A volatile October ended with record highs for the US Treasury market, but dealers are not reaping the rewards, Coalition Greenwich has found.
Average daily notional volume was US$893 billion over the month, up 11% year-on-year (YoY). A record US$1.54 trillion of volume was traded on 31 October.
However, dealer revenue was down during October. The report states that G10 rates revenues for the top 12 banks were down 18% year-to-date last month compared to 2023’s figures, the result of tighter spreads, greater competition among liquidity providers and increased automation from clients.
E-trading rose by 5 percentage points YoY to account for 63% of market volume, supported by growth in both dealer-to-dealer and dealer-to-client trading. In the former category, 59% of volume was traded electronically – up by 9 percentage points YoY.
Kevin McPartland, head of research for market structure and technology at Coalition Greenwich, commented: “A hyper-competitive CLOB market, coupled with the growth of streaming and session-based trading, is driving the growth. Our previous research has concluded that mandatory clearing should ultimately help this trend. However, given the pending change in leadership at the SEC, it’s prudent to pause our analysis of clearing mandate impacts until more details are known.”
READ MORE: Acuiti: Sell-side not confident on compulsory clearing timeline
Volatility, as measured by the Merrill Lynch Option Volatility Estimate (MOVE), was down 7% YoY to 121.79. Towards the end of the month, this ticked up slightly to the high 120s and mid 130s as the US election approached, but receded after 5 November as a clearer picture of the four years ahead was established. The day after the election, US$1.4 trillion was traded.
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