Tradeweb: Best ETF Platform – 2020 was full of extremes says Tradeweb’s Head of Equities (Europe) Adriano Pace (pictured), with the unprecedented volatility in the early part of the year and then the market rally through the second part, as news of Coronavirus vaccines and the US election results came in.
“Whenever we have these big knee jerk reactions in either direction, we tend to see tremendous volume going through the platform,” Pace says. For Tradeweb, it was a very good year. With notional volume reaching over EUR470 billion, an increase of 30 per cent from 2019, and 87 per cent compared with 2018.
In terms of the number of trades conducted through the Tradeweb European ETF platform, the increase from 2019 to 2020 was 41 per cent.
“We continued to see large block trades going onto the platform, and the feeling is that investors are getting more and more comfortable with trading large blocks of ETFs in this request-for-quote (RFQ) environment,” Pace says.
Tradeweb’s automated intelligent execution (AiEX) tool, which allows traders to fully automate transactions via their own pre-programmed parameters, also saw growth. In 2020, 72.4 per cent of all European ETF trades were conducted via AiEX against 65.4 in 2019.
“What we are seeing is that, even as the volumes are growing, the proportion of AiEX trades is rising at a steady rate,” Pace says. “This shows that institutional investors are happy to use a trade process that they trust, without actually seeing the trade go through.”
Newer functionalities on the system are also encouraging client confidence, he believes. For instance, the time-release feature has proved very popular. Pace explains: “Customers send an order into Tradeweb with an exact time of day that they want it executed, which can be outside their own time zone. It is still using automation, but it has a particular tag that holds the order to a specific time.”
Traders tend to use the feature when they want their orders to be completed at the market close or when a fund is formally valued. “They trust the system, so they send the order now and execute at the appropriate time.”
Another recent AiEX enhancement is the Rules by Size option. “Rather than just having one blanket set of rules, clients can now have different trade size buckets and apply different rules for each one,” Pace says. “It’s a more flexible workflow, and rules can be reconfigured whenever they want. Unsurprisingly, this functionality has gone down very well.”
Pace has also noticed an increase in appetite for ESG ETFs, particularly demonstrated by Tradeweb’s Switch tool.
“We have most definitely seen higher trading activity in ESG funds as we have genuinely seen a lot of switches, with clients selling the original non-ESG ETF and buying the ESG version,” he says.
During a switch transaction, competing liquidity providers are asked to quote at the same time for all of the items in the enquiry.
“From a risk point of view, the two versions are not going to be a million miles different from each other; one reduces exposure to some companies and increases to others,” he says. “The best way to do that trade is to ask the liquidity providers to show a bid on one side and an offer on the other, and Tradeweb works out the best price. So, if you win one you will win the other, which makes it a smoother process with less market risk.”
Adriano Pace, Head of Equities (Europe), Tradeweb
Adriano Pace is a managing director at Tradeweb, head of Equities (Europe). Since joining the firm in 2010, Adriano has been instrumental in developing and running the equity derivatives and European ETF client-to-dealer platforms. After starting his career with a three year spell on the equity futures and options desk at Union Bank of Switzerland, he moved to Credit Suisse First Boston where he became a director in the equity derivatives division. Then, as a director of the global equity derivatives desk at Deutsche Bank AG, Adriano was responsible for the sales coverage of UK institutional clients in all flow derivatives. In 2006 Adriano joined consultancy ‘lucidate’ and was responsible for financial training in the areas of derivative markets, derivative and volatility products, fund management trends and portfolio strategy.