17 Dec

MiFID II Boosts e-Fixed Income Trading

A very interesting article written by Shanny Basar at Markets Media, which discusses the continued adoption of e-trading, largely driven by MiFID II.

A few highlights -

- According to ICMA, MiFID II is the most significant development to impact European bond markets. In its report published in November, it stated, “The survey responses suggest that while the increase in electronic trading is not significant, it is prevalent (77% to 56% across bond asset classes) and perhaps more noticeable in the relatively more commoditized supranational, sub-sovereign and agency; and investment grade credit markets.”

- ICMA added that some firms are opting to move most, if not all, of their trading onto venue.

- “It would further seem as if much of this incremental shift to more electronic trading is through the use of ‘move to venue’ protocols, whereby the original pre-trade negotiations take place off-venue (via messaging, ‘chat’, or over the phone), but the final execution takes place on-venue,” said ICMA.

- Greenwich Associates also reported that although MiFID II has not caused a sea change in e-fixed income trading, but year-over-year growth was meaningful. E-trading accounted for almost 40% of client activity, up from 33% in 2017.

- According to Tom Jacques, from Greenwich Associates, “In the long run, the biggest impact of MiFID II on fixed income might have less to do with changes in research payments and more to do with a shift toward electronic execution, with innovative technology becoming an increasingly critical competitive advantage.”