Seamless Access to More U.S. Credit Liquidity Has Arrived
Live Streaming Liquidity in U.S. Credit
Greater adoption of electronic trading has driven the average trade size down, and alongside that, liquidity in the bond market has evolved. The result? Expanded access to liquidity – especially that available in the retail market has become increasingly relevant to institutional traders. To cater to this demand, Tradeweb has integrated once highly discrete, liquidity pools from the firm’s institutional and Tradeweb Direct platforms. II spoke with Tradeweb’s Amanda Meatto (above right), Head of Sales and Relationship Management at Tradeweb Direct, and Iseult Conlin (above left), U.S. Institutional Credit Product Manager, to hear more about how they innovate to open up access for clients to more than $6bn of actionable liquidity per side in more than 6,000 CUSIPs.
Is it more significant that institutional traders can now access streaming liquidity, or that they can do so without interrupting their usual workflow?
Iseult Conlin: It’s both. For most institutional clients, this is the first time they are accessing live streaming retail liquidity – that is, continuous firm quotes that are immediately actionable – as we have historically operated the two marketplaces on separate platforms. There are a lot of institutional buy-side participants that still don’t know this liquidity exists, and even those who previously knew, tended to ignore it because they couldn’t access it easily from their screens. That was compounded by the different use of execution protocols within these market segments, which made it all the more difficult for large institutional buy side firms with RFQ workflows to access streaming liquidity elsewhere. Market convention has also played a part: the retail business typically trades off price, and the institutional buy-side is more spread-based. At Tradeweb, we have integrated $10bn of additional liquidity without altering either participant’s normal workflow. That’s really significant improvement for these trading communities.
Amanda Meatto: I agree. The one thing we hear consistently from clients is that they don’t want to have to log in to lots of different platforms. We totally understand – simpler is better – and especially when workflow, behavior and compliance procedures are already so ingrained. That’s why we made a very deliberate choice to deliver a solution for traders that expands the picture but doesn’t alter the screen.
And why is Tradeweb Direct uniquely positioned to provide this capability?
Meatto: Well 80% of retail corporate trades are actually live streaming markets so it makes sense to offer it to institutional accounts as well. On average daily, Tradeweb Direct offers 16,000 live markets on quotes of $250K and above, and over 5,000 live markets on those over $500K. We didn’t really need to persuade the institutional buy-side on how useful that was: the trade sizes are very similar to existing volume on the platforms they use each day, and so it was really a no-brainer for them.
Are there deal size thresholds for the retail liquidity in this integrated liquidity pool?
Meatto: From the Tradeweb Direct side, we now stream all markets up to $1 million onto the institutional platform. For a trade larger than that, you’d typically expect to see a response via RFQ anyway. On the taker side, the liquidity initiator is looking to see how many more additional quotes they’ll get, and they’re seeing anywhere from a 40 – 50% increase of respondents.
Is the integrated liquidity pool only for investment grade corporates?
Conlin: We’re talking about everything that falls under the umbrella of U.S. Credit – investment grade credit, high-yield, even emerging markets. For anything under $250,000 notional, Tradeweb Direct markets account for more than 18% of the anonymous trades on the institutional platform. The trade sizes might be smaller, but the huge positives of competitive pricing are there for IG, HY and EM.
Is there interest in the integrated liquidity pool outside of the U.S.?
Conlin: Absolutely, the European market structure tends to be a price-based market, and so it leans toward streams and click-to-trade. This means our current efforts really gel with what they’re used to seeing already, and we’ve got Europe-based clients, who want to use the solution. We’ve already seen them take some of their U.S. dollar credit trading in particular and bring that over, because they are accessing liquidity that they couldn’t otherwise. That has a network effect: diverse liquidity begets more diverse liquidity.
Meatto: We’re focused on making this solution as intuitive and accessible as possible. It’s obviously less straightforward to integrate counterparties in different countries due to regulatory and compliance variations, but our size and scale across global markets really helps when it comes to addressing these pain points. We’re focused on providing a single point of execution for participants, whatever the firm, and wherever they trade.
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