Portfolio Trading on the Rise in FI – Survey

Alongside the unsurprising finding that participants expect greater electronification in fixed income markets, an Acuiti survey, in association with Valantic FSA, finds that portfolio trading is also on the rise in the asset class.

A survey of sell-side participants finds what the firms call a “secular trend that has been taking place for many years” is continuing, driven by ever-increasing demands for efficiency on the part of clients.

Reinforcing recent findings from ICMA, the survey finds that market participants are increasingly using repo to navigate fixed income markets in 2023. ICMA’s most recent survey of the European market, conducted in December 2022, showed a new high in activity, with the total value of outstanding repo contracts on the books of the 61 firms that participated in the survey reaching €10.374bn.

Acuiti says its own survey supports those results, with 67% of respondents seeing clients make more use of repo markets, and 66% seeing customers predominantly access repo markets using both voice execution and electronic platforms. It adds, however, that 86% indicate that more of repo volume is shifting toward electronic platforms.

“Sell-side providers mainly attribute client interest in portfolio trading to a desire for efficiency, as the buy-side seeks to create, execute and optimize portfolios faster and with less headcount and reduced transaction costs” says Andy Browning, head of electronic trading, at Valantic FSA. “Over 70% of respondents have seen an increase in demand for greater portfolio trading functionality in recent years.

Will Mitting, managing director at Acuiti, adds, “It is clear that momentum is growing, with 86% of the network reporting a growing amount of repo volume moving to electronic platforms and the increase in electronic platforms becoming available to participants.”