Bond Dealers Increasingly Automate Trading

The corporate bond market is undergoing a seismic shift, with nearly 30% of bond dealer trading volume now executed without human intervention, marking a significant milestone in the electronification of fixed income trading..

“The fixed-income market is moving into the next phase of electronic trading in which trade execution is not simply electronic, but fully automated” said Kevin McPartland, Head of Research at Coalition Greenwich Market Structure & Technology and author of Corporate Bond Dealers Focus on Trade Automation.

Continuously growing market volumes, shrinking dealer profit margins and client expectations for instant liquidity are all driving dealer investments in automation. 

Coalition Greenwich research found that top-tier U.S. corporate bond desks see roughly 30,000 inquiries per day on average, making it is now virtually impossible for humans to manually respond to all (or in some cases, even some) of those client-generated requests-for-quote (RFQs).

The largest dealers and non-bank liquidity providers are leaders in automation adoption, with top-tier firms in our research executing 57% of their trading volume without human intervention and non-bank liquidity providers 70%.

Dealers Name Automation as Top Tech Priority
Automatic execution is poised for even more dramatic growth ahead.

“Interest in fully automated trading is not limited to the biggest corporate bond liquidity providers,” said McPartland. “Nearly two-thirds of corporate bond dealers see increasing automation in the trading process as a top technology priority for 2024.”

The report breaks down the prevalence and use of automated trading by bond type, order size and trading venue, provides a detailed breakdown of how automated execution works, and looks at future opportunities for additional automation.