Electronic fixed income trading during the pandemic:
Before 2020, electronic trading was already prominent in a high percentage of financial markets. A Greenwich Associates report from 2017 stated that “69% of the $487 Billion (US Treasuries) traded daily is through electronic platforms.” While other industries were embracing what new technologies could provide, the credit market was resistant to change, staying traditional in its ways. Then the global pandemic struck.
In March of 2020, the pandemic forced most industries to undergo changes, and credit trading was no different. With voice trading increasingly difficult due to remote work, fixed income investors had to move away from tradition and embrace e-trading. This switch had a massive impact on the industry. According to research by Greenwich Associates, the average daily volume for fixed income electronic trading had reached a new all-time record of $10.3 billion in May of 2020, only to then break that record again in January of 2021, this time with a total of $10.6 billion.
While electronic credit trading has made significant strides, there is still tremendous upside and potential to grow. One of the reasons why fixed income investors were tentative to shift into electronic trading pre-pandemic was due to the perceived anonymity of executing with trading desks where they had long-standing relationships. Previously, companies with these contacts had no motive to move to electronic trading. Now, the tide has started to turn — more investors are embracing modernization, and there are fewer limits for electronic trading usage.
The sustained move to electronic fixed income trading has revitalized the market, and investors have clearly taken notice. Compared to traditional trading, e-trading can cut costs, improve liquidity, and be completed faster and easier. Even now as workforces are beginning to return to in-person routines, investors have seen the value behind electronic fixed income trading.
A smarter way to access the markets
Investors can (electronically) access the various credit trading platforms either by building out their own connectivity, a very time-consuming and expensive effort requiring significant resources and in-house expertise or through an outsourced platform like MultiLynq. Our service provides universal access to electronic fixed income markets, offering anyone and everyone access to electronic trading venues. By being quick and easy to implement, platforms like MultiLynq save users time, effort, and money.
Looking forward
Even with limited access, electronic trading in the credit markets has exponentially grown over the past year and a half. As access becomes more available to a larger variety of investors, this trend will continue until electronic trading becomes a staple in the fixed income market.