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    GLOBAL MARKETS  |  3 POINT PERSPECTIVE

    Survey says…electronic trading in Fixed Income is hitting new heights

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    Contributor: Tyler Wellensiek
    14 Jan 2025

    The electronic wave in Fixed Income continues, extending into harder-to-reach segments and embedding deeper into workflows. These were key findings from the latest Barclays Global Fixed Income Market Structure Survey, now in its fourth year, which tracks the evolving electronic trading practices of major buy-side participants in the c. $140 trillion* global Fixed Income market.

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    The survey, conducted in Q3 2024, gathered responses from over 100 institutional clients worldwide, including asset managers, hedge funds, and others. The study provides insights on electronic trading’s present and future, looking in detail at the possible paths forward in both Rates and Credit. Here are three key takeaways.

    1. Electronification has grown and will continue to do so 

    The survey has tracked client electronification levels for four years, revealing steady growth in electronic execution across Credit and Rates.

    Client electronification levels for four years, revealing steady growth in electronic execution across Credit and Rates.

    In Rates, 70% of clients indicated that they now execute a high majority of their volumes electronically.1  While Barclays Research estimates the ceiling for electronic execution is 80% of market volumes before large or complex trades constrain usage2, the survey supported the view that further electronification also takes the form of broader automation and innovation in workflows.   When asked about desired improvements to current electronic trading venues, Rates respondents’ answers focused on finding such workflow efficiencies. For example, many responses focused on areas such as improved reliability of axes (discussed further below).

    Credit markets are primed to see further electronic expansion, with greater automation via low-touch execution and increased Portfolio Trading likely to drive growth. Managers now e-trade large numbers of bonds simultaneously in Portfolio Trades to rebalance portfolios or improve efficiency on smaller tickets. The increasing adoption of sophisticated analytical tools for Portfolio Trades is enabling more strategic use, opening the door to further electronification.

    The increasing adoption of sophisticated analytical tools for Portfolio Trades is enabling more strategic use

    When it comes to increasing flow volumes, the survey revealed that clients have expanded automation across their businesses: roughly 60% of Credit respondents now use some form of venue-based or in-house automated execution, up from 40% in prior years. This type of automation is done exclusively over electronic platforms, and its growth demonstrates the efficiency value it brings to clients.

    Market structure reforms, including enhancements to post-trade public transparency, are also on the horizon. Clients expressed mixed views on the impact of initiatives like the forthcoming consolidated tape in the EU/UK (which will aggregate post-trade data from multiple venues). Still, a portion of respondents indicated plans to leverage these changes to support more systematic trading strategies.

    Market structure reforms, including enhancements to post-trade public transparency, are also on the horizon.

    2. Axes: Potential to automate

    This year, the survey delved deeper into axes—liquidity providers’ signals of interest to transact in certain instruments, often with better pricing. Although trading venues now offer an axe flag across Rates and Credit, clients cited inefficiencies in the existing workflow.

    Although trading venues now offer an axe flag across Rates and Credit, clients cited inefficiencies in the existing workflow.

    Many of the most frequently used ways to consume axes contain a very human element, such as chats and venue-based user interfaces. Survey responses show that there is not consensus around what being “axed” entails, with a broad range of expectations around axe source and price. For example, participants were split as to whether an axed price should be at market, inside market, at mid or through mid.

    These nuances, often clarified in conversation, are harder to replicate in digital execution.

    However, respondents saw clear potential for automation. Suggestions included a scoring system in dealer-selection rules engines that rewards liquidity providers based on axe quality and consistency. A broader shift toward greater integration with liquidity providers’ positions could also drive an improved client experience.

    3. RFQ remains highly resilient amidst emerging protocols

    While much investment has gone into protocols such as closing-price trading and executable streams, Fixed Income markets continue to rely heavily on RFQ (request for quote) protocols. The survey results show that RFQ remains by far the preferred way to do business, with voice channels also highly valued.

    The survey results show that RFQ remains by far the preferred way to do business, with voice channels also highly valued.

    While RFQ has been the prevailing market structure for some time, a deeper look at Rates suggests there may be a growing shift towards more streaming-type execution underway. Grouped together, streaming variants are now the third most used protocol in Rates trading. This is a space to watch, with implications for clients across technology, best execution procedures and liquidity provider relationships.

    1 https://www.sifma.org/resources/research/statistics/fact-book/
    2 Barclays Research “The human touch: why the bond market will continue to have a voice”. October 2024

    Important content disclosures

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    To discuss the results of our Global Fixed Income Market Structure Survey further, please contact your Business Representative at Barclays.

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    About the expert

    Tyler Wellensiek

    Head of Fixed Income Market Structure

    Tyler Wellensiek is a Managing Director at Barclays, where she is Head of Fixed Income Market Structure in the firm’s Global Markets division. She is responsible for driving client & internal engagement around critical changes in how the fixed income marketplace operates. In her role, she provides content, business preparedness, and advocacy on major market structure topics including regulation and technology innovation. She also represents Barclays across various industry bodies and working groups, including the ISDA board, the GFMA board and the FMSB Standards board. Prior to her current role Tyler held various leadership positions in the global rates sales business at Barclays, including Electronic Sales & Product Development and Head of US Official & Financial Institutions Sales. Tyler joined Barclays in 2005 from Credit Suisse and has BA in Physics from Wellesley College.

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