Record sized portfolio trades (PT) were reportedly responsible for pushing PT volumes up to around 10% of US credit market average daily volume in April, according to traders and market operators
“The month of April was what I’d call an unusual month for portfolio trading,” said Chris Concannon, CEO MarketAxess told analysts on a call in May. “We saw a number of very large portfolio trades during the month, somewhere around $10 billion and $7 billion in size. So those are quite sizable portfolio trades that we haven’t seen [before], almost record size. We expect portfolio trading to continue to be a vibrant part of the credit market, and that’s why we’re so focused on delivering a solution.”
Although PT volumes fell back in May, the trading protocol is still revolutionising execution, with MarketAxess reporting its total portfolio trading volume for the month was up 136%, and Tom Pluta, president of Tradeweb telling analysts in April that growth over the year was significant, with Tradeweb’s average daily volume (ADV) for PT at US$2.43 billion in May.
“Portfolio trading ADV rose over 70% year-over-year with IG portfolio trading reaching record levels,” he said. “Our clients continue to get more sophisticated in their usage of PT, with 65% of our PT volume done in-comp. These in-comp volumes grew 85% year-over-year.”
MarketAxess has also been chasing growth in PT and Rich Schiffman, global head of trading solutions at MarketAxess, explained on an earnings call that winning that business required a specific group of users to be engaged.
“It’s a relatively small number of PTs that we’re all after,” he said. “We estimate about 20 to 40 per day of substantial size, call it US$50 million and above. We’re all going after those. So on the days where we can capture it and we had a great day on month end, you see a number like that, 40%. That gives us a lot of confidence that we can carry that on to the entire month. So clients are open to using different platforms and with liquidity being the same across [them] it’s a matter of coming up with the best workflows and unique features that are going to attract the traders to our solution.”
The firm noted that in May approximately 55% of its portfolio trading volume was executed via its new trading interface, X-Pro and it estimates its market share of US investment-grade portfolio trading was 22%, up from 3% in the prior year, and up from 15% in April.
MarketAxess analysis found that portfolio trading represented an estimated 8% of total TRACE, up from an estimated 6% in the prior year, but down from an estimated 10% in April.
