{"id":50787,"date":"2025-08-07T17:14:10","date_gmt":"2025-08-07T17:14:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/50787\/"},"modified":"2025-08-07T17:14:10","modified_gmt":"2025-08-07T17:14:10","slug":"trade-size-growth-undercuts-european-bond-market-equitification-the-desk","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/50787\/","title":{"rendered":"Trade size growth undercuts European bond market \u2018equitification\u2019 – The DESK"},"content":{"rendered":"

Since 2023 European corporate bond markets have seen trades size grow, as trading platforms report increasing volumes
\n\"LianeLiane Fahey, head of European institutional credit at Tradeweb.<\/p>\n

\u201cIf we break down electronic trading growth\u00a0in European credit, the average ticket size for automated trades has grown year-on-year,\u00a0and\u00a0we are also seeing average trade sizes grow in RFQ and PT trading,\u201d says Liane Fahey, head of European institutional credit, at Tradeweb. \u201cOn top of that, we are seeing overall volumes grow.\u201d<\/p>\n

Looking at data from MarketAxess TraX, which measures activity across multiple marketplaces, it is clear that while volumes and trade count have fallen over the past year in high yield and grown in investment grade, trade count is not keeping up with notional traded.<\/p>\n

\"\"Source: MarketAxess [NB data missing for three weeks in December 2023]<\/p>\n

Digging into the number, in 2025 the average trade size in Europe, year-to-date, is \u20ac719k for investment grade (IG), up 15% from \u20ac626k YTD in 2024 and up 28% on the \u20ac560k YTD seen in 2023.<\/p>\n

In high yield (HY), average trade size in 2025 YTD for HY is \u20ac808k, up 20% from \u20ac673k YTD in 2024 and 46% up on the \u20ac553k YTD average trade size in 2023.<\/p>\n

\"\"Source: MarketAxess [NB data missing for three weeks in December 2023]<\/p>\n

This flies in the face of bond market \u2018equitification\u2019 \u2013 the idea that bond markets are following the pattern of trading seen in equity markets. Equity markets are characterised by increasingly electronic, smaller trades. Bond markets are reverting to type, favouring larger risk transfers over shorter periods of time \u2013 where possible.<\/p>\n

Platform analysis
Electronic trading platforms providers report that growth of electronic trading protocols is outpacing that of overall trading volumes, which are flattish in IG to falling in HY.<\/p>\n

\"\"Gareth Coltman, head of trading solutions, EMEA and APAC at MarketAxess.<\/p>\n

\u201cThe fastest growing protocol we have is automation,\u201d says Gareth Coltman, head of trading solutions, EMEA and APAC at MarketAxess. \u201cIt is a layer on top of other protocols, which still continues to significantly outpace any other way that clients interact with our platform.\u201d<\/p>\n

He also notes that portfolio trading has increased considerably, a fact supported by analysis published in June by Barclays\u2019 thematic FICC research analyst, Zornitsa Todorova.<\/p>\n

\"ZornitsaZornitsa Todorova, Barclays.<\/p>\n

\u201cVolumes in March and April 2025 hit record highs of \u20ac35bn across 800 portfolio trades each month,\u201d she wrote. \u201cActivity was led by euro-denominated IG bonds, which accounted for over \u20ac20 billion of monthly volume and a 14% market share as of April. But the strength was not limited to euros \u2013 sterling-denominated bonds also saw standout growth, with PT volumes nearly doubling and accounting for 21% of dealer-to client activity. Our analysis attributes this surge to increased activity from pension funds and real money investors, alongside passive flows concentrated around month-end as index rebalancing tends to drive portfolio trades.\u201d<\/p>\n

That balance of trading counterparties is also reflected across trading protocols, says Tradeweb\u2019s director of data science, Gio Accurso, as intra-month trading has increased in volume,<\/p>\n

\u201cThis points to the growth of actively managed funds who are trading and finding opportunities in the volatility,\u201d he says. \u201cThat is also affecting the segments we\u2019re seeing traded, and in July, we had a record for high yield European credit trading. As markets are bouncing back, high yield is a strong segment to speculate with for actively managed funds, because it offers higher potential returns. So clients are doing more with these protocols, and they\u2019re being potentially more speculative in trading. That means so far there is no obvious pattern to the intramonth trading, but rather follows the volatility, as and when it emerges.\u201d<\/p>\n

Coltman adds, \u201cOn the sell side, dealers have increased the size they\u2019re willing to quote on algos significantly. It is not uncommon at all now to see sizes of \u20ac5 million. Clients are beginning to track their own automation size settings in-line with this activity. In the US we\u2019ve seen some dealers quoting up to US$10 million on algos. This trend will continue as those algos get proven out.\u201d<\/p>\n

\"JamesJames Dale, Tradeweb.<\/p>\n

However, James Dale, co-head of international developed markets at Tradeweb, observes that automation in Europe has a greater uptake and adoption in credit than in the US, so it may overtake the US market in the long term.<\/p>\n

\u201cWe\u2019re seeing the largest sizes ever being automated in that manner, where historically clients would have used it just for their low touch, low effort trades,\u201d he says. \u201cWe\u2019ve seen tickets of up to \u20ac10 million being traded in a completely automated, end-to-end fashion.\u201d<\/p>\n

Although each protocol offers a different model of execution, Coltman notes that there is a common thread of increased efficiency is driving adoption by clients.<\/p>\n

\u201cTrading desks have more orders and activity to manage, in the most efficient and data driven way possible,\u201d he says. \u201cUsing automation to approach the market on a line by line, order by order basis, allows them to control that interaction. Approaching the market in one large interaction, as with a portfolio trade, gives a complete execution, but both yield similar outcomes in terms of efficiency by saving time.\u201d<\/p>\n

E-trading battle heats up ahead of transparency launch
The battle for market share in European electronic trading is fiercely contested, as in other markets. Yet new offerings continue to emerge, and compete on trading models and price.<\/p>\n

\"AngeloAngelo Proni, CEO, MTS Markets<\/p>\n

\u201cWe will be introducing portfolio trading in November, and that really does support our credit efforts,\u201d says Angelo Proni, CEO of MTS. \u201cThis product is an integral part of the dealer-partnership initiative that we kicked off in September last year, supporting an exceedingly competitive price point, and we already have six dealers who are beginning to factor in those commercial benefits in the way they price, which should get a real boost through portfolio trading.\u201d<\/p>\n

Playing to the strengths of liquidity providers, and supporting their weaker points, is expected to draw liquidity onto the MTS Bond Vision platform.<\/p>\n

\u201cWe\u2019ve also introduced targeted firm streams, allowing a dealer to stream firm prices by API to their clients in a very customised manner,\u201d he says. \u201cThey can tailor quotes and sizes to the single instrument and user on the other side. That capitalises on our order book technology and the fact that, when it comes to latency, we\u2019re second to none. It\u2019s venue centric direct connectivity without the time to market of direct connectivity and with scalability.\u201d<\/p>\n

\"\"Chris Murphy, CEO at Ediphy<\/p>\n

In Europe and the UK, consolidated tapes (CTs) are expected to become operational in 2026, allowing a common feed of post-trade reporting of European bond trades. When this additional transparency comes into effect it will inevitably create new opportunities says Chris Murphy, founder and CEO of Ediphy, the firm selected to run the European consolidated tape.<\/p>\n

\u201cWe would expect to see smaller clip sizes, more tickets, and midpoint auction type protocols develop,\u201d he says. \u201cThe CT has a role to play as, with more price transparency, people have more confidence in the midpoint, whether it\u2019s an evaluated midpoint, or directly from trading on the CT. Electronic trading activity produces more data to then feed trading.\u201d<\/p>\n

There are lessons from US markets, which has had a similar tape for over two decades, Murphy notes, indicating how new models of trading might develop.<\/p>\n

\u201cThe central limit order book (CLOB) type markets in the US have no real equivalent in Europe,\u201d he observes. \u201cWe\u2019re likely to see a section of the market with more retail CLOB-type activity, as we start to get more transparency from the tape. When there\u2019s enough natural two-way flow you can start to converge around a CLOB. Secondly, that price information can also help with price formation. It will bring in more alternative market makers into this space. You\u2019ve got the link with portfolio trading and also exchange traded fund (ETF) providers. That virtuous circle will evolve.\u201d<\/p>\n

As equities trade on central limit order books this development would be some way to increase equitification of bond markets, however such activity is limited even in the US.<\/p>\n

The current direction of travel appears to support the idea that as traders become more accustomed to trading in larger sizes on new protocols, order sizes will keep expanding.<\/p>\n

\u201cClients are more willing to use PT for much larger sizes,\u201d Coltman says. \u201cIt is more common for clients to include block sizes in their PT versus RFQ. For us in Europe, we\u2019ve seen significant growth in clients trading individual lines of blocks as well using small group RFQ or trading directly with one dealer. Generally, clients have an appetite to trade in larger size using electronic tools.\u201d<\/p>\n

\u00a9Markets Media Europe 2025<\/p>\n

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