In recent months, two of the major fixed income trading venues have expanded their service offerings by acquiring algorithmic trading providers.
In recent years, algorithmic trading has become a key driver of fixed income firms’ execution strategies. It has become central to the way liquidity providers adapt to supporting buy-side clients, making the topic a central theme for several panels at this year’s Fixed Income Leaders Summit last year.
Given challenges in accessing liquidity, algorithms can be leveraged to create more value as they are adaptable and fast in terms of pricing and distribution, some industry participants noted.
Not surprisingly, trading venues have strengthened their capabilities in this area inorganically through deals and acquisitions to meet this new demand. In August, MarketAxess announced plans to acquire multi-asset algorithm trading provider Pragma for an undisclosed amount later this year. This was followed earlier this month by news that Tradeweb had put plans into action to acquire algorithmic trading provider r8fin.
Pragma provides algorithmic trading and analysis services for equities, forex and fixed income with a customer base that includes asset managers, hedge funds, broker-dealers, banks and exchanges. The platform’s algorithmic trading platform claims to have processed over $2 trillion in algorithmic client orders across a range of asset classes across 50 trading venues in 2022.
“Fixed income automation has increased rapidly in recent years, but we believe we are still relatively early in the adoption curve. “Our acquisition of Pragma allows us to combine award-winning algo trading technology with MarketAxess’ unique data and open trading liquidity,” Gareth Goltman, global head of trading automation at MarketAxess, told The TRADE.
“This mix of fixed income DNA and cross-asset algo trading expertise will enable us to develop automation solutions that provide our clients a step-change in efficiency and cost savings and prepare them for the next wave of fixed income. Prepare income electronification.”
In June, MarketAxess conducted the first multi-protocol algorithmic client trading with Adaptive Auto-X, its automated multi-protocol execution solution. The Adaptive Auto-X pilot launched earlier this year to help users access fragmented liquidity by leveraging MarketAxess’ liquidity pools along with its data and analytics offering, enabling the creation of more complex automated workflows.
Just three months later, Tradeweb confirmed that it would also become the latest fixed income trading venue to add an algorithmic technology provider to its arsenal with its acquisition of r8fin.
r8fin specializes in US government bonds and interest rate futures. Customers include hedge funds, systematic hedge funds, professional trading firms and primary traders.
“r8fin brings cutting-edge technology and a business that is firmly in Tradeweb’s wheelhouse. “This acquisition will help us achieve new and differentiated levels of intelligent execution through a mix of algorithmic technology and cross-market connectivity,” Tradeweb CEO Billy Hult told The TRADE.
“Our goal is to provide an integrated product suite to access the U.S. Treasury market across multiple cash and futures liquidity pools, and we expect this technology to open up new opportunities for additional asset classes over time.”
Trading venues in particular have viewed consolidation as a means of expanding their offering, allowing them to respond to changing customer demand on both the buy and sell sides.
As more volumes in bond markets are executed electronically – particularly for smaller flows – algorithmic trading continues to be beneficial in this particular asset class.
The ongoing frenzy of M&A activity on fixed income trading venues, as well as many other areas of the market, shows no signs of slowing and more announcements are expected to be on the way.
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