After bottoming out at 31% in the midst of the global financial crisis, the share of overall U.S. Treasury trading volume executed electronically climbed to 48% in 2014, according to a new report, Platform Providers Battle for Share as e-Trading Grows for Rates Products, from Greenwich Associates. That share is likely to top 50% in short order given the fact that four out of five institutional investors have now embraced electronic trading for at least some portion of their Treasury trading business.

The short-term fixed-income market, which consists primarily of commercial paper and U.S. government debt with maturities of less than two years, experienced a similar falloff in e-trading activity during the crisis, but hasn’t recovered as quickly. After peaking at 42% in 2008, the share of short-term fixed income trading volume executed electronically now stands at 30%.

Bloomberg and Tradeweb Dominate
For both U.S. Treasuries and short-term debt, Bloomberg and Tradeweb dominate dealer-to-client electronic trading. Competition for this market segment has been particularly fierce between the two in the past few years.

They are evenly matched in market share, with Bloomberg pulling slightly ahead in terms of market penetration. Bloomberg has worked aggressively to improve its platform and educate its 300,000 terminal customers that they can trade Treasuries electronically at no additional charge. Tradeweb is not standing still either, continuing to upgrade its platform and provide high-touch service to its traditionally real-money client base.

“Looking ahead, with dealers re-evaluating how and how much liquidity they provide to clients, and investors putting ever more focus on best execution, a continued examination of trading venues and protocols is inevitable, and we expect dealer-to-dealer platforms to slowly enter the client-execution space as well,” says Kevin McPartland Head of Research for Market Structure and Technology at Greenwich Associates.