Tradeweb aims to expand FI trading footprint after Yieldbroker addition

As fixed income continues to evolve and automation seeps in, Tradeweb is looking ahead at its potential to bring more electronic trading to the market. Chief executive officer Billy Hult shared during today’s second-quarter earnings call that he sees electronic trading playing a critical role in helping traders navigate both calm and turbulent markets.

“We believe this will be led by technological advances, multi-asset class trading, driving structural changes to financial markets, traders leveraging technology to maximize client value, and data being supercharged by AI and machine learning,” he said.

As Tradeweb expands its electronic markets footprint, its proposed acquisition of Australian derivatives and bond trading platform Yieldbroker has cleared regulatory approval following the Australian Competition & Consumer Commission completing its inquiry on the deal. “We look forward to closing the transaction in the coming months,” he said.

Founded in 1999 through a consortium that included banks and the Australian Securities Exchange (ASX), Yieldbroker provides electronic trading in Australian and New Zealand debt securities. As of May 25, it facilitated trading of A$6 trillion annually ($4 trillion). Upon the deal’s announcement in May, Tradeweb indicated that the acquisition would expose existing clients to more international markets.

Executives also highlighted the success of Tradeweb’s automated trading tool, AiEX. The service, which was first rolled out at the end of 2012, started in US Treasuries. Since then, Tradeweb has expanded the tool across asset classes. “Automation continues to be an important theme, with institutional US Treasury AiEX average daily trades increasing by more than 90% year-over-year,” Hult said.

In the first six months of this year, AiEX average daily trades were up over 45% year-over-year across the business, with AiEX having the strongest penetration across European ETFs, US Treasuries, European government bonds, and US credit.

In response to an analyst question on whether Tradeweb viewed the burgeoning interest in buy-side execution management systems (EMS) as a competitive threat, Hult demurred, saying “we have a very long history of working with EMS functionality, [and] we believe this is an advantage for us. We think the future of the marketplace is going to be more algorithmic trading, not less. In terms of the single-dealer component of it, we’ve competed against single-dealer platforms.”

Thomas Pluta, president of Tradeweb Markets, fielded a second question on what Citadel Securities’ recent foray into the corporate bond market could mean for markets going forward.

“I think the way we need to think about this move is it’s not a one off, but it’s more indicative of the continuation of a trend that we’ve seen some more systematic market making in credit, where the courting process is automated and very fast,” said Pluta. “Technology and automation are becoming increasingly important in market-making, which is very positive for the growth of electronic trading over time and getting people off the phone.”