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What makes Tradeweb's ETF marketplace so successful with institutional investors?

| Tradeweb

We're delighted to share that our exchange-traded funds marketplace has scooped its third accolade. This time, ETF Express readers voted Tradeweb the winner of the "Best OTC Trading Platform for Institutional Investors" category in this year's awards survey.


"Tradeweb enjoyed a very positive 2015, as activity on our European ETF platform grew by 84 per cent over 2014," says Adriano Pace, Managing Director, Equity Derivatives.


"It was a very significant increase in what was a significant year for us and the ETF space," he adds. "We saw clients either trading ETFs more or trading them for the first time in a meaningful way."


The range of ETFs that were bought or sold on the platform also increased to nearly 2000 different instruments in 2015. According to Pace, this shows "a real breadth in the way clients were trading."


In addition, there was a growth in the number of transactions by integrated clients. "They find that electronic OTC execution is superior to using more traditional methods such as phones or chat, as there are no `fat finger' issues and there can be no misinterpretation of the order through manual entry. The trade execution flows automatically back into client systems, thus avoiding any manual errors," Pace says. In 2015, the integrated proportion of trades was 70 per cent, whereas in 2014, that stood at 53 per cent. "It demonstrates that clients are getting more ingrained in this way of trading," he adds.


Another key consideration for Tradeweb is to improve price discovery for institutional investors. "Even before you have traded, the search for liquidity is important," Pace notes. "If you have a large ETF order to transact, you have to work out how to best execute it. Our clients are able to view the better dealers in a specific instrument through our axe functionality. Any dealer who wants to buy or sell a particular ETF instrument can use the platform to indicate their interest. We then aggregate this information, so that clients can identify who can offer them the best price." Tradeweb now sees more than 3,000 axes posted daily by dealers.


The platform has currently 22 liquidity providers for ETFs alone and Tradeweb is getting a lot of incoming requests to join from additional dealers, particularly independent market makers. "Some only specialise in ETFs, whereas others are market makers in equities and derivatives too. In some cases, these firms have not faced end clients historically."


ETF liquidity has also been under the microscope. "We've spent time looking at how the platform has behaved in periods of high stress. Our hit rate, enquiries against trades executed, held up very well under severe market pressure," Pace says. "It's good for us and good for the asset class."


"What's been positive is seeing clients being able to execute large size trades in asset classes such as emerging markets or corporate bonds on days of distress, at a time when there are conflicting views on whether ETFs solve or hinder liquidity in underlying assets."


Building on the success of the European platform, Tradeweb recently announced the launch of a US-listed ETF marketplace, applying the same concept of allowing clients to choose on a disclosed basis a number of dealers that they want to put in competition for the larger block trades.