When it comes to the e-trading revolution in financial markets, the main action has shifted to new frontiers like high-yield bonds and those changing at the hands of new regulations like cash equities, where the impacts of MiFID II and advances in automated trading technology have triggered a surge in e-trading.
Over the past two years, top-line growth in e-trading has slowed from revolutionary to evolutionary, due mainly to the fact that the worlds most electronic markets like FX and index CDS are likely near their e-trading limits for current technology.
Greenwich Associates research shows there are still pockets of growth and high-yield corporate bonds, where the share of total global institutional trading volume executed electronically jumped to 14% in 2017 from just 9% in 2015, is a case in point.
Some of the most creative thinking in the capital markets is happening in high yield, and the market is starting to see the benefits, says Kevin McPartland, Head of Research for Greenwich Associates Market Structure and Technology and author of From FX to High-Yield Bonds: Global Electronic Trading Update.
In addition, e-trading grew to 36% of global institutional cash equities trading volume in 2017 from just 32% in 2015. After nearly a decade of little change in execution channel selection, equity markets are seeing e-trading via execution algorithms, smart order routers and direct market access tick up meaningfully, says Kevin McPartland. He adds that MiFID II is likely a big component of the move, and one that is still playing out.