“All-To-All” Corporate Bond Trading Goes Mainstream

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April 20, 2021 | Stamford, CT — Long held assumptions about how corporate bond markets operate have changed as investors and dealers are increasingly comfortable trading anonymously with best execution the ultimately goal.

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In all-to-all (or A2A) markets – where all market participants are able to trade with one another regardless of firm type - asset managers are providing liquidity to dealers and each other, inter-dealer trading is increasing, and nonbank liquidity providers are growing in importance.

These A2A platforms, which were a revolutionary concept a decade ago, are growing fast. Coalition Greenwich estimates that A2A trading accounted for 12% of investment-grade corporate bond trading volume in 2020, a huge jump from the 8% recorded only a year before in 2019.

“The absolute numbers only tell part of the story,” says Kevin McPartland, Head of Research in the Coalition Greenwich Market Structure and Technology group and author of All-to-All Trading Takes Hold in Corporate Bonds. “Whereas A2A trading was previously available on only a handful of platforms and retail-focused central limit order books (CLOBs), today most of the major platforms have A2A activity on the board.”

Investors Value A2A Liquidity and Execution Quality

Market participants view this growth as a positive factor for markets. Approximately 85% of the corporate bond investors participating in a recent Coalition Greenwich study believe there is value in the buy side providing liquidity.

As markets evolve, participants are quickly getting over past concerns about the identity of their counterparties. In 2019, 23% of research participants felt the counterparty to an electronic trading “mattered a lot.” In 2020 that share dropped to just 14%.

“Relationships still do matter,” says Kevin McPartland, “but execution quality should matter more.”

Greenwich Report Dissects A2A Trading

The new Greenwich Report analyzes the growth in A2A trading by breaking down the sources of liquidity on A2A platforms (including the banks), discussing the impact of A2A trading on price improvement, and examining the broader role A2A is playing in the evolution of fixed-income markets.

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