Liquidnet Fixed Income: The next chapter
As Liquidnet Fixed Income approaches its sixth anniversary, and following the recent acquisition by TP ICAP, a leading global markets infrastructure and data solutions provider, it’s a time for reflection, celebration, and excitement of what is to come in the credit space.
Since its founding in 1999, Liquidnet has been on quite a journey, playing a key role in the trading technology revolution, growing its global network, and being consistently recognized as a leader and trailblazer in financial technology innovation.
With an established reputation as a leading unconflicted agency-broker in Equities, in 2014, Liquidnet expanded into Fixed Income with the acquisition of bond-trading platform Vega-Chi, and the following year launched the first dark pool trading platform for corporate bonds. Liquidnet’s vision then still holds true today — bring market participants together to facilitate the flow of corporate bond liquidity more efficiently.
With a strong and significant buy-side Member base and impressive Order Management System (OMS) connectivity in place, Liquidnet was able to quickly plug into fixed income liquidity and address the growing need from the buy side to electronically trade credit, leveraging one of its core strengths as a protected, safe venue that specialized in difficult to execute blocks.
The electronic landscape for corporate bonds became a crowded and competitive space but, while some platforms faded or joined forces with others, Liquidnet went from strength to strength. Adoption grew to over 400 Member firms in 2018 and expansion came in various forms, including a more diverse set of liquidity-seeking protocols such as Targeted Invitations and Virtual High Touch, plus a unique Portfolio Manager workflow and a move into Emerging Markets.
What is Liquidnet’s secret sauce? A deep level of trust and partnership between its Fixed Income team and Members who recognize that, while electronic trading has seen widespread adoption, the need for solutions which ensure efficiencies and avoid fragmentation, while also fostering innovation, remains. This brings me to today.
Liquidnet is a franchise that Members can depend on, and I want to continue to build on this legacy. Today, Liquidnet Members have access to a large pool of corporate bond liquidity. As I look ahead to the transformational opportunity the acquisition by TP ICAP gives us, I feel optimistic and energized.
This unique partnership will see the firms combine a state-of-the-art electronic platform with extensive fixed income market knowledge and experience, while upholding Liquidnet’s core values and protecting clients’ data privacy. Bond market specialists from TP ICAP have transferred and quickly integrated into Liquidnet’s Fixed Income group, creating a large team of experts who are developing new protocols, onboarding new Members, (over 25 new EMEA firms since April 2021), and elevating the Member experience. The new team aspires to achieve two significant goals:
- Electronify the full bond life-cycle: Leveraging Liquidnet’s strong grounding in the secondary market as a springboard, Liquidnet is bringing long overdue innovation to primary markets, with a goal to become the first electronic unconflicted agency broker to provide an end-to-end workflow solution for the full life-cycle of a bond, from issuance to redemption. Liquidnet Primary Markets will launch in September 2021 and will be our first step towards this goal.
- Be the leading trading counterparty or electronic agency- broker to execute complex orders: Electronic trading in corporate bonds rose to 47% of EMEA trading volume last year, versus 31% of US investment grade and 21% for high yield1. However, the majority of securities remain difficult to execute electronically — often requiring additional skills, negotiation, and discovery. Our goal is to become the leading electronic trading platform with a team of execution consultants able to help clients with corporate bond trades of any size and complexity. Combining talent and expertise with state-of-the-art technology is, I believe, a powerful proposition as fixed income has become an increasingly sophisticated marketplace.
The next chapter in our Fixed Income story will see bond market electronification move into new areas and push the boundaries of trading technology. And, while our approach to technology will always have an eye to the future, our approach to high-quality client service will remain the same with collaboration, transparency, trust, and connectivity at the heart of everything we do.
Written by Mark Russell, Global Head of Fixed Income