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Tradeweb – Best OTC Trading Platform for Institutional Investors


Tradeweb offers institutional investors access to a consolidated pool of liquidity for the entire range of US and European-listed ETFs. Adriano Pace, managing director for equity derivatives at the firm, reports that the request-for-quote (RFQ) platform saw activity in European ETFs reach EUR165 billion in 2017, an increase of 23 per cent on the previous year. The US trading arm, which launched in 2016, also saw significant growth, with trading up by 126 per cent and USD55 billion of notional volume.

“2017 was another very positive year for our ETF offering,” Pace (pictured) says. “Despite the lack of market volatility, growth figures have been very healthy.”

Pace believes that the platform’s increasing adoption by institutional clients is driven by several recurring themes, including the simplicity of the trading workflow. “The ability to send a trade enquiry to multiple dealers and to receive competitive pricing is another key platform characteristic. Each order may be different in terms of size, but on average, clients are achieving a saving of around four basis points against the exchange best bid/offer price.”

Pace says that Tradeweb is particularly focused on helping clients to select the dealers they should put in competition.

“How many and which ones are the key considerations,” he says. “We have developed pre-trade analytics and ways of optimising pre-trade transparency. One way is the ability for dealers to provide directional axes to clients, so they can pull up an ETF and see which dealers are interested in buying or selling it at that moment in time.

“Also, pre-trade transparency data available within the trade ticket helps inform the dealer selection process based on their historical performance in each particular ETF segment. For each one of those segments, we present this information to clients at the point of trading, and we’ve also expanded it to reflect not just their own activity, but that of the whole platform.”

There are currently 29 dealers providing European ETF liquidity on Tradeweb, and Pace says that this number is particularly valuable because different dealers tend to shine in different sectors or instruments.

Looking forward, Pace sees lots of momentum in the firm’s Automated Intelligent Execution tool or AiEX. The functionality allows buy-side execution desks to set parameters that systematically dictate how orders are directed and completed in a fully automated workflow. “There are certain clients who see the benefit of executing trades using pre-programmed rules tailored to their own strategies.”

This part of the business had come to represent 29 per cent of all European ETF trades by the end of 2017.

Pace says that asset managers can combine AiEX with their best execution policies under MiFID II, and in a manner that frees up a lot of buy-side desk time, so they can focus on higher touch trades.

“For instance, if they need a certain number of dealers to have quoted, AiEX will ensure that they get exactly that.”

Looking back to the high volatility of early February 2018, Pace says: “The most rewarding takeaway from that exceptionally volatile period was that the platform held up well. Higher volatility means higher volumes and we saw ours explode, while our clients were able to successfully complete their trades on a very consistent basis.” 

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