Following two major announcements this year, The TRADE speaks to the trading venues hoping to dominate the evolving fixed income algo trading sphere.
Over the last few months, the market has seen two of the most prominent fixed income trading venues expand their service offerings through acquisitions of algorithmic trading providers.
In recent years, algorithmic trading has become key to firms’ fixed income execution strategies, becoming central to how liquidity providers are adapting to support buy-side clients and making the topic a central theme to several panels at the Fixed Income Leaders Summit this year and last year.
With challenges in accessing liquidity, algorithms can be leveraged to bring more value, given their ability to be adaptive and fast in price and distribution, as noted by some industry participants.
Trading venues have – unsurprisingly – been inorganically bolstering their capabilities in this space through deals and acquisitions in order to cater to this new demand. In August, MarketAxess revealed plans to acquire multi-asset algorithmic trading provider, Pragma, for an undisclosed amount at the end of this year. This was followed by news earlier this month that Tradeweb had set in motion plans to acquire algorithmic trading provider, r8fin.
Pragma provides algorithmic trading and analytical services across equities, foreign exchange and fixed income with a client base that spans asset managers, hedge funds, broker dealers, banks and exchanges. The platform’s algorithmic trading platform claims to have handled over $2 trillion of client algorithmic order flow in a range of asset classes across 50 venues in 2022.
“Fixed income automation has grown rapidly in the past few years, but we believe we are still relatively early on the adoption curve. Our acquisition of Pragma allows us to combine award winning algo trading technology with MarketAxess’ unique data and Open Trading liquidity,” Gareth Goltman, global head of trading automation at MarketAxess, told The TRADE.
“This mixture of fixed income DNA and cross-asset algo trading expertise will enable us to create automation solutions that offer a step change in terms of efficiency and cost savings for our clients and prepare them for the next wave of fixed income electronification.”
In June, MarketAxess executed the first client algorithmic trade across multiple protocols using Adaptive Auto-X, its multi-protocol automated execution solution. The Adaptive Auto-X pilot launched earlier this year to simplify plugging into fragmented liquidity for users by taking MarketAxess’ liquidity pools and placing them alongside its data and analytics offering, allowing more complex automated workflows to be set up.
Just three months later, Tradeweb confirmed it was also set to become the latest fixed income trading venue to add an algorithmic technology provider to its arsenal with the acquisition of r8fin.
r8fin specialises in US treasuries and interest rate futures, with clients encompassing hedge funds, systematic hedge funds, professional trading firms and primary dealers.
“r8fin brings cutting-edge technology and a business that’s very much in Tradeweb’s wheelhouse. This acquisition will help us reach a new and differentiated level of intelligent execution through a mix of algorithmic technology and cross-market connectivity,” Billy Hult, chief executive of Tradeweb, told The TRADE.
“Our aim is to provide an integrated product suite for accessing the US Treasury market through multiple liquidity pools across cash and futures, and over time we expect this technology will open up new possibilities spanning additional asset classes.”
Trading venues, in particular, have viewed consolidation as a means to expand their offerings, allowing them to cater to evolving client demand on the buy- and sell-side.
With more and more volumes being executed electronically in fixed income markets – particularly for smaller sized flow – algorithmic trading continues to present its case within this specific asset class.
The ongoing flurry of M&A activity at fixed income trading venues, like in many other areas of the market, shows no sign of slowing, with more announcements anticipated to be in the pipeline.
