© 2017 GREENWICH ASSOCIATES

Q2 2017 ALL-TO-ALL TRADING, COUPLED WITH

AN ARRAY OF TECHNICAL INNOVATIONS,

IS MAKING TRADING CORPORATE BONDS

EASIER FOR THE BUY SIDE 67%

OF INVESTORS SAID

EXECUTING CORPORATE BOND

ORDERS OF $1 MILLION IN NOTIONAL

IS NOW EASY OR EXTREMELY EASY

Innovations Ease Corporate 

Bond Trading

Trading corporate bonds is finally getting a little easier. No, we are not going back to the good old days, nor are the 

Trump administration’s promises to scale back financial regulations—and the Volcker Rule in particular—driving banks 

to take on large bond positions again. What we are seeing, however, is an adaptation to the current market structure 

and with that, a smaller but much more efficient buy-side trading desk.

Two-thirds of the investors we spoke with believe that executing corporate bond orders of $1 million in notional size or 

less is now easy, up from 56% the year before. Corporate bond execution venues and offerings that were a mere idea 

a few years ago are finally consolidating and starting to bear fruit. Meanwhile, the quantity of data available has grown, 

along with the number and quality of tools to analyze and action the data.

Note: Based on 51 respondents in 2015 and 34 in 2016. 

Source: Greenwich Associates 2016 Market Structure & Trading Technology Study

ABILITY TO TRADE CORPORATE BONDS BY NOTIONAL SIZE RANGE

$15+ million

$5.01–$15 million

$1–$5 million

Below $1 million

Easy Neutral Di­cult

59%

53%

44%

16%

24% 9%

15%

12%

26%

12%

41%

56%

26%

14%

22%

29%

32%

43%

67%

29%

74%

59%

24%

14%

2016

2015

2015

2016

2015

2015

2016

2016
2   |   GREENWICH ASSOCIATES

Note: Based on 45 respondents. Respondents were allowed to select multiple responses. 

Source: Greenwich Associates 2016 Market Structure & Trading Technology Study

ELECTRONIC TRADING PROTOCOLS USED OTHER THAN TRADITIONAL RFQ

Infrequently traded bonds

Large-size orders

Small-size orders

Non-urgent orders

Other

49%

31%

40%

29%

13%

Note: Based on 46 respondents. 

Source: Greenwich Associates 2016 Market Structure & Trading Technology Study

EXPECTATIONS OF ADDITIONAL LIQUIDITY SOURCES IN 1–2 YEARS

Buy-side to buy-side trading

New non-bank market makers

More capital put to work for

liquidity provision by banks

Derivatives

Improvements in communication

of axes by dealers

ETFs

1—Most likely to come from 2 3 4—Neutral 5 6 7—Least likely to come from

39%

38%

20%

9%

7%

4%

13%

26% 13%

2%

9% 7%

2%

13% 50%

18% 18% 16% 11% 13%

4%

18% 11% 27% 20% 16%

11% 18% 20% 20% 22%

2%

22% 22% 20% 16% 16%

4% 18% 16% 24% 24%

What’s Next?

While orders above $1 million in notional size still can present challenges, orders of $5 million and up are particularly 

tough to execute. Helping to match those buyers and sellers is the holy grail of corporate bond technology firms. By 

cracking the code for matching large and often illiquid bond trades so that information leakage and time spent searching 

for liquidity is minimized, these firms aim to both control the corporate bond market and rake in profits. Large and 

illiquid orders are, in fact, the main reason buy-side bond traders look toward newer trading mechanisms today.

While fintech focuses on block trades, forward-looking bond investors are less interested in round-lot executions. 

Although this is due in part to the growing average trade size on electronic platforms, these investors are increasingly 

focused on solutions that provide anonymous all-to-all trading and the resulting access to new liquidity providers. 

Why? Because they see these attributes as key sources of new liquidity in the next one to two years—alongside ETFs, 

derivatives and other market enhancements.
3   |   GREENWICH ASSOCIATES

Note: Based on 75 respondents in 2015 and 46 in 2016. 

Source: Greenwich Associates 2016 Market Structure & Trading Technology Study

MOST IMPORTANT CRITERIA WHEN SELECTING A FIXED-INCOME TRADING VENUE

Price improvement

All-to-all trading

Dealer-provided pricing

Access to new liquidity providers

OMS connectivity

Trading protocol flexibility

48%

43%

43%

41%

32%

41%

41%

33%

30%

39%

2016

2015

Anonymous all-to-all trading may conjure images of continuous central limit order books, such as those used in futures 

and equities markets. In this case, however, that view is too limited. Trading among all market participants, without the 

counterparties knowing one another, can occur via a host of protocols including auctions, dark/lit pools, on-demand 

order books and, of course, continuous central limit order books. In a market where liquidity in any given name is rarely 

consistent, approaches that allow market participants to get involved in and when demand occurs will likely be winners 

at the institutional level going forward.

We’ve said it before and we’ll say it gain: Major (and minor) corporate bond dealers are not going anywhere and will 

continue to be at the center of risk transfer in this market. Their balance sheets, data, expertise, and role as new-issue 

underwriters ensure they are critical partners for asset managers and hedge funds investing in U.S. credit. However, 

these same dealers have reduced their capital commitment to this business, creating a liquidity gap that still needs 

filling. And while no single technology or trading model innovation can make up for the principal liquidity lost, a 

combination of several will get the market as close as can be reasonably hoped for.

API Doesn’t Rule Out UX 

Conversations about electronic-trading adoption in other markets—such as government bonds, FX or equities—center 

around automated trading driven by direct connections between the trader’s execution management system (EMS) 

and the variety of liquidity pools needed to ensure best execution is found. Despite the steady growth of electronic 

trading in corporate bonds, buy-side bond traders still rely heavily on the screen and the mouse, as opposed to 

algorithms and direct connections.

The next logical question is exactly which screen do they rely on? Again, contrary to other electronic markets, corporate 

bond buy-side EMSs are almost non-existent. With Bloomberg’s TSOX and AB’s Alpha the largest exceptions, only 2% 

of buy-side traders utilize either a third-party or internally built, standalone EMS to access the corporate bond market. 

Order management systems (OMS) are quite common, however, with Bloomberg’s AIM, BlackRock’s Aladdin and Charles 

River the most used. Even so, in less than one-third of those cases are bond orders executed directly from the platform.
4   |   GREENWICH ASSOCIATES

Note: Based on 48 respondents. May not total 100% due to rounding. 

Source: Greenwich Associates 2016 Market Structure & Trading Technology Study

PLATFORM USED TO ACCESS CORPORATE BOND MARKET

Other

EMS only

OMS only

A single trading platform for OEMS

Separate OMS/EMS platforms tailored

to specific investment needs

2%

33% 56%

4% 4%

Note: *e.g., Bloomberg, MarketAxess, Tradeweb. Based on 48 respondents. 

Source: Greenwich Associates 2016 Market Structure & Trading Technology Study

CHANNELS USED TO SUBMIT ELECTRONICALLY TRADED ORDER

Via the trading venue

front end*

Via OMS Via an aggregator Other

63%

38%

8%

15%

This brings us back to the execution venues themselves, where proprietary user interfaces (UI) are still the primary 

window for investors into electronic bond-market liquidity. Native front ends bring with them a user experience (UX) 

that is perfectly suited for all of the features and functions within the given platform. By contrast, an OMS or EMS 

provides an aggregated view, which must normalize all liquidity pools to create a single interface. As such, Bloomberg, 

Liquidnet, MarketAxess, Tradeweb, Trumid, and others have all poured tremendous time and money into the look and 

feel of their front ends in hopes that their screen will literally sit in the center of the trader’s center monitor.

It is also important to note that the larger players in this space see little benefit to their liquidity being aggregated, as 

doing so would put them in more direct competition with other liquidity on a single screen. While all are confident that 

their liquidity is deep and spreads are tight, encouraging quick access to quotes elsewhere isn’t in their best interest. 

Trading in equity markets is done largely via venue aggregation technology today, but that only came about following 

the implementation of Reg NMS, which essentially required the change. Nothing similar is expected in corporate bonds 

in the foreseeable future.
5   |   GREENWICH ASSOCIATES

Greenwich Associates 

Managing Director

Kevin McPartland is

Head of Research for the 

Firm’s Market Structure 

and Technology practice.

Conclusion

The corporate bond market is electronifying faster than electronic trading volumes are growing. In other words, total 

notional volume executed via the screen underestimates the impact of technology innovation on the ecosystem. All-to-all 

trading in and of itself won’t transform the market, but coupled with improved data, analytics, liquidity intelligence tools, 

user interfaces, and trading systems, the changing face of the market becomes more readily apparent.

It is because of these innovations that trading corporate bonds has become easier for the buy side. Challenges 

remain, mind you, but it is no longer the near impossible feat that it was following the credit crisis in 2008. And while 

regulatory changes at the hands of the Trump administration remain largely opaque, expectations for an expanded 

definition of market maker in the Volcker Rule and revised bank capital rules should give the market hope that the 

hardest period of this cycle is behind us.

RESPONDENTS BY LOCATION

RESPONDENTS BY TRADING VOLUME

RESPONDENTS BY INSTITUTION TYPE

Continental Europe

North America

United Kingdom

Asia

Latin America

Undisclosed Under $1 billion $1–10 billion $11–50 billion Over $50 billion

42%

31%

15%

8%

4% 

Investment managers

Banks

Corporations

Hedge funds

Insurance companies

Government agencies

48%

19%

15%

10%

2% 

6%

8% 4% 42% 19% 27%

Note: May not total 100% due to rounding.

METHODOLOGY

From June through August 2016, Greenwich Associates interviewed 50 buy-side traders across the globe trading fixed-income 

products to learn more about trading desk budget allocations, trader staffing levels, OMS/EMS/TCA platform usage, and the 

impact of market structure changes on the sector.
greenwich.com ContactUs@greenwich.com Ph +1 203.625.5038 Doc ID 17-2026

The data reported in this document reflect solely the views reported to Greenwich Associates by the research participants. Interviewees

may be asked about their use of and demand for financial products and services and about investment practices in relevant financial 

markets. Greenwich Associates compiles the data received, conducts statistical analysis and reviews for presentation purposes in 

order to produce the final results. Unless otherwise indicated, any opinions or market observations made are strictly our own.

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