David Parker, head of US sales at MTS, said the electronic fixed income trading venue owned by the London Stock Exchange Group is going to introduce new tools to help investors trade in larger sizes.

Last month MTS BondsPro, which is registered with the US Securities and Exchange Commission, had an 80% increase in total trade count compared to a year ago.

Daily market share continuing to grow on @MTSMarkets BondsPro. 80% increase in total trade count in August compared to Aug 2017 https://t.co/NtIHLoMlPv pic.twitter.com/cWLUHzXm9p

— MTS Markets (@MTSMarkets) September 7, 2018

MTS BondsPro said in a statement that trading activity on the platform doubled in the year from July 2017, and its market share has grown 10%. Parker told Markets Media that the firm had benefitted from the shift to electronic trading in fixed income, which has been encouraged by regulators.

“We are well positioned for the increase in electronic trading,” added Parker. “US banks that have adapted for MiFID II have made changes globally.”

MiFID II, which went live in the European Union this year, extended best execution requirements from equities into other asset classes, including fixed income, for the first time. The rules also introduced pre-trade transparency requirements and post-trade reporting in fixed income which can be more efficient if trading is electronic.

One issue is fixed income is that most bonds are not liquid and it is difficult for investors to trade in large size electronically.

Parker said: “We have to address the challenge of trading in larger size and we will be launching some new tools that are already used in other asset classes, such as equities. Intelligent automation will allow clients to set targets for trades and automated execution.”

He continued that over the last two years more clients have been connecting for automated trading.

“Auto execution is a major trend and has significant room to grow in numbers of participants, sizes and prices,” added Parker.

There has been a rise in auto quoting, where liquidity providers respond to request for quotes using algorithms to calculate a price appropriate for that particular request, without any input from a trader, according to Greenwich Associates.

The consultancy said in a report last year that the algorithms price quotes based on the individual client, current market liquidity, the dealer’s current risk position as well as other factors

Kevin McPartland, head of research for market structure and technology at Greenwich Associates, said in the report: “As investors themselves start to utilize algorithms to automatically select the right counterparty for a given trade based on RFQ responses, the bond market will have its first foray into computers trading with computers. With dealers and investors alike now focused on electronic trading and empowered with data and analytics, execution quality and speed will allow new entrants to gain share where never before possible.”

Oliver Clark, head of product development at MTS, said in a blog that automation can play an important role in helping traders even before they place a deal by identifying the right order at the right moment.

Automation creates opportunities to improve productivity by reducing inefficiencies and boosting performance. In this paper, we discuss how MTS's automation tools can benefit the trader at each point in the trade lifecycle: https://t.co/MSeAlTWQuL pic.twitter.com/lxS2BePiTO

— MTS Markets (@MTSMarkets) September 21, 2018

“The emergence of new technologies such as machine learning and wider availability of application programming interfaces (APIs) for trading have enabled bond traders and their algorithms to take automated electronic trading to the next level,” Clark added.

Buyside trading 

Another trend is the rise of all-to-all trading which allows multiple parties in a network to come together to trade rather than the traditional model of only banks supplying liquidity to the buy side. Consultancy GreySpark Partners predicted last year that all-to-all bond venues will emerge as the winners in the shift to electronic trading, especially for liquid, easily-priced instruments.

“We have seen a 50% increase in buyside trading,” added Parker. “They are more cognisant of their ability to make prices and trade inside the bid/offer spread.”

Last month MTS BondsPro launched a list trading functionality to enable participants to execute many trades simultaneously. After uploading a list of orders to MTS BondsPro, participants can connect with multiple liquidity sources in the platform’s anonymous all-to-all order book and execute on the best price for each trade.

Larry Tabb, founder of consultancy Tabb Group, said in a statement that the reallocation of fixed income portfolios spawns multiple transactions.

“This means that buy-side traders are typically tasked with sourcing liquidity for dozens if not hundreds of bonds, in various sizes and liquidity profiles,” Tabb added. “Creating a more efficient list trading process will not only help institutional fixed income traders focus on large and more difficult trades, but enable investors to source liquidity from more sources and at better prices.”