Tradeweb reported its best-ever month in its European SSA business in March this year and volumes in the first quarter as a whole were up 37% compared to the same period in 2020 — which itself was a very strong quarter.
One of the big drivers for the business has been the entry of SURE. “The impact of SURE has pulled up the rest of the market with it and we’d expect the upcoming NGEU issuance programme to have a similar impact,” said Tom Britton, managing director at Tradeweb responsible for business and product management.
Up to the end of May, 23% of Tradeweb’s SSA trading volume this year was SURE bonds, with activity spiking around new issuance when investors trade in and out of different lines, such as around May’s five- and 25-year bonds which took SURE’s share up to 33% for the month.
The majority of SURE trading activity is coming from central banks and asset managers but Britton says there are signs of crossover from complementary markets. “Hedge funds make up around 38% of activity in euro government bonds on our platform year to date, but historically they were less active in SSAs,” he says. “We are increasingly seeing them start to show interest in EU issuance and so the investor profile on the SSA side is likely to evolve over time, as liquidity increases and more investor types come into the market.
The SSA platform itself has grown and evolved over the last year, with 39 dealers now live after recently adding three new players, and with at least one more in the pipeline
“We’ve really focused on getting regional niche players onto the platform to ensure we have the strongest possible liquidity,” he says. “It allows us to have dealers who are supporting and providing pricing in bonds in which they are the specialists.”
Almost all of the SSA dealers on the platform are now providing axes, and 40% of those are providing axes through an API. “The key benefit of an API axe is that it provides clients with far more certainty of execution, or at least certainty of the dealer axe,” says Britton.
“We are trying to find ways to help them trade these bonds in an efficient manner and between complementary markets — euro SSAs, covered bonds, euro govvies — so we’re making sure that we’re aligned there by taking functionalities from these complementary markets, such as transaction cost analysis tools, which the government bond buyside has been using as a performance indicator for many years.”
Tradeweb has also been making SSA trading more efficient in other ways. It has seen continued growth during the Covid period of its Automated Intelligent Execution (AiEX) tool that allow traders to set up their systems to interact with the trading platform based on their own criteria. And with traders working from home — leaving screen space at a premium — the firm’s AiEX team have been working on tailoring parameters for execution desks to make them more effective.
“We’re trying to find ways to make life easier if you’re used to being in an office with five screens and now you’re sat at home with one,” says Britton.
Tradeweb also introduced AiEX features such the ability to auto-resubmit enquiries that were not completed, and also to adjust their order parameters, including their dealer selection or execution protocol.
“We’ve got an extensive client network and long-established relationships with the world’s largest asset managers, central banks, hedge funds and pension funds, and we work constantly with clients to cater for their needs,” says Britton. “Rather than just producing a solution which we put in front of clients, we’re there to listen to what people want and then develop those solutions, whether it’s help using AiEX or it’s changes to the front-end GUI.”
And that goes for the sell-side too, where it is constantly working with participants to make sure that the way that orders come in are easily managed. It offers session-based trading platform or Sweep, for instance, which allows dealers to quickly and easily do odd-lot matching.
“When launching new products or developing new tools, we try to add value for both our buy- and sell-side customers,” stresses Britton. “We’re focused on providing them with robust and resilient marketplaces they can depend on to exchange risk efficiently.”
