Tradeweb Markets, a global marketplace for electronic fixed income, derivatives and ETF trading, announced that Chinese onshore bond trading activity surpassed CNY 697 billion (USD 107 billion) since the launch of Bond Connect on July 3, 2017. More than 6,200 fully electronic CNY cash bond transactions have been executed on Tradeweb, the first trading link to Bond Connect, an initiative aimed at driving the electronification and internationalization of the Chinese bond market.
The addition of Chinese debt instruments in global fixed income indices is expected to create even greater demand for efficient, electronic trading in these markets, when global investors strategies incorporate China bonds in new ways. In preparation for index inclusion, Tradeweb has worked closely with CFETS, Bond Connect Company Limited and asset managers to facilitate pre-allocation of block orders in CNY bonds from mid-July 2018, which will allow investors to complete large transactions without incurring adverse market impact.
Tradeweb is also focused on further improving price discovery in Chinese bonds through the introduction of indicative pricing this summer. Moreover, the implementation of Delivery-Versus-Payment settlement, which will reduce counterparty risk for investors, and the clarification of tax collection policies will align Chinas bond market with its more mature global counterparts, thus spurring its adoption by offshore investors.
Tradeweb is well placed to accommodate the anticipated increase in investor demand for Chinese debt given our market-leading infrastructure, long-standing fixed income expertise, and extensive community of more than 2,000 institutions, said Lee Olesky, CEO of Tradeweb Markets. Our early involvement in the creation and launch of Bond Connect means we are uniquely positioned to deeply understand the specific requirements of Chinese bond market participants, and use our established client network and technology to further enhance their trading experience.
More and more clients are onboarding to Tradeweb to access Bond Connect, and our growth is a representation of the operational efficiencies this innovative program brings to institutional investors, said Li Renn Tsai, Head of Asia at Tradeweb. We are privileged to be working closely with Bond Connect stakeholders to further streamline investors electronic access to Chinese bond market liquidity, acting as a catalyst for greater efficiency and transparency.
Accessing the Chinese domestic bond market through Tradeweb will enable us to send a trade inquiry simultaneously to multiple dealers, which has the potential to improve the price discovery process, said Kenneth Topping, managing director, Goldman Sachs Asset Management. The end-to-end electronic workflow will allow us to achieve greater efficiency as it facilitates pre- and post-trade OMS integration.
Since July 2017, the first month of China bond trading on Tradeweb:
- The monthly average daily trading volume increased nearly fivefold to CNY 6.8 billion.
- Buying volume represented approximately 70 per cent of the overall CNY activity.
- The average maturity of CNY bonds more than doubled.
- The single most active day was June 11, 2018 with nearly CNY 9 billion in notional volume.
- The number of onshore market makers has increased from 24 to 34.
- Investors from the U.S., Europe, and Asia Pacific (including Hong Kong, Singapore, Taiwan, Japan and Australia) have traded on the platform.
Bond Connect was established by the China Foreign Exchange Trade System & National Interbank Funding Centre (CFETS) and Hong Kong Exchanges and Clearing (HKEX). Via the Tradeweb link to Bond Connect, investors can leverage disclosed request-for-quote (RFQ) protocol to improve price discovery, submit orders, and execute all 30,000+ bonds tradable in the China Interbank Bond Market (CIBM), including Chinese government bonds, local government bonds, policy bank bonds, financial institution bonds, enterprise bonds, corporate debt instruments and more.
