When it comes to electronic trading, Europe’s corporate bond market is racing ahead of its US counterpart, with two thirds of European investors looking to adopt algorithmic trading, according to Coalition Greenwich research.
Europe’s corporate bond markets are the most electronic in the world, with 62% of European investment grade corporate bond trading volume executed electronically in 2022. By comparison, 40% of US investment grade corporate bond was traded electronically last year.
Coalition Greenwich head of head of market structure and technology research Kevin McPartland said the firm expects trading volumes in the EU and UK to continue their migration to new electronic trading protocols thanks to innovation and regulation.
Similarly, 49% of notional high yield volume was traded electronically in Europe compared to 31% in the US.
“It is much easier for market participants to comply with trade reporting requirements when trades are executed electronically and buy-side traders may find it easier to connect to trading venues that all operate under a standard framework. In general, the more data that is available, the easier it is for investors and traders to enter and stay in the market in search of alpha.” McPartland added.
The research firm said that two thirds of European investors plan to adopt auto-execution functionality, trading algorithms that send trades to dealers via trading venues depending on the characteristics of the order and more than half of investors also plan to route more orders into all-to-all networks,
On regulation, the European market is more conducive to electronic trading with new rules set to increase trade reporting and require additional trading-venue registration, both of which would help to create a more standardised framework for e-trading across the region, Coalition Greenwich said.
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