57% of European government bonds executed electronically

ECB building

Figures show that more trading in government bonds is being carried out electronically within the European bond market which indicates the rapid growth of the industry. Last year saw an increase of 14% since the start of the financial crisis and 57% of the trading volume in European government bonds was executed electronically.

77% of the 1,200 senior fixed-income investment professionals interviewed for the new report ‘European Fixed Income: E-Trading Growth Continues’ published by Greenwich Associates said they now trade electronically.

The report, which interviewed professionals at banks, insurance companies and hedge funds throughout Europe and the Middle East  between July and September 2014, explores how Europe’s bond markets will continue to move towards a more electronic approach and distance themselves from the traditional trading by voice technique that is used in large-sized trades or less-liquid markets.

The report suggests another reason why a move to electronic trading might become more prevalent could be due to the increasing regulatory pressure for greater transparency and heightened concerns about information leakage.

According to Andrew Awad, managing director of Greenwich Associates this “could drive current users of electronic trading to execute a greater proportion of their total volume via the screen in the future.”

In comparison to the US, there has been a rapid growth in e-trading from the European market for fixed-income products and in 2014 Europe traded 50% of their volume electronically, a figure which is much higher than the 12% traded by the US. Furthermore, when considering the high-yield bond market, the US is only trading 4% of their marketplace electronically compared to 19% in Europe.

Nevertheless, the report highlights the transition to e-trading is growing but the list of competing platforms is remaining the same and corporations like TradeWeb and Bloomberg run the show when it comes to European government bond e-trading. Kevin McPartland, head of the marketing structure and technology research at Greenwich Associates states that the “two are neck and neck.”

Bloomberg’s impressive fixed-income footprint given its terminal distribution and TradeWeb’s strong dealer relationships and longstanding penetration with major asset managers create continued healthy competition,” said McPartland.

Greenwich Associates summarise that e-trading is becoming more significant and is used more within the larger corporations but Europe is managing its government bond market more electronically than the US.