MarketAxess Releases Year-End Review of 2011 U.S. Corporate Bond Market
NEW YORK &
LONDON--(BUSINESS WIRE)--Feb. 2, 2012--
MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading
electronic trading platform for U.S. and European high-grade corporate
bonds, emerging markets bonds and other types of fixed-income
securities, today released its first year-end review of trading activity
in the U.S. corporate bond market for 2011. The analysis was conducted
by
MarketAxess Research.
The analysis is based on FINRA TRACE and other publicly-disseminated
data, as well as proprietary trading data from MarketAxess from January
through December 2011. MarketAxess Research uses its own proprietary
approach to analyze price movements and liquidity trends.
Rick McVey, Chairman and CEO of MarketAxess, said: “Following a period
of generally favorable conditions in the credit markets in 2010 and
early 2011, the second half of 2011 saw headwinds develop, with widening
credit spreads and increased credit spread volatility. Among other
factors the ongoing dislocation in the European markets has increased
market risk, one indicator of which is the reduction in primary dealer
balance sheets for corporate bond market-making. These declined, most
notably in the second half of 2011, finishing the year below the credit
crisis lows and over 80% below pre-crisis levels. Declining liquidity
and challenging market conditions were also reflected in decreasing
average trade size throughout the year, evidence that as the year
progressed investors found greater success in executing smaller trades
versus large blocks.”
2011 Notable Trends:
Overall High Grade TRACE volumes increased slightly to 2.92 trillion in
2011, up from 2.89 trillion in 2010.
However, TRACE volumes decreased 6.6% in the fourth quarter to 617.0bn,
compared to 660.9bn in the fourth quarter of 2010.
Primary Dealer corporate bond inventories were down 45.9% for the year
and currently stand at $46.7 billion, according to the Federal Reserve
Bank of New York. This is 21.9% below the credit-crisis low of $59.8bn.
Various measures of market liquidity declined throughout the year.
Turnover, defined as the total amount traded divided by the total amount
outstanding for the bonds that traded, declined 2.8 percentage points to
16.8% in the fourth quarter, compared to 19.6% in the fourth quarter of
2010.
According to MarketAxess estimates, bid-ask spreads were flat at around
10 basis points (bp) for the first half of the year but widened out
significantly beginning in August, ending the year at around 20bp.
Block size trades (greater than 5 million in size) decreased 4.0
percentage points to 36.7% of overall TRACE volumes in the fourth
quarter of 2011, compared to 40.7% in the fourth quarter of 2010.
Consistent with a more challenging trading environment, as well as the
trend in annual numbers released by FINRA, counterparty diversification
on the MarketAxess electronic trading platform increased for
institutional investor clients. The percentage of volume executed by
‘new’ dealers on the MarketAxess trading system (defined as dealers who
have joined MarketAxess since 2008) accounted for almost 21.4% of volume
on the system in Q4 2011, compared to 17.5% in Q4 2010.
The cost savings for MarketAxess clients trading electronically
increased 22.0% to 6.7 bps in the fourth quarter, compared to 5.5 bps in
the fourth quarter of 2010. We calculate transaction cost savings by
comparing trade prices on MarketAxess with the weighted average spread
of comparable trades in the same bond reported to TRACE.
Total global trading volume on MarketAxess in 2011 increased 31% to
$525bn, compared to $402bn for 2010.
High-grade volumes on MarketAxess in 2011 increased 33% for the full
year, compared to a year ago. MarketAxess’ estimated high-grade market
share increased to 11.1% in 2011, compared to an estimated 8.4% in 2010.
Volumes in MarketAxess’ ‘Other’ product category (which includes high
yield, emerging markets, agencies, structured products and CDS) also
increased 52% in 2011 compared to 2010.
Kevin McPherson, Head of U.S. Sales at MarketAxess, commented: “The
market data confirms many of the trends we observed at MarketAxess
throughout the year. The MarketAxess trading platform demonstrated its
usefulness to investors seeking efficient and transparent access to
alternative sources of liquidity from a greater number of counterparties
during challenging market conditions.”
Bid-Ask Spreads:
MarketAxess has developed a proprietary corporate bond bid-ask index to
demonstrate how spreads change over time and in relation to other macro
factors. The index is composed of a broad sample of high grade bonds and
includes trades in an average of 200 bonds on a daily basis. The index
values are calculated by comparing client buy and sell trades in the
index bonds (for institutional trades of $100,000 and above) as reported
to TRACE.
Alex Sedgwick, Head of Research at MarketAxess, added: “While
overall corporate bond volumes remained flat in 2011 compared to the
prior year, our data shows trading activity increasing within parts of
the market where liquidity has become more concentrated, such as in
recently issued benchmark bonds. Institutional clients took advantage of
the liquidity opportunities and dealer presence available through
electronic trading, and in return realized significant cost savings when
trading electronically on MarketAxess.”
For further information please visit www.marketaxess.com/data/marketaxess-research.
Analysis and the methodology can be made available by request.
About MarketAxess Research
MarketAxess Research works with institutional buy-side clients to
deliver custom research and analysis to better inform their electronic
fixed-income trading and execution strategy. Leveraging its wealth of
fixed-income experience, MarketAxess Research focuses on many aspects of
credit trading, including trade cost analysis, fixed-income trading
flows, portfolio pricing and fixed-income exchange traded fund (ETF)
pricing. It has developed a proprietary approach called REXIQ to
calculate execution costs by comparing electronically-executed trades to
prevailing market prices, allowing clients to calculate the annual
portfolio performance improvement due to e-trading. For more information
about REXIQ, see http://www.marketaxess.com/trading/reducing-execution-costs.php.
About MarketAxess
MarketAxess operates a leading electronic trading platform that enables
investment industry professionals to efficiently trade corporate bonds
and other types of fixed-income instruments. MarketAxess’ patented
trading technology allows institutional investor clients to request
competitive, executable bids or offers from multiple broker-dealers
simultaneously, and to execute trades with the broker-dealer of their
choice. Over 850 institutional investors are active users of the
MarketAxess trading platform, accessing the global liquidity provided by
MarketAxess’ 87 broker-dealer clients in U.S. high-grade corporate
bonds, European bonds, high yield and emerging markets bonds, agency
bonds, asset-backed and preferred securities and credit default swaps.
MarketAxess also offers a number of trading-related products and
services, including: market data to assist clients with trading
decisions; connectivity solutions that facilitate straight-through
processing; technology services to optimize trading environments; and
execution services for exchange-traded fund managers and other clients.
MarketAxess maintains its headquarters in New York and has offices in
London, Chicago, Salt Lake City, Hong Kong and Singapore. For more
information, please visit www.marketaxess.com.
Source: MarketAxess Holdings Inc.
Media US:
MarketAxess
Florencia Panizza,
+1-212-813-6029
fpanizza@marketaxess.com
or
William
McBride & Associates
Judith Flynn, + 1-917-902-9726
jflynn@wmmcbride.com
or
Media
UK
MHPC
Charlie Prichard, +44 (20) 3128 8554
marketaxess@mhpc.com