Portfolio Trading on an upward trajectory – valantic FSA’s latest Sell-Side Fixed Income Expert Network Report

London, July 21, 2023: Participants in the Sell-Side Fixed Income Expert Network continue to see deepening electronification of fixed income markets, according to the latest report produced by Acuiti in association with valantic FSA.

This secular trend that has been taking place for many years continues to gain momentum as clients demand greater efficiency in their operations. More and more firms are connecting to electronic platforms and looking to how much of their workflow they can automate. The report examines how this is taking form, exploring the adoption of portfolio trading, electronification of repo markets as well as the effects a growing move towards cross-products sales is having on fixed income teams.

“Sell-side providers mainly attribute client interest in portfolio trading to a desire for efficiency, as the buy-side seeks to create, execute and optimize portfolios faster and with less headcount and reduced transaction costs” observed Andy Browning, Head of Electronic Trading, at valantic FSA. Over 70% of respondents have seen an increase in demand for greater portfolio trading functionality in recent years.

Repo Rising

Market participants are increasingly using repo to navigate fixed income markets in 2023. ICMA’s most recent survey of the European market, conducted in December 2022, showed a new high in activity, with the total value of outstanding repo contracts on the books of the 61 firms that participated in the survey reaching €10.374bn.

This was borne out in the respondent results.

• 67% are seeing clients make more use of repo markets.
• 66% are seeing customers predominantly access repo markets using both voice execution and electronic platforms, but 86% indicate that more of repo volume is shifting toward electronic platforms.

“It is clear that momentum is growing, with 86% of the network reporting a growing amount of repo volume moving to electronic platforms and the increase in electronic platforms becoming available to participants” noted Will Mitting, Managing Director of Acuiti.

The report also explores attitudes to artificial intelligence, tech vendor relationships and cross product sales approaches and outlook for the rest of the year.