Curated News
By: NewsRamp Editorial Staff
May 02, 2024
Analyzing Execution Quality in Portfolio Trading
TLDR
- Dealers have become more competitive in pricing their baskets, allowing clients to trade closer to the market mid, potentially gaining better prices.
- Execution quality is measured through bid/offer spread, with %BOS trending around 40-45% which reflects an improvement in execution quality over the last couple of years.
- Understanding the factors influencing execution quality in portfolio trading can lead to unlocking more liquidity at better prices, benefiting the overall markets.
- The closer a portfolio trade is to an ETF, the easier for dealers to hedge and price the basket, potentially leading to better execution quality.
Impact - Why it Matters
Understanding the trends and factors influencing execution quality in portfolio trading is crucial for investors, traders, and industry professionals in the U.S. credit markets. The analysis provides insights into how portfolio construction and market-driven factors impact trade execution, allowing clients to gain further insight into what drives execution quality and fine-tune portfolio trade construction, potentially unlocking more liquidity at better prices.
Summary
U.S. credit portfolio trading (PT) volumes have grown significantly over the past few years, with record volumes recorded through the first quarter of 2024 across the market as a whole and on the Tradeweb platform. As usage of the protocol evolves and new use cases arise, we continue to monitor the critical trends in portfolio trading and how they are impacting U.S. credit markets today. This analysis explores one of the key drivers of the portfolio trading evolution: execution quality, focusing on the transaction cost and the role of pre-trade data. The importance of reliable pre-trade data has become an increasingly critical component in global credit markets, relevant in portfolio trade construction and market factors. The analysis shows that portfolio composition and market-driven factors are essential in predicting a range in which a basket might typically trade, and how Tradeweb has integrated these findings into their new pre-trade analytics for portfolio trading.
Source Statement
This curated news summary relied on this press release disributed by News Direct. Read the source press release here, Analyzing Execution Quality in Portfolio Trading
