Powering Asia’s transition to electronic trading
Over the last 12 months, geopolitical tensions and the Covid-19 pandemic have led to significant turmoil and volatility in financial markets across the globe. Under these unprecedented conditions, fixed income investors in Asia have faced severe liquidity and operational challenges – managing both remote working alongside stressful client relationships and expectations.
Specifically, traders in Asia have needed access to increased pools of liquidity, highly accurate and transparent pricing data, and a resilient trading platform that can handle extremely high volumes. No longer could an extremely fragmented bond market – where phone communication remained the dominant mode to trading – remain the norm. The shift to electronic trading became paramount to traders’ market participation, and MarketAxess was immediately ready to meet the challenge.
Winner of Asia Asset Management’s Best of the Best 2021 award for Best Bond Trading Platform, MarketAxess opened its doors to Asian investors in 2010 from its office in Singapore. In 2015 the company extended its Asia business to support local currency trading, opening a second office in Hong Kong and launching Open Trading for its APAC users in 2016. The following year it gained approval to operate as a Recognised Market Operator (RMO) in Singapore, extending its reach to key local currency markets, including Malaysia, Singapore, Thailand, the Philippines, Indonesia and South Korea. In 2018 the company expanded its Open Trading partnership with BlackRock to the region, driving a significant increase in available liquidity on the platform.
Today MarketAxess covers 65 countries and offers trading in 26 local currency markets globally, with Asia local currency bonds being the fastest growing sector on the platform in 2020, up 48% versus the prior year.
“The support from clients throughout the past decade has been incredible. In addition to our global network of international investors and dealers, we now count some of the region’s largest asset managers and dealers as clients and have developed a strong and trusted partnership with them,” says Christophe Roupie, CEO of EMEA and APAC at the firm. “From the earliest stages in our development, they have supported our trading efficiency vision and embraced our Open Trading liquidity solution. Since 2016 we have tripled our APAC trading volume, and in the past two years doubled the size of our Asia team,” he adds.
Open Trading has been a key differentiator for MarketAxess. An all-to-all marketplace where buyside and sellside can both take and make liquidity, it has empowered investors in Asia to overcome the liquidity hurdle and to start trading with other investors at a pricing point more efficient than traditional liquidity.
“With Open Trading, we have developed the world’s largest fixed income all-to-all trading network, and the importance of that has never been clearer. Last year’s Open Trading volumes rose by more than 60%, to over US$850 billion, which across our core products represents more than 30% of total activity on the platform,” notes Roupie. “We’re now at well over 1,800 global participants, with increasing contribution from clients and dealers across Asia, whose trading volume rose 74% in 2020 versus the previous year. Open Trading has also driven real cost savings when it mattered most, enabling liquidity takers and providers to save over $1 billion in transaction costs globally in 2020,” he adds.
For Roupie, this new market structure – where dealers and clients play changing roles – represents a much larger shift in the industry, and one that MarketAxess has fuelled as dealers initiating Requests for Quotes (RFQ) to seek liquidity in APAC saw their activity nearly double over the last 12 months.
“The increase in volumes and growing involvement by many different market participants such as private banks, hedge funds and other alternative liquidity providers has played an essential role in creating a more efficient market in Asia, which is critically important if markets are to function properly during times of extreme uncertainty and volatility,” says Roupie.
And with the future of bond trading clearly electronic, Asia’s introduction to Composite+ (CP+), MarketAxess’ AI-powered pre-trade pricing engine, has ushered in a new era of smart trading, where market participants can leverage the power of machine learning to predict bond prices more accurately based on actionable, and not indicative, transaction data. In addition, the integration of Axess IQ, a new and fully customised order and execution workflow solution for private banks and wealth managers, has enabled improved liquidity discovery and execution efficiency.
“What sits at the heart of Open Trading and all our protocols is the unique pricing, transaction and market data that we provide. Since launching in Asia we have taken a leading role in accelerating the transition to electronic trading – helping the region’s bond markets to expand and modernise, and its key players to become more efficient and more global at the same time,” concludes Roupie.