Pre-Trade data strategy: Optimizing protocol selection in European Credit
Our high touch trading solutions offer a competitive edge with advanced pre-trade data and smart counterparty analytics. At MarketAxess, we leverage our unrivalled pre-trade data and partnerships with our vast dealer community for the best possible outcomes.
Leveraging our pre-trade data
The first step in guiding our clients on their high touch journey begins with pre-trade data. Our pre-trade data is available in several forms—Tradability is one of our most innovative products, which allows traders to better understand the market’s capacity to immediately fill an order. This AI-driven liquidity metric provides a unique, real-time measure of market depth for European credit on the platform. Tradability adapts quickly to changing market conditions throughout the trading day based on extensive proprietary trading platform and historical response data.
European Axes is another form of pre-trade data that guides high touch trades—more than 55 dealers contribute Axe data onto the MarketAxess platform, often exceeding 4 million Axe updates per day. The latest innovation is the ability for dealers to specify the source of their Axe content—as algo-driven liquidity dynamics become increasingly popular, venturing into the round lot and block sizes.
The next generation of our award-winning CP+™ predictive pricing engine, CP+ Inquiry, provides data-driven insights into size-based pricing expectations by leveraging machine learning to analyse RFQ data. This offers the most precise predicted prices across trade sizes to help traders efficiently understand how execution costs scale with order size. CP+ Inquiry empowers traders to make more informed decisions about their trading strategy, ultimately leading to better execution outcomes in larger trades where market impact is a key consideration.
Our Smart Dealer Select tool leverages the power of algorithms to automate dealer selection and highlights dealers with actual liquidity in any given bond using counterparty Axes and proprietary data-driven indicators. This tool is great for targeted execution styles best suited to larger—and more sensitive—inquiries.
Protocol selection for high touch trading
The next step in the high touch journey? Protocol selection, which is data-driven. In terms of the protocols available for high touch trading, we have traditional RFQ, Portfolio Trading, and Targeted RFQ. Targeted RFQ launched recently, and it is great for this style of trading as it provides transparency with the dealer community while limiting information leakage for all participants.
By partnering closely with our buy-side community, we see firsthand the value that electronification of the bond trading market has brought in terms of efficiency and best execution. Our clients were asking for access to the same service for larger trades, due to the pressures faced by trading desks to execute more with less. This was the genesis for Targeted RFQ, which has enhanced transparency to ensure the dealer community is comfortable pricing competitively, achieving the best execution for clients. The protocol is designed to simplify the process for clients, encouraging them to go to a more precise pool of dealers.
The decision of how many, and who, an inquiry should be going to is client-led, supported by our unique data capturing live market dynamics. For every Targeted RFQ inquiry, the dealers selected will know how many counterparties they are in competition with, and why they were selected by the client—whether it’s due to historical performance in that bond, their recent trading activity or because they had a live Axe. This helps dealers to build a picture of how to optimise their performance in the market, encouraging greater contribution of high-quality data which refines the client selection process and provides a better trading experience for all.
As our platform continues to evolve, these solutions empower traders to navigate the complexities of the market with greater ease and control: maximising competition while minimising information leakage—to strike the perfect balance.