MarketAxess to Overhaul ETF Analytics

Shanny Basar

Eectronic fixed income trading platform MarketAxess expects CP+ (Composite Plus), it’s proprietary algorithmic pricing engine for corporate bonds, to become equally relevant for fixed income exchange-traded funds following the partnership with market maker Virtu Financial.

This month MarketAxess announced a partnership with Virtu Financial to provide institutions with enhanced trading tools and access to global ETFs and fixed income securities in the third quarter of this year. MarketAxess will distribute eNAV ETF, a streaming fair value tool for ETFs, which Virtu recently acquired as part of its purchase of broker ITG.

John Keller, ETF product manager at MarketAxess, told Markets Media that the firm was in talks with ITG last year before Virtu announced its acquisition, which was completed last month. Keller said: “Once the deal closed we picked up where we left off.”

He continued that ITG considered a real-time net asset value (NAV) ETF business last year but lacked fixed income pricing capabilities.

“We launched CP+ three years ago and it is now hitting its stride in terms of value and accuracy so the partnership will have the best pricing data for fixed income ETF NAVs,” Keller said.

CP+ is updated every 15 to 60 seconds, depending on the liquidity of the instrument, and generates nearly 20 million levels per day covering 90-95% of trading activity in its markets. The pricing engine uses machine learning to provide an indication of where a bond might trade next.

Keller said: “The partnership will elevate CP+ to the centre of the ETF ecosystem. We have the most data in credit and emerging market bonds so we should become the pre-eminent pricing product.”

He continued that by combining eNAV and CP+, MarketAxess could provide new analytics to bond trading clients such as how high-yield bonds are trading compared to the ETF shares.

MarketAxess said today that it has launched a suite of market and trading performance indexes for the US investment grade credit market. The suite of US investment grade trading performance indexes will offer a view of the relative “over-performance” or “under-performance” associated with venue selection.

Chris Concannon, president and chief operating officer at MarketAxess, said in a statement: “In the case of fixed income ETFs, we believe our data and analytical tools will create ETF products that can trade more efficiently and can achieve lower trading costs.”

MarketAxess claims that participants had an estimated improvement of 0.9 basis points in yield per bond in March 2019 when trading US investment grade credit on its platform,  versus when trading away from MarketAxess.


Keller said: “By introducing accuracy and consistency across issues we can open up the ETF market to our bond trading customers.”

Chris Concannon, MarketAxess

Concannon told Markets Media in February that the buy side wants to increase their use of algos and other electronic products in fixed income.

“The huge growth in assets under management in fixed income ETFs is changing the underlying market and leading to more electronic plays,”  added Concannon.

MarketAxess’ partnership with Virtu will also include disclosed and anonymous ETF trading via a request-for-quote protocol and access to Virtu’s ETF platform, RFQ-hub.

“ITG had an agency desk where clients could trade ETFs anonymously,” said Keller. “In the all-to-all world, information is key so we see more clients using this avenue.”

MarketAxess’ all-to-all model is Open Trading, which allows the buy side to also supply liquidity, rather than the traditional model of only banks supplying liquidity to investors. The firm reported in its 2018 full-year results that Open Trading reached a record last year, with almost twice the volumes of 2017.

Concannon said in a statement: “Our entry into ETF trading with Virtu is a natural extension of our success with Open Trading, now established as the preferred all-to-all trading solution in the credit markets.”


Keller continued that ITG was a top provider of transaction cost analysis globally so the Virtu partnership will enlarge MarketAxess’ TCA capabilities.

Consultancy Greenwich Associates said in a report that fixed income trading is becoming increasingly electronic which is driving demand for decision-support analytics. This particularly applies in Europe, where the MiFID II regulations included fixed income in the best execution requirements at the start of last year. The report said only about 38% of fixed-income desks currently use TCA.

Richard Johnson, Greenwich Associates

Richard Johnson, principal in Greenwich’s market structure and technology practice, said in the report there are challenges for fixed income TCA.

“While the availability of data has certainly expanded in the past decade—particularly for bonds and swaps—there is still no single benchmark price,” Johnson added. “In addition, most prices are evaluated rather than actual, given the relative illiquidity of the market.”

The study said that in foreign exchange and fixed income TCA, Bloomberg is the market leader followed by MarketAxess and ITG in the US, and BestX and IHS Markit in Europe.

“However, TCA in these asset classes is still somewhat of a greenfield,” said Johnson. “As overall penetration increases, we could see shifts in the competitive landscape.”


Last week Refinitiv, financial markets data provider agreed to redistribute MarketAxess’ fixed income market data via its Elektron Data Platform.

Brennan Carley, managing director for enterprise at Refinitiv, said in a statement: “The increasing electronification of the bond market and heightened regulatory pressure to demonstrate best execution mean fixed income traders and investors need more data to power smarter trading engines, find an investment edge, and meet their reporting obligations.”

Keller said: “Our biggest differentiator is the ability to provide best in class analytics in real-time for both pre- and post-trade.”

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