By all measures, Portfolio Trading (PT) as a protocol has reached maturity, accounting for 20% to 25% of all US electronic credit trading. We investigate what comes next for the protocol, which remains concentrated on the dealer side.
Analytics, automated workflows, and residuals management should bring structural changes rather than incremental volume changes, according to our interviewees at credit trading platforms MarketAxess, Tradeweb and Trumid.
Crisil Coalition Greenwich, using Tradeweb data, puts PT at 21% of electronic US corporate bond trading (10.4% of total credit trading and 16.3% of dealer-to-client US credit trading).
Paris Pender, head of portfolio and macro US credit trading, Trumid
For Trumid, Paris Pender, head of portfolio and macro US credit trading, the protocol is so mature that its next evolutions will have to be structural, not just incremental.
About Trumid’s own effort in PT, Crisil noted that it saw the largest percentage gain in PT share last year and said: “Trumid’s portfolio trading is well loved by many on the buy side”.
He told The Desk: “I think the PT space has reached a level of maturity that feels high enough and advanced enough that it must evolve. This feels like the right time for an inflection point. We expect risk recycling to become increasingly important, setting new efficiency metrics for balance sheet turnover, while analytics grow more sophisticated, ultimately driving the emergence of new market constructs.”
PT’s footprint in overall credit trading is particularly notable in dealer-to-client flow. For Pender, the protocol represents 20% to 25% of flows. He said to The Desk that “The top dealers see the vast majority of the flows”.
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