An electronic trading revolution is finally coming to corporate bonds, years after reaching other financial markets.
That’s what Man Numeric, a quant investment arm of the world’s largest publicly listed hedge fund manager, believes. The firm is executing 90% of its high-yield and investment-grade trades through digital platforms, and expects to get to 100% within two years. A year ago, only about a third of its junk bond trades were electronic, with the rest happening on the telephone or a messaging platform.
During times of turmoil, voice trading has often won out for the biggest trades, even as recently as the early part of the pandemic in 2020. But in the last few years, Man Numeric has noticed that trading volume on electronic platforms was growing in both bad times and in good, said Robert Lam, co-head of credit at Man Numeric. More investors seem comfortable using fully electronic trading, in part because they have more sophisticated pricing algorithms that can handle big market shifts.
Man Numeric views its edge as being in security selection. It’s generally looking for individual bonds or groups of securities that are underpriced, or for long-short trades. “We still believe this market has a lot of innovating to do,” McPartland wrote in a recent note. “Retail access to the bond market is still a decade or more behind the equity market.”
France Dernières Nouvelles, France Actualités
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