Tradeweb’s Enrico Bruni: ‘Our job is to help the market evolve, help clients evolve’
This article originally appeared in Financial News here written by Jeremy Chan.
“Trading has a lot to do with emotions,” says Enrico Bruni, Tradeweb’s head of Europe and Asia, who has spent two decades at the trading platform.
In the past, phone orders and shouting in the pits were common for traders. But Bruni says that even though trading activity has largely shifted to screens and traders are rarely dealing with people on the end of a phone line, much of the emotion is still there.
“Electronic trading doesn’t take the emotions out — it lets you deal with the emotion in a different way,” he says.
The internet, the financial crisis, MiFID II and the pandemic have all led to behavioural changes among traders. But they have also helped to buoy Tradeweb’s business in over-the-counter electronic trading.
E-trading pioneers Lee Olesky and Jim Toffey set up Tradeweb in 1996, with Bruni joining the firm in 2003 as a business analyst. Back then, Tradeweb was not the award-winning household name it has since become, at least not in Europe.
One of Bruni’s first tasks was to call a compatriot Italian firm and convince them to trade bonds on Tradeweb. “I remember the first call very clearly,” he says. “I called them and I had to spell the name of the company. ‘Trade-what? How do you spell that?’”
Luckily for Bruni, he managed to convince the firm and it remains a Tradeweb client to this day.
Tradeweb started as a venue for US treasury bonds. But while fixed income remains the firm’s bread and butter, its marketplace has added interest rate and credit default swaps, money markets, ETFs and repo to the mix.
It has grown significantly in the past five years, with revenue increasing more than 16% every year to hit nearly $1.2bn for 2022.
Bruni attributes that growth to technological advances and regulatory changes. Tradeweb has reaped the benefits of markets becoming more electronic and regulations such as the US’s Dodd-Frank Act and the EU’s MiFID II making derivatives trading more open and standardised.
But he says that staying ahead of the curve — particularly regulatory changes — has been paramount.
“You need to position yourself for that change. You need to have a swap offering for MiFID that has the function, liquidity and workflow solutions that address the needs of banks, asset managers and hedge and pension funds, who all trade the market in different ways.”
Bruni says that although regulation has helped drive trading to Tradeweb’s platform, its strongest growth markets are regions and products where there are no trading obligations.
“In emerging markets, there is no trading or clearing mandate in swaps. There is no trading or clearing mandate in cross-currency interest rate swaps either,” he says. “It is the community realising the benefit of the electronification in derivatives, the benefits of standardisation and migrating execution activity electronically, even without a mandate.”
With more than a third of Tradeweb’s revenue now originating from outside the Americas, the firm is looking to diversify from its domestic US market.
Bruni is confident there is room to grow. There is continued strong demand for European government bonds and its new repo business in emerging markets.
And despite 26 years of electronification, it is still an “early innings” for the firm, especially for its swaps business. Only around 30% to 35% of the institutional swap market is traded electronically; the rest is still done by voice. Bruni says there are several reasons for this, including low liquidity and large trading sizes.
“Clients have not gone through that behavioural shift,” he says. “Our job is to help the market evolve, help clients evolve with the market and, most importantly, help people to change their behaviour.”
Recent bouts of volatility, such as the onset of the Covid pandemic in March 2020 and the recent US banking crisis have also proved to be a boon for Tradeweb.
“In this kind of market environment, we do really well,” says Bruni. “We offer clients the opportunity of executing transactions in volatile markets with a high degree of certainty.”
But success during volatility is not a given and has not always been the case. Bruni goes back 15 years to the financial crisis of 2008 as an example.
“At that time, our screens went literally blank,” he says. Bruni adds there was no capacity from the sellside to price bonds or swaps electronically; nor was there trust from the buyside to use screens over the tried-and-tested voice.
A combination of improvements to auto-execution tools and greater confidence in electronic trading meant Tradeweb was much better prepared for the pandemic.
“Fast forward to March 2020 and the world is falling apart again and we had the strongest month in four years,” says Bruni.
And it happened again this year during the banking crisis — March was Tradeweb’s best month in terms of volume since at least 2017, when almost $35tn of securities were traded on the venue. “The resiliency of the infrastructure has improved very significantly and with it the confidence of both buyside and sellside to kind of transfer risk through it,” he says.
Similar to any firm whose European operations hinge on London, Bruni has had to make some adjustments post-Brexit. In 2016, the firm was entirely located in London, but Tradeweb’s client-facing teams, such as its sales professionals, are now evenly split between the EU and the UK.
“Paris is all of a sudden becoming a little bit of a cluster for rates and credit trading,” he says.
But like some other big names in the City, Bruni doesn’t think it is all doom and gloom.
“The UK has some critical advantages that have been built in over many decades at being at the forefront of financial markets,” he says. “Financial infrastructure, the legal contracts, the flexibility of the labour market and the deep pool of talent — I don’t think those factors will change very quickly.”
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