Fixed income trading venues have reaped the rewards of rising trading volumes, but a highly competitive landscape is having an impact on market share.
Market operator MarketAxess has reported that January saw credit trading at record levels, with average daily volume (ADV) of US$15 billion, up 6.9% year-over-year (YoY) from US$14 billion.
MarketAxess also said its US investment-grade ADV of US$7.5 billion in January was a record, and up 20.2% YoY from US$6.2 billion. The firm noted that including the impact of single-dealer portfolio trades, US high-grade ADV would have been US$7.7 billion, up 22.8% YoY. Its total portfolio trading volume hit US$18.3 billion in January 2024, an 88.4% increase against January 2023 and up 36% against December 2023 levels. The increase in trading volume was also buoyed by a 11% YoY increase in ADV from emerging markets and Eurobonds.
However, US high-yield ADV stood at US$1.4 billion in January, down 25.4% YoY from US$1.9 billion, while US high-yield estimated market ADV decreased 3.8% YoY.
MarketAxess CEO John Concannon said, “We delivered record total credit ADV of US$15 billion, driven by a 20% increase in US high-grade ADV to a record $7.5 billion, and an 8% increase in emerging markets ADV to a record $3.7 billion, on record levels of hard currency trading volume. The roll-out of X-Pro [a customisable trading interface] is continuing and client engagement is increasing with approximately 12% of our largest client firms active on the platform. These solid results helped to offset lower levels of US high-yield trading activity and estimated share on our platform driven by continued low levels of credit spread volatility.”
Analysts noted that higher ADV figures were offset by the firm’s market share trends, which saw YoY losses across both US investment grade credit and US high yield credit. Morgan Stanley equity analyst Michael Cyprys, noted that across US investment grade credit, market share of 19.1% in the month of January was down -38bps YoY and down -295bps month-on-month (MoM). Across US high yield credit, market share of 13.0% was down -380bps YoY and down -524bps MoM.
“MarketAxess’s share [was] particularly impacted by seasonally strong new issuances in the month of January,” wrote Cyprys. “Notably, January represents the highest new issue Jan[uary] on record with over US$190 billion of new issuances. US high yield (HY) credit ADV [is] down approximately 30% YoY for MarketAxess, while industry ADV is down around 9%, indicating significantly lower market share. MKTX attributes the decline to be driven by lower exchange traded fund (ETF) market maker activity, increased focus on distressed names that generally trade via voice, thus pressuring electronic share, and increased focus on the new issue calendar by long only accounts.”
Concannon said, “Our US high-yield client franchise is strong, with a record 1,300 active client firms. We believe that higher levels of credit spread volatility will help drive a return to more normal levels of trading activity in U. high-yield in the coming months.”
The firm saw emerging markets ADV of US$3.7 billion, up 8.2% YoY. The increase was driven by hard currency trading volume, up 12.4%, and 18.2% growth in local currency markets trading volume.
MarketAxess highlighted “strong” geographic and product diversification with a 10.8% YoY increase in average daily volume ADV from emerging markets and Eurobonds; record portfolio trading volume of $41.8 billion, up 35.8% YoY, and 7.8% YoY growth in municipal bonds on record ADV.
Eurobonds ADV in January stood at US$1.9 billion, up 0.5% YoY, and municipal bond ADV stood at US$405 million, down 21.5% YoY.
Tradeweb
Tradeweb reported total trading volume for the month of January 2024 of $42.6 trillion, up 84% YoY (Jan 2023 total trading volume stood at US$23.2 trillion). ADV for the month was US$2 trillion, an increase of 74.6% YoY, a “record”, the firm reported.
US government bond ADV was up 33.7% YoY in January 2024 to US$182.1 billion. European government bond ADV was up 18.5% YoY to US$50.1 billion.
The firm said US government bond volumes were supported by growth across all client sectors, including record volume on the institutional platform, as well as increased adoption across a diverse set of trading protocols and sustained rates market volatility. Higher interest rates continued to drive trading in the retail market on the short-end of the curve while “strong” European government bond volumes were driven by sustained rates market volatility and new issuances in the primary market as well as increased client activity.
The firm’s US investment grade credit market share of 17% increased +327bps YoY but was down -126bps MoM. US high yield credit market share of 7.2% was up +159bps YoY and up +71bps MoM.
Fully electronic US credit ADV was up 45.% YoY in January 2024 to US$7.1 billion and European credit ADV was up 16% YoY to US$2.5 billion
US credit volumes were driven by increased client adoption of Tradeweb protocols, most notably in request-for quote (RFQ), portfolio trading and Tradeweb AllTrade, the firm noted. Municipal bonds ADV was up 1.5% YoY to US$322 million.
In equities, US exchange traded fund (ETF) ADV was up 41.8% YoY to US$10.1 billion and European ETF ADV was down 12.3% YoY to US$2.6 billion. US growth was driven by continued institutional ETF adoption as well as increased trading in the firm’s wholesale equity businesses, Tradeweb said. European ETF volumes were lower alongside muted European equity market volumes, the firm noted.
CME Group
Derivatives marketplace CME Group saw its highest-ever January ADV with 16% growth YoY and record January interest rate ADV of 13.1 million contracts, up 27% YoY.
The company’s interest rate ADV saw double-digit growth, driven by its SOFR complex and US Treasury futures. 10-Year US Treasury Note futures ADV increased 24% YoY in January, to 1.9 million contracts. 5-Year US Treasury Note futures ADV increased 27% YoY to 1.3 million contracts.
The firm also saw a “record” January interest rate ADV of 13.1 million contracts, an increase of 27% YoY.
CME saw equity index ADV hit 6.6 million contracts, and interest rate ADV increased 27% while options ADV increased 26%.
Interest Rate options ADV increased 16% to 3.5 million contracts and equity index options ADV increased 37% to 1.7 million contracts.
BrokerTec US repo average daily notional value (ADNV) increased 11% YoY to US$288.2 billion and US Treasury ADNV increased 2% YoY to US$107.7 billion.
©Markets Media Europe 2024
