Client survey finds tech transformation takes hold in rates electronic trading

Technology is transforming how traders electronically execute rates transactions, according to the findings of a new client survey. In February 2019, Barclays invited North American rates clients to participate in the BARX Rates Electronic Execution Considerations and Preferences Survey designed to identify clients’ preferences shaped by electronification and provide insight into the future of e-trading.

The survey polled sentiment across a variety of electronic rates trading topics, such as best execution, broker selection and transaction cost analysis (TCA). This included responses from a variety of institutional clients, including asset managers, hedge funds, banks, broker-dealers, official institutions and insurance companies. The survey was voluntary and all responses were anonymous.

Clients execute the majority of their rates transactions electronically

Clients have adopted e-trading as a major component of their overall rates trading workflow. Survey respondents indicated that the majority of their rates trading, measured by number of trade tickets or notional size, is now executed through electronic channels.

Source: BARX Rates Electronic Execution Considerations and Preferences Survey 2019

80% of clients execute the majority of their rates tickets electronically.

Operational efficiency is a key driver of executing rates electronically

The majority of clients surveyed indicated ‘operational efficiency’ as their top criteria in deciding whether to execute a trade electronically, which includes considerations such as pre-trade price transparency and post-trade allocations. The ability to ‘evidence best execution’ was the second most common response, likely due to MiFID II and other regulations that require investors to define a framework for their execution practices. Electronic trading assists with this framework. For example, it allows investors to access and demonstrate their competing quotes more easily.

Source: BARX Rates Electronic Execution Considerations and Preferences Survey 2019

Various sources of data are considered when selecting dealer groups

Even as technology improves and the reliance on data increases, relationships remain important when it comes to selecting electronic tdealer groups. Clients now have the ability to complement their sales coverage with a wide array of pre- and post-trade data sources made available to them by various providers.

Source: BARX Rates Electronic Execution Considerations and Preferences Survey 2019

The #1 consideration for clients choosing e-trading counterparties is their network of relationships and quality of sales coverage.

Adoption of transaction cost analysis remains challenging in rates

Client responses indicate that the adoption of transaction cost analysis (TCA) continues to grow in the rates space. Clients commonly use TCA to compare the trade execution costs versus an execution benchmark. However, defining an appropriate execution benchmark can be a challenge which suggests that TCA frameworks must evolve.

Source: BARX Rates Electronic Execution Considerations and Preferences Survey 2019

About BARX

BARX is Barclays’ cross-asset electronic trading platform that continually seeks to innovate to set the standard of performance and deliver expert execution capabilities for our institutional clients’ evolving needs.

BARX Rates provides access to liquidity across a variety of cash and derivatives products. Our electronic rates team continues to invest in the platform – to expand our pricing infrastructure, increase product coverage, standardize business and trade capture workflows – all with an aim of optimizing & creating the next generation of electronic trading in this asset class.

Please contact the BARX Rates Sales Team for more information from the BARX Rates Electronic Execution Considerations and Preferences Survey.