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Tradeweb – Best OTC Trading Platform for Institutional Investors


Tradeweb enjoyed record-breaking activity across products in 2018, and exchange-traded funds were no exception. Notional volume executed in European ETFs reached EUR251.5 billion, an increase of 52 per cent over 2017, while activity in US ETFs grew by 94 per cent up to USD106.9 billion.

Meanwhile, the number of institutions trading ETFs rose by 17 per cent in Europe and 29 per cent in the US. “We had another great year,” says Adriano Pace (pictured), head of equities, Europe at the firm.

“Whereas in previous years we concentrated on developing several new technology features and preparing for MiFID II, we feel that our platform is now more mature and deeply ingrained in the European ETF ecosystem.”

Pace explains that more recently the development focus had shifted onto optimising trade counterparty selection and enhancing execution workflow efficiencies. One major trend last year was the increased adoption of AiEX, Tradeweb’s Automated Intelligent Execution tool, which allows buy-side clients to send in their trade requests in a completely automated process.

Clients leverage their existing FIX connectivity with Tradeweb to manage trading workflows through their OMS, using a set of more than 50 parameters. At the start of 2018, approximately 29 per cent of European ETF transactions were completed via AiEX, a figure which had climbed to over 40 per cent by December and still continues to rise. 

The tool enables trading desks to increase their speed to market and to reduce both cost and operational risks, while also allowing them to concentrate on larger and more complex trades.

Pace adds that Tradeweb is the only ETF platform in the RFQ space offering this type of automated workflow. “The parameters are completely predetermined. They cover pricing, size, counterparty selection and timing, among other settings.” 

Last year’s volatile markets also helped Tradeweb’s growth rate, as institutional investors used ETFs more broadly and actively. The other big driver was MiFID II, which Pace describes as ‘particularly beneficial for the ETF market’ as every single trade has had to be reported since 3rd January 2018.

“MiFID II has increased investor confidence in the depth of the ETF market,” Pace says. “It’s an important point because before you could only see the liquidity on exchange. It’s helped us because clients are more confident of executing large trades electronically.”

Another development Pace has observed over the previous year is that while Tradeweb’s client base for European ETFs has traditionally comprised institutional investors, engagement with retail type participants such as retail aggregators, wealth managers and robo-advisers is significantly on the rise.

He also reports the first signs of substantial momentum within Asia, with local Asian ETF clients beginning to consistently use the RFQ platform to conduct their business.

“However, it is the quality and certainty of execution that we pride ourselves on,” Pace says. “By trading European ETFs on Tradeweb, clients were able to save an average of 4.2 basis points against the order book on the Exchange, and that saving has been steady since the platform launched in 2012.”

“Dealers are being put into competition through the RFQ platform and for them to win, they have to be aggressive enough to beat competitors, which leads to an overall tightening of the spread,” Pace concludes. n

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