“All the ingredients are there to continue the growth in U.S. corporate bond trading.”
The U.S. corporate bond market has all the ingredients to sustain its high growth momentum as liquidity begets more liquidity, electronification creates velocity and transparency, and AI expands the horizons of e-trading, according to Jason Quinn, Chief Product Officer & Global Head of Sales, and Justine Robertson, Head of U.S. Credit Sales & Client Strategy, at fixed-income electronic trading platform Trumid. They spoke to Kevin McPartland, Head of Research in Market Structure & Technology at Crisil Coalition Greenwich, in a Behind the Market Structure interview.
“The credit market overall is fundamentally in a strong spot,” stated Robertson. Record-high new issuances and double-digit growth in secondary volumes indicate that “investor demand is being absorbed pretty well across the space.” Added Quinn, “All the ingredients are there to continue this trend, so it feels more secular than it does anything else.”
E-trading’s virtuous cycle
Apart from catalysts like tariffs, geopolitics and interest rates, electronic trading is facilitating corporate bond volume growth. According to Quinn, e-trading has created a virtuous cycle with more velocity in trading leading to more transparency on where things are trading.
Liquidity is widely dispersed across “hyper-liquid” bonds that “trade like water” with tight bid-offer, “super-liquid stuff” and “a really big fat center of that curve,” he pointed out. “You're getting much more clarity around bonds in the meat of the market and so, it's turning over more. The more trades, the more confidence you get around pricing. As you get more confidence around pricing, it facilitates more systematic participation, and again, that feeds the virtuous cycle.”
Additionally, the availability of multiple workflows and protocols is attracting new market participants, which, in turn, is enhancing liquidity, added Robertson. “As we always say, liquidity does beget liquidity. As soon as there's proof that there's a price that's vetted in the market, more will follow suit.”
Grey market trading goes electronic
That’s evident in Trumid’s innovation in grey market trading in new issuances. “That’s where we've really made a mark in terms of making that much more efficient to transact, while it's still grey and after it prices for the first couple of days,” stated Quinn.
Grey market trading is “tricky” because the instrument is not an established bond or CUSIP before it gets priced in the market, pointed out Robertson. “We've created a way in which those bonds can trade before they're priced. So, it allows our users to find that clearing price before it's well established in the market, which is pretty distinct.”
Engagement in new issuances on the Trumid platform is at the “highest level” seen so far and a lot more is “trading in the secondary part of greys, particularly on Day 1” as well. “I think that's a function of more liquidity overall,” said Robertson. Across all sectors, approximately 60% of Trumid’s Day 1 new issue volume has traded in the grey market year-to-date, with even higher percentages in Financials, TMT, and Healthcare & Pharma.
Client willingness to adopt an innovation is also a function of its ability to solve an existing problem, added Quinn: “Trading in the grey was disparate earlier. When you did a trade, you had to … make sure you got your tickets after the fact. Now, there's transparency on where it is trading … [and] no matter how you trade it electronically, in a Swarm or bilaterally, you will get the ticket from the system when the bond is freed and allocated and priced. From an operational risk perspective, that friction has been resolved.”
From single-workflow automation to FST
Trumid hasn’t stopped there. It has also injected machine-learning (ML)-driven models, pricing intelligence and analytics to offer no-touch trading in greys through its new Full Self Trading (FST™) automation tool.
Trumid FST, which has witnessed accelerated adoption in new issues and greys, goes beyond rules-based automation in a single workflow. It enables fully automated execution across multiple workflows within a single platform based on trader-defined criteria. For instance, a trader can give a buy or sell order for a particular grey bond on the system, and FST systematically monitors, evaluates and “will take over and look for opportunities to get the order filled.”
In terms of product design, it’s what Quinn calls the “ultimate in simplification,” since it sits as a single layer upon existing workflows. “You don't even have to click. You just give it your intention, your parameters, and it takes over. That's our vision for FST at the end of the day.”
Relinquish the wheel or not?
Like with Full Self-Driving (FSD), are traders wary of relinquishing control of the wheel? “It's not as scary [as FSD], because you are giving it instructions. But it will get more sophisticated over time. The important thing is that this is a journey,” said Quinn.
As for the dilemma between automation trying to take over a client’s job versus making it more efficient, Robertson stated, “Since we've been live with FST, we've been pretty energized by the receptivity and adoption of it. I think it's because [users] are realizing it's something they didn't even know they needed... It's taking away that friction where they might spend more time deciding ‘Where should I actually execute this?’ and freeing them up for other things.”
Automating voice workflows for dealer
Meanwhile, Trumid’s new AI-powered capability, Trumid Smart Voice™, which converts client conversations into trade tickets, has gained traction with dealers.
“It's been widely adopted by the sell side,” said Robertson, pointing out that over 50% of the corporate bond market is still based on bilateral voice trades. “Those thousands of tickets need to get processed in an efficient manner, so the sell side is looking to embrace [it]. In turn, buy-side clients are utilizing that workflow because it saves them time as well.”
“We try to create tools that the whole market will find value in. So, dealers can also use FST [to manage some of the risk on their books]… That's a way to deliver value to a really important cohort,” added Quinn.
Innovation ahead
Both Quinn and Robertson expect innovations in fixed-income automation to keep flowing and helping users tap “unlocked opportunities” to expand e-trading volumes.
Through its new collaboration with DirectBooks, Trumid is working to help “solve the problem of streamlining the primary process, which is another piece of the puzzle of improving the market structure overall,” stated Quinn.
It will also deliver more sophistication in tools like FST such as on-demand insights delivered through a “conversational interface.” The adoption of new technologies like GenAI in users’ personal lives is having a spill-over effect in the willingness to adopt new tools in their professional lives, pointed out Quinn. So, as users get more comfortable with FST, he expects a personalized relationship to develop “with the platform that's delivering insights that help you do your job more efficiently.”
Trumid will also continue to innovate “down the spectrum” of corporate bonds—and not just in primary issuances that form the “tip of the spear” of hyper-liquid bonds. Stated Quinn, “At the end of the day, for all market participants, turnover, velocity and transparency are healthy for the market structure overall.”