Credit Markets Switch Gears


On the eve of the Federal Open Markets Committee’s expected December 14 announcement of an increase in interest rates, some in the industry expect a much more active credit market.

“In the last few years, we’ve seen relatively flat volatility, and therefore, trading activity had actually come down for the whole market,” said Lee Olesky, CEO of electronic credit trading platform operator Tradeweb. “We hadn’t seen the same kind of growth that we have had historically; then in November, we really had a big lift.”

Olesky’s “big lift” translated as $7.9 trillion in transactions occurring across all of Tradeweb’s markets in November, the highest volume since the 2008 credit crisis.

Lee Olesky, Tradeweb

Lee Olesky, Tradeweb

“Considering the environment in November, the derivatives market went into hyper-drive in terms Tradeweb volume,” he said.

Compared to the trading volumes of November 2015, Tradeweb’s credit derivatives, rates derivatives, and credit markets saw a year-on-year growth of 153.4%, 87.3%, and 73.7% respectively.

At the same time, the venue operator’s ETFs/equity derivatives, mortgages, and government bond markets witness growth rates of 48%, 31.3%, and 29.8% respectively.

Olesky traced the start of the increased and sustained activity to the two days after the US presidential election on November 8.

“It’s hard to kind of move away from that fundamental point,” he said.

However, he did not attribute the change in the credit market solely to the election of Donald Trump as the next President of the United States.

“There are a number of influential factors in Europe too, with Italy, Brexit, and elections in a number of countries throughout the region,” said Olesky.

How long this new environment will last is a tough call, but it certainly will continue for a while, he noted.

“2017 is going to be an active year for Tradeweb across our markets and in the major regions we operate in,” said Olesky. “There’s going to be a lot of focus on European reform with MiFID II, potential regulatory changes in the U.S., and in new technology addressing these issues and advancing the market.”

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