Tradeweb turns attention to automating larger trades in credit

Tradeweb has published its highest ever third-quarter revenues, up 14.4% against the same quarter in 2022.

The record results were driven by a surge in revenue from US Treasuries, the market that Tradeweb originated in. Revenue from Treasuries surged 17% year-on-year to hit a new high this quarter.

On the company’s third quarter earnings call, CEO Billy Hult attributed the growth in Treasuries to increased adoption of Tradeweb’s RFQ+ function and a record average daily volume on its institutional streaming protocol. Hult said that the C-suite is prioritizing further growth in rates, saying “if you heard the way Tom [Pluta, president] and I and Sarah [Furber, CFO] spoke in my office, the major priority of the company would be … increasing the electronification of the very first market Tradeweb was in way back when, which is the Treasury market.”

Treasuries shared the spotlight with AiEX, the company’s automated intelligent execution tool, where institutional US treasury AiEX average daily trades increased by more than 150% this quarter compared to the year prior. As the company looks to the quarters ahead, “We’re also laser focused on enhancing our one-stop shop value proposition for our clients continuing to add and link products electronically,” Hult said.

Company leaders pointed to places in the market where electronification has already gained traction, pointing to credit as one area that has seen substantial growth. Global credit AiEX average daily trades “continued to surge”, said Pluta, increasing over 95% year-over-year. “Electronically, credit is a young market that is ripe for further innovation. The team remains focused on growing our wallet share over the long term led by further product innovation and enhancements as we work with our clients to further electronify the market.”

At present, less than 30% of the overall market is electronified, according to Pluta. “In 2023, as we’re entering 2024, there are still clients that pick up the phone and do trades like it’s 1994,” Hult added. He attributed this to the number of larger and complex trades still handled over the phone.

Tradeweb hopes that AiEx will help to drive these larger trades onto its platform, with executives noting that clients often break down large Treasuries trades into smaller pieces. “A lot of what we’re doing around AiEX, from our perspective, begins to really address that as we think about the concept of larger trades getting broken down,” Hult said.

Treasury markets are more automated than other asset classes, with levels of electronification already around 75 to 80%, Hult said. Half of Tradeweb’s US treasury tickets are now executed by AiEX, which makes up about 10 to 15% of the company’s treasury volumes.

At present, the company is working on algorithmic solutions for the cross-product trades, Pluta said. “We feel that we do have ways that will make it more efficient to execute these trades electronically.”

“Electronic adoption is different across our different clients. But the trend is all the same. We believe clients will look to trade more of their flow electronically moving forwards,” Pluta said. He added that, “I’ve described this as like a one-way train effect around how clients are connecting with their most important dealers through algorithms and electronically. That’s where we’re headed. I think it plays a really large role in allowing the biggest, most important banks to make markets to their most important clients efficiently.”

The news follows quarterly results from rival fixed-income platform MarketAxess, which reported a record number of clients. MarketAxess also said it would focus on its proprietary data and automation business lines.

Tradeweb also announced earlier today its new market data agreements with Refinitiv. Refinitiv will distribute Tradeweb’s data to its clients over a two-year period, in a contract that executives hope will provide more flexibility for Tradeweb to grow its proprietary data business.

The announcement came just days after Tradeweb announced a partnership with FTSE Russell to expand benchmark pricing.