Buyside dominant price makers on MarketAxess

LONDON, Jan 26 (IFR) - Investors have become the dominant liquidity providers on MarketAxess’s Open Trading platform, though rapid growth in participant firms appeared to level off in 2016.

Full-year results published on Wednesday showed Open Trading, an ‘all-to-all’ platform, had a record fourth quarter, with around 125,000 transactions taking place and an average daily traded volume of US$831m, up 86% from the same period in 2015.

Several trading platforms have been created in recent years to address a decline in corporate bond liquidity. Some have employed unconventional trading protocols such as all-to-all rather than the traditional dealer-led principal-at-risk model.

Larger asset managers’ bond holdings now dwarf those of investment banks, which have drastically reduced the size of bond inventories in response to capital-intensive post-crisis regulation.

Electronic bond trading platforms are unlocking some of this liquidity by allowing asset managers to trade directly with one another, rather than using a dealer as an intermediary.

The number of responses to requests on the platform’s Market List continued its strong growth across 2016, while the number of liquidity providers appeared to level off at around 650 in the second half of the year.

But a majority of the liquidity provided in Q4 came from long-only investment managers, which accounted for 39% of trade volume, compared with 29% for dealers and 32% for other market participants. (Reporting by Tom Porter; Editing by Ian Edmondson)