Seizing the opportunity How electronic trading is enabling larger trades in Asia Credit

Asia's credit markets have evolved into a dynamic and increasingly attractive segment of the global fixed income landscape. Since the launch of MarketAxess’ targeted block trading solution in late 2024, more than 100 clients and 40 dealers worldwide have used the protocol. Adoption continues to grow as traders leverage block trading technology and data advances to improve pricing discovery and enhance liquidity selection.

During MarketAxess’ latest Traders Table in Singapore with Standard Chartered Bank, buy-side and sell-side participants in the region shared insights on the rise in electronically traded Asia credit volumes through block trades, and the associated market benefits.

Technology and data advances

Market levers such as the rise of emerging markets fixed income are fuelling innovation in the electronic trading market in Asia, unlocking additional liquidity, greater transparency and efficiency for larger block trades of Asia credit. Strong technology and data are the cornerstone of the future of trading and will remain resilient in any market condition.

MarketAxess’ Targeted Request-for-Quote (TRFQ) and the Smart Dealer Select (SDS) mechanism are also enabling larger electronic trades. Designed for trade sizes over $3 million, TRFQ, a buy- and sell-side friendly protocol solves the dealer selection pain point by suggesting up to eight active sell-side players based on a series of criteria and recent activity, allowing the trader to accurately define his or her selection. This has been a well-received complement to dealer selection which has historically been placed largely on just streaming Axes. The result is a more strategic, data driven approach and counterparty selection which results in improved execution quality and greater operational efficiency.

For those concerned about making large and sensitive inquiries electronically, SDS provides data-driven assistance when selecting disclosed dealers on more delicate inquiries. This leverages proprietary real-time data designed to create trading opportunities, minimize information leakage while optimising the chances of a competitive quote. Traders using SDS have achieved hit rates exceeding 70%.

Since TRFQ launched in November 2024, MarketAxess has seen an increase of 22% year to date in block trades above $3M being traded electronically.

Improved price discovery

Electronic trading tools are enhancing price transparency and discovery, particularly in Asia Credit where bond pricing data is often fragmented across markets and time zones. Protocols such as TRFQ provides traders with data and a more contained environment to confidently and more accurately execute larger, sensitive block trades. TRFQ also allows for negotiation and customized solutions, providing valuable data points on market valuations that smaller, more frequent and voice trades may not capture effectively or as confidentially. The beauty also lies in the fact that it complements, rather than replaces, existing workflows.

For fixed income traders, the ability to transact larger blocks provides insights into the true supply–demand dynamics of specific issuers or sectors. This helps traders make more informed decisions, identify mispricing, and ensure best execution. Over time, improved price discovery fosters a more efficient and resilient credit market in Asia.

Leveraging data to enhance your liquidity selection

Larger block trades, which consolidate transactions into fewer, more substantial executions, can significantly reduce trading costs. However, this is only applicable to bonds that are highly liquid. For less liquid bonds, buy-side dealers may struggle to gauge whether they are getting prices that are most in-line with the market.

Anonymous liquidity pools have benefited the buy side with price improvements and greater efficiency. However, it comes at the cost of dealers’ protection and potential information leakage, particularly with illiquid bonds. Given the risk of the winner’s curse, sell side dealers could adopt a more defensive strategy when pricing bonds in anonymous liquidity pools. New trading protocols have been put in place to ensure pricing is limited to a restricted number of dealers, reducing information leakage while motivating sell-side price markers to provide a better price.

Selecting the right dealer also drives further cost savings. Proprietary protocols like “Smart Dealer Select” add value by showing buy-side clients which dealers have been most active on specific bonds, and where each bond was previously traded. This information gives the buy-side insights on who is able to successfully sell a bond, increasing the likelihood for it to be sold at the best price.

Better trading outcomes

As Asia's credit markets evolve, embracing solutions like TRFQ and SDS will improve the overall trading experience for both the sell and buy-sides.

This will help participants seize opportunities in Asia's credit markets, supporting better trading outcomes and enabling them to capture the region's growth potential in this asset class.