Adapting to Changing Market Dynamics: Discover How Tradeweb Innovates with Intelligence – Inside Our Cross-Market Trading Series
In recent years, financial markets have witnessed a significant shift towards cross-product execution, where buy-side trading desks are no longer specialising in a single asset class, but are rather engaging in multi-asset trading.
This trend is especially evident in Europe, where financial institutions are adapting to the complexities of the global market by diversifying their trading strategies to include a broad selection of financial instruments.
As this cross-product trading continues to gather pace, at Tradeweb we rely on our client-facing teams to stay attuned to how our clients are evolving, their challenges, and their strategies with the aim to introduce initiatives that grow alongside our clients' needs. With our 20th anniversary our rates offering fast approaching we spoke with our European Sales Co-heads, Nawel Khelil and Rob Marchetti, about how their roles have transformed over the years and how clients' workflows have changed, as they adopt electronic trading solutions and adapt to new regulations and turbulent market conditions.
What is your current role at Tradeweb and how has it evolved over the years?
Nawel: When I joined Tradeweb, the platform supported only two products, namely US Treasuries and European Government Bonds. My role has mainly centred around covering central banks and official institutions, which, interestingly, were early adopters of electronic trading. As we expanded into new regions and asset classes, it has been fascinating to see how dramatically our client base has evolved over the years. Early on, Central banks appreciated electronic trading’s ability to prove best execution and comprehensive compliance benefits. Since then, they have also diversified their trading activities, moving from government paper and bills to repos, supranational bonds and interest rate swaps, among other instruments.
Rob: Both Nawel and I have a long sales track record at Tradeweb. Initially, I covered multi-asset cross - client sales, before moving on to lead a team mainly looking after the hedge fund community. This has brought me full circle to my current role of Co-head of EMEA Sales, which focuses on asset managers, hedge funds, pension funds, insurance companies, corporates and bank desks offering the full suite of Tradeweb products.
How pronounced is the trend towards multi-asset trading across your clients and what factors have influenced that shift?
Nawel: Traditionally, trading desks within banks and financial institutions were focused on specific types of financial instruments, such as bonds or derivatives. However, the increasing interconnectedness of global markets and the demand for more sophisticated investment strategies have led to the emergence of multi-asset trading buy-side desks. Additionally, trading floors have shrunk over time, resulting in fewer people handling more tasks. Our clients are increasingly trading across multiple asset classes to maximise efficiency and effectiveness.
Rob: The trend towards multi-asset trading is very pronounced, particularly within the real money sector, which operates on a fee-based model. The availability of more financial information and the rise of passive funds have pressured these clients to demonstrate the value they provide, including through cost-cutting measures. As a result, having traders who can handle multiple asset classes has become crucial.
In Europe, the shift towards multi-asset trading has been driven by several factors. Regulatory changes, for instance those brought about by the MiFID II rules, have increased transparency and reporting requirements for financial instruments, giving them more visibility to the depth of liquidity available across markets. Regulation has also helped create a clearer division between portfolio managers and execution traders. Automation has significantly contributed to multi-asset trading desk execution by eliminating the necessity for buy-side line traders to specialize in single asset classes, thereby streamlining operations and enhancing efficiency.
Additionally, the low interest rate environment has prompted traders to seek diversified portfolios that combine yields from various sources, enhancing the attractiveness of multi-asset trading. On the hedge fund side, while multi-asset trading is increasing, it varies depending on the specific strategies of different pods, such as macro or relative value approaches.
How has the Tradeweb sales team adapted to the changing client landscape and how do you meet new demands and inbounds?
Rob: Initially, our client base mainly comprised real money clients, most of which were connecting via an OMS. Over time, our client network became more diversified to include central banks, sovereign wealth funds, hedge funds and bank desks, with the latter acting both as liquidity takers and price makers. To adapt, we have enhanced our real-time client service and integrated new products. For example, we have updated our tools and interface to accommodate various client environments, such as those that do not use a FIX setup. We have also developed solutions that include delivery through Excel, command languages (VBA) and, more recently, connectivity though Python API, and other bespoke integrations to meet our client demand.
Furthermore, we have built out more automated tools using data to help with dealer selection, and rules-based trading to provide efficiency. In aviation terms, rather than piloting the plane, heads of trading will act more as air traffic controllers, ensuring they have a variety of tools at their fingertips to call upon in different market conditions and investment scenarios, and being able to pinpoint when they need to deploy those tools.
Nawel: As technology has made clients more sophisticated, we have had to implement a more bespoke approach. There is an increasing demand for data consumption, such as transaction cost analysis and AI-driven insights. In response, we provide tailored solutions that help our clients stay ahead in a rapidly changing market, which includes automation tools, AI and machine learning workflows, and data-driven executions tools. Every single time, this has been done in collaboration with clients, understanding how each of them would like to work with us and, in turn, offering a white glove approach to working with their desks.
How has Tradeweb reacted and adopted to these shifts?
Rob: We take huge pride in the fact that we develop our platform according to our clients’ needs. Today, we support products such as inflation swaps, providing a robust tool for managing inflation-linked liabilities and investments with full STP compatibility and wide dealer coverage, enabling quick and efficient transactions. We also offer multi-asset packages, allowing traders to gain exposure to various markets from a single ticket, ideal for portfolio optimization across asset classes. Additionally, our swaps vs. futures strategy enables clients to hedge or take positions by trading as a spread between the swap rate and the implied forward yield of the cheapest to deliver (CTD) bond. Lastly, our non-contingent trading feature helps clients seamlessly link different markets within a single execution, facilitating smoother and more flexible trading strategies. Building these solutions together with our clients has been an exciting and rewarding process, and the end results have helped them navigate the complexities of multi-asset trading and global financial markets effectively.
Nawel: As Rob mentions, operating a multi-asset marketplace has been extremely advantageous in developing tools and products that address the needs of our clients in a constantly changing trading landscape. We see our clients using Tradeweb’s Cross Market trading tool to simultaneously trade two non-contingent legs of a spread trade, sourcing the best liquidity on both legs of the package. However, this theme of cross-market and cross-product adoption is not just limited to products, but also extends to the regions we cover.
We have opened offices in new regions to ensure we serve our clients to the highest degree. In Europe, our office in Amsterdam has helped us address regulatory frameworks associated with Brexit. We also opened a Paris office to remain close to our heads of desks, when we saw an increase in activity shifting to Paris from our banking clients, and we recently opened an office in Dubai to better cater to hedge fund growth in the Middle East.
The Future of Cross-Product Trading
We believe the future of cross-product trading is certainly not a static one. Instead, it will continue to evolve and expand, driven by innovation, market integration and client adoption. Tradeweb’s recent launch of a streamlined workflow that allows repo execution together with OIS Hedging is a great example of a Tradeweb cross-market trading protocol, which is designed to help clients manage risk and liquidity exposure across various financial products. By integrating this tool into our platform, we link different asset classes together, enabling clients to timely and efficiently hedge their positions. In terms of adoption, we have seen European interest rate swaps traded via Tradeweb’s Cross Market trading tool in Q2 2024 go up 100% in delta terms, compared to Q2 2023. Activity in European government bonds traded non-contingently over the same period was up 75% in delta terms, with an average daily traded volume in Q2 2024 of over 1bn Euros in notional.
The ability to quickly adapt to market changes and execute trades efficiently across multiple asset classes will prove crucial for financial institutions aiming to stay competitive in this dynamic environment. It is this innovation-first approach that guides us in developing our range of products across our rates offering, making Tradeweb the premier destination for Rates trading.
As the market continues to evolve, the adoption of cross-product trading strategies will play an increasingly important role in shaping the future of finance in Europe.
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