre-defined time, but evaluation times can vary according to acceptable pricing levels, number of quotes and other criteria. One client might execute at the best price once they get five responses, others might wait for a particular dealer quote, with parameters often set by the client’s best execution requirements.

Q Does use of AiEX impact clients’ pre- and post-trade workflow?

A With AiEX, the client’s pre- and post-trade workflow can remain the same as a manual trade. Both the pre-trade receipt of the order from the OMS and the post-trade data that flows back into the OMS are essentially the same as any other trade. It’s as simple as a plug-and-play of an existing OMS connection to identify which orders should be executed via AiEX.

Q Do AiEX adopters change their trading patterns over time?

A Tradeweb works closely with clients’ fixed-income trading teams to identify which transactions to automate – by size, maturity, complexity, and so on – and the parameters required to ensure optimum outcomes, such as the number of counterparties approached via the automated RFQ, and time windows for responses, whether automated or manual. Once onboarded, we continue to support our clients when creating new or custom parameters, and help them optimize current configurations as their use of AiEX evolves.

AiEX is highly flexible and has multiple use cases. From expediting the execution of smaller transactions to facilitating larger trade sizes or capitalising on new trading opportunities through increased reactivity to market conditions and events, the tool delivers numerous benefits to trading desks. As a result, AiEX has received broad-based support in Asia thanks to local firms’ adoption of the compliance and performance advantages of intelligent automation.

Q What level of follow-on support do AiEX users require?

Regardless of geography, installation can be a challenge for all trading applications. But a key reason for the rapid uptake of AiEX is the relative simplicity of integration – only incremental work is required for OMS users to add AiEX to their Tradeweb interface. In contrast to the speed of AiEX installation, however, Tradeweb encourages clients to spend as much time as necessary refining their approaches to intelligent automation in its test environment.

Whether to ensure compliance of automated processes with local rules or to analyse execution outcomes based on tweaking parameters and market conditions, testing is a critical function of the Tradeweb consultation process. Once live, traders are able to quantify transaction costs using the Tradeweb proprietary transaction cost analysis tool. Feedback from this same application can be used to iterate and refine execution rules in accordance with clients’ own best execution policies. 

Q What other advantages can AiEX bring to trading desks in Asia?

A A further aspect of intelligent automation – especially when trading in large size – is flexibility over execution timing. For example, the execution quality of a Singapore‑based wealth manager trading European government bonds is improved considerably, if its traders can schedule a transaction during European trading hours. Similarly, the ability to preload smaller transactions in advance of a portfolio rebalancing can help improve execution quality by focusing clients’ attention on the trades on which they can have the most positive impact. 

AiEX already offers time release for a wide range of instruments across asset classes. These include US Treasuries, European government bonds, European credit, US corporates, supranationals and covered bonds, mortgage-backed securities, interest rate and credit default swaps, and US and European ETFs.

Q How do clients use AiEX across asset classes and markets?

A On our ETF platform, clients are able to better inform their AiEX trading parameters thanks to pre-trade data such as dealer streams and live best exchange bid/offer. This can help them achieve a better pricing outcome than on exchange, with associated best execution benefits. Once clients prove they were able to trade better than the exchange, they can determine how and where to execute future orders.

Although we mainly talk to clients about AiEX in terms of cash bonds and ETFs, we have also found a lot of interest in automating derivatives flow. In short, the speed at which clients execute via AiEX can lend itself to wanting to trade in a faster market, especially where there is a trading obligation to execute on venue. As such, we’ve had a lot of success in the derivatives space where clients can trade in a regulatory compliant manner, whilst gaining access to pools of liquidity quickly and effectively. Swap dealers are able to quote up to four times a second, but this can be easily handled by AiEX’s pre-set rules. We are constantly working to broaden AiEX’s scope and already offer 26 product groups across rates, credit and equities.

Another use case is retail aggregation firms with multiple orders throughout the day. For those clients, it’s not feasible to have numerous traders manually requesting and accepting quotes, but AiEX provides a cost-effective means of aggregating retail orders and executing them efficiently on-venue.

Q What else can users expect from Tradeweb’s AiEX?

A The reasons for the enthusiasm surrounding AiEX in the Asian market are abundant, and many of the attractions of automation are universal. All asset managers face increasing pressures to optimise their trading operations, and ensure cost-effectiveness, accuracy and scalability to underpin enterprise-wide efforts and boost competitiveness in a fast-evolving and challenging landscape. 

Tradeweb is focused on supporting efficient, effective trading by working closely with clients to support more streamlined and automated workflows. To this end, we are now able to offer our Direct Dealer Content service to AiEX users, which provides streaming prices and axe data from dealers in a single feed via a Tradeweb API. This tailored dealer pricing can help AiEX clients to build and refine their trading strategies, supporting in-house analytics and dealer selection processes to strengthen best execution analysis.