July 27, 2021 | Stamford, CT — Portfolio trading volume in U.S. fixed-income markets jumped 159% over the past two years as both buyers and sellers began taking advantage of the potential for efficiency gains, price improvement and other benefits. 

“Currently, portfolio trading accounts for about 3-5% of overall U.S. fixed-income trading volume,” says Kevin McPartland, Head of Research in the Coalition Greenwich Market Structure and Technology group and author of Making the Case for Portfolio Trading. “However, given the rapid improvement in technology, tools and access, we believe portfolio trading could grow to 8-10% of the market over time, depending on market volatility and other macro conditions.”

Investors appreciate portfolio trading for its efficiency and ability to provide price improvement. Coalition Greenwich research shows that 72% of portfolio trades in 2020 achieved price improvement over the prevailing evaluated mid-price. 
In the near-term, compliance concerns represent one of the biggest speedbumps for portfolio trades as the marketplace works out how to assess and prove best execution in fixed-income portfolio trades. However, given continuous improvements in trade cost analysis (TCA) and data analytics, and other technology innovations, it should not take too long for markets to address these compliance issues. 

“The more important limit on portfolio trading growth is that portfolio trades are not the best fit for every organization and every trade,” says Kevin McPartland. “Instead, it will become another tool in the toolbox, and market infrastructure providers will offer solutions that make it more obtainable for the masses.”