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Interview with Billy Hult, President & Head of US Operations, Tradeweb
“Tradeweb has put an enormous amount of time and resources into strengthening its position in the corporate bond market.” - Billy Hult
Investors’ concerns about accessing fixed income liquidity seems to be at an all-time high. How are electronic trading platforms like Tradeweb addressing these concerns?
Implicit in this question are concerns around a shrinking pool of liquidity within the market-making community. The key to addressing this issue is ensuring that the buy-side has access a the full range of trading and execution protocols, including Request for Quote (RFQ) and streaming market functionality. Maximizing the flexibility of the market structure also depends on allowing the buy-side to execute within a central limit order book.
Ensuring that the market is firing on all cylinders also means providing the buy-side with access to comprehensive pre-trade information and analytics, which is why Tradeweb has invested extensively in the integration of axe functionality and creating ways for the buy-side to see inventory and execute off that inventory. Too often, the buy-side has been flying blind by sending out bid lists to an enormous network of dealers and not getting quality prices back in an acceptable format.
What other steps has Tradeweb taken to maximize the pools of liquidity that institutional investors can access in the fixed income market?
Scalability to connect different communities of investors, like our retail market, called Tradeweb Direct, significantly improves overall access to liquidity. So we are leveraging our strengths across the wholesale, institutional and retail markets to maximize the efficiency of risk transfer among all market participants.
You’ve mentioned the importance of pre-trade analytics. Is post-trade data equally important?
Absolutely. We have always seen our post-trade capability as a very high priority. Tradeweb Best Execution Reports, for example, make it easier for buy-side institutions to analyze trading activity and performance against defined internal policies. These provide a summary of trading activity, including detailed execution reports, price benchmarking and peer group comparison. The credibility this has given us with the buy-side and the sell-side is such that there have been occasions when clients have executed a trade in a different venue but routed their post-trade workflow through us.
What was the rationale behind your recent acquisition of CodeStreet? What does this mean for investors, especially in credit markets?
In terms of liquidity, something has clearly gone awry in the $8.2 trillion US corporate bond market since the crisis. But there has been plenty of innovation in the market, which makes this a very exciting time for the electronification of credit.
Tradeweb has put an enormous amount of time and resources into strengthening its position in the corporate bond market. The acquisition of CodeStreet is another example of this commitment because it will hopefully increase the volume of transactions by helping customers to find the other side of their trades.
In February, Tradeweb announced the launch of an electronic over-the-counter marketplace for US-listed exchange traded funds (ETFs). How will this benefit the institutional community, and will fixed income ETFs add liquidity to the market?
The institutional community is clearly becoming more aware of the opportunities provided by ETFs to give them access to liquidity in underlying cash bonds. The challenge for us is to find ways to facilitate more efficient access to that liquidity.
We have drawn on our experience in the European ETF market where liquidity is more fragmented and there is more OTC trading. We are electronifying the market in the US by allowing Tradeweb’s clients to trade with 11 leading liquidity providers. This gives them access to all European and US-listed ETFs, including fixed income ETFs. Instead of reaching out to a couple of dealers over the phone, institutional traders will be able to put those dealers into competition with each other via an RFQ protocol on our platform, which will help them to achieve better execution.
We’re at the early stages of the electronic development of the ETF market, and although fixed income ETFs may not be a panacea for the bond markets, the Tradeweb ETF platform will support improved liquidity by enhancing transparency and providing an innovative way to execute larger-size, or traditionally less liquid trades.