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Virtu and MarketAxess combine to offer global trading platform for ETFs


Electronic trading firms Virtu Financial and MarketAxess have launched a partnership to provide institutions with enhanced trading tools and access to global ETFs and fixed income securities. 

The partnership is expected to go live in the third quarter and includes the distribution of Virtu’s streaming eNAV ETF fair value offering.

John Keller, ETF Product Manager for MarketAxess, explains that Virtu’s recent purchase of ITG, who had previously acquired RFQ-hub, means that the new partnership can work with clients on a pre-trade basis with MarketAxess’ Composite+ algorithmic pricing tool and Virtu’s eNAV ETF fair value offering, through execution on Virtu’s RFQ-Hub and post-trade as well with Virtu’s suite of total cost analysis tools.

The resulting range of services will be more robust than Tradeweb or Bloomberg, Keller believes.

The eNAV ETF service is particularly interesting for him. “In less liquid asset classes, ETF market makers have a real challenge in trying to evaluate where the shares are trading against the real-time NAV of the ETF,” Keller says.

Equities trade electronically on exchange so there is always a quote available to be plugged into the NAV model. “The marketplace knows precisely where the market is trading for domestic equities but where markets are closed or if in fixed income, it’s more difficult.”

The partnership sees MarketAxess, which operates an electronic trading platform for fixed-income securities and provides market data and post-trade services for the global fixed-income markets, contribute via its algorithmic bond pricing engine, Composite+, which generates prices for upwards of 25,000 securities every 15 to 60 seconds.

“The partnership brings together our fixed income expertise with their fair value business offering a global and multi-asset, intra-day net asset value data business,” Keller says.

MarketAxess did consider setting up its own platform but the firm felt it made more sense to combine forces: “Especially with eNAV as we think clients will see it as truly differentiating.”

The new partnership will start in the US and then come to Europe and the plan is that it will go global.

MarketAxess has upwards of 1500 clients globally. “There are plenty of unique clients we are bringing to the table,” Keller says, and they come from traditional asset management firms, insurance companies, pension funds and hedge funds who are increasingly quite active in trading ETFs.

“ETFs are becoming a beta investment tool, which are accessible and employed by most institutional asset managers,” Keller says.

“The ETF market is only going to continue to grow and we want to be able to offer ETF trading to our clients so we feel there is plenty of growth in the space and believe eNAV is quite unique and should be attractive to most participants in the ETF eco system.”

Fixed income ETFs have lagged equities in terms of assets under management but that is beginning to change. Keller says: “We are seeing more of our traditional bond trading clients trading ETF shares, some of them off the equity desk and some off the fixed income desk. ETFs are a beta investment tool that bond portfolio managers see the value in. We think that looking down the road bond desks are going to want to have all these different tools at their disposal.” 

eNAV’s strength lies in the fact it allows clients to compare apples with apples when trading similar ETFs, Keller says.

“If a client wants to trade a high yield ETF, they know they can trade HYLB, HYG or JNK, three of the larger high yield funds but all three have different pricing providers for their funds and if a client is trying to work out which one is the cheapest it’s hard to compare on an apples to apples basis but eNAV allows them to do that as we will be using the same pricing source and NAV framework.”

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