BrokerTec expands in Europe
Icap has started to offer market data on European government bonds from BrokerTec, its fixed income platform, as it expects further consolidation in electronic bond trading.
The European market data includes real-time and historical prices on more than 1,000 bonds in 10 countries streamed directly from the BrokerTec Market electronic trading platform.
Kevin Taylor, managing director of Icap Information Services, told Markets Media: “BrokerTec has been distributing data on US Treasuries for a number of years and has become the industry standard pricing source. It was a natural progression to use our established market acceptance and extensive customer base to expand our offering into European government bonds.”
John Edwards, managing director of BrokerTec, Europe, said that over the last seven to eight years BrokerTec has become an increasingly important liquidity provider in the dealer-to-dealer space for Euro sovereign bonds and this new data service will complement the overall offering.
There has been a proliferation of new electronic bond trading platforms as regulations have forced banks to cut their balance sheets and reduce their risk-taking.
Edwards said a meaningful amount of trading is still transacted by voice brokers but a lot of competition exists in the electronic space. “We anticipate there will be further consolidation and Brokertec has been a big advocate of central clearing which helps in allowing banks to net and free up balance sheet to do more business in the current environment,” he added.
The Desk’s Trading Intentions Survey this year listed 18 electronic fixed income platforms to which 10% of respondents planned to move to find liquidity, with seven supported by more than 20% of respondents. The survey was conducted across 24 buy-side firms with $12.2 trillion in assets under management based in Europe and the US.
The Desk said: “Of those not shown, Icap’s Brokertec, Eurex Bonds and State Street’s FI Cross deserve an honourable mention for each garnering support from 8% of respondents.”
Edwards added: “We feel the market remains ripe for further innovation and development in trading methodologies evidenced by the lack of any serious matching or mid-market like functionality. There are interesting areas we are exploring which will allow us to increase market share but also enhance overall liquidity in this sector as we have seen on the BrokerTec platform in US Treasuries.”
Icap’s latest annual report for the year ended 31 March 2015 said European government bond volumes on BrokerTec improved last year as a number of new market-making initiatives resulted in higher volumes. The report said: “Increased client footprint, most notably in Italy, with more domestic regional banks using BrokerTec, complemented ongoing efforts to improve market share in the Italian sovereign bond market.”
BrokerTec revenues for the 12 months ended 31 March 2015 fell 4% year-on-year to £128m ($200m). The report said this reflected a 3% increase in US Treasury average daily volumes to $163bn, a 1% increase in US repo to $220bn and a 7% decrease in European repo
Edwards said: “There has been a contraction in liquidity in July and August which may be somewhat seasonal but there are additionally a number of other factors at play. Banks have significantly reduced their inventories as both balance sheet and risk appetite has reduced but the on-going discussions surrounding Greece have not been good for the Eurozone sovereign debt market.”
Alongside BrokerTec, Icap operates EBS, an electronic trading platform in foreign exchange. Last December Icap announced plans to combine its electronic business to create EBS-BrokerTec.
Icap said in the report: “Our aim is to build a truly world leading electronic OTC transaction platform with a multi-product offering. Bringing EBS and BrokerTec together will allow us to scale our technology assets and leverage our sales capability. This will deliver new products and we will reach new client segments.”
The report said Icap’s electronic trading franchises are increasingly expanding from the central order book interbank market to the bank-to-customer market.
“The most notable example is EBS Direct which has leveraged the desktop real estate and connectivity of EBS to regional and smaller banks and offered an executable streaming price service initially connecting bank liquidity providers to bank liquidity consumers but also to an increasing number of non-bank liquidity consumers such as hedge funds,” said Icap.
The firm plans to expand EBS Direct to FX swaps/forwards, corporates and fixed income.
Featured image via D0llar Photo Club
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The analysis is based on transactions publicly reported by 30 European APAs and venues.
A similar service is available on the BIDS platform in the US equity market.