Electronify investment: delivering repo to D2D and D2C markets
03 October 2023
Global head of BrokerTec John Edwards and global head of Repo Sara Carter speak to Carmella Haswell about the firm’s advances within the repo space since its acquisition by CME Group and how the team is expanding its platforms to remain at the forefront of electronification
Image: stock.adobe.com/idaline!
Since CME Group’s acquisition of NEX Group in November 2018, BrokerTec has been migrated to the CME Globex platform and has made significant investment to the technology and system architecture that now supports its products, in particular, the firm’s core dealer-to-dealer (D2D) platform relating to cash bonds and repo.
BrokerTec, a provider of electronic trading platforms and technology services in fixed income markets, has expanded its team with a number of key appointments over the past 12 to 18 months. The team brings knowledge from a variety of backgrounds including sales, trading, voice-broking, fintech and post trade.
In May 2023, Sara Carter joined BrokerTec, overseeing the continued development of the firm’s global repo business and the BrokerTec Quote platform.
The BrokerTec platform has recorded an increase in volumes over the past few years and, as BrokerTec works to provide additional offerings and expanded functionalities, it remains at the forefront of electronification of the repo market.
With the repo market recording strong organic growth over the past few years, CME Group’s global head of BrokerTec John Edwards indicates that BrokerTec will continue to innovate and develop new features as markets evolve.
“BrokerTec is the largest liquidity pool for repo in the D2D, cleared markets,” says Edwards. “Across our US, European and UK repo products, we transact over 30,000 trades per day, and more than US$750 billion in nominal repo volume. US repo volumes have been particularly strong over the last 12 months, as specials remain in demand in the current environment.”
Moving forward in repo
BrokerTec hosts three defining platforms which cover the D2D market via the central limit order book (CLOB) and the dealer-to-client (D2C) markets via BrokerTec Quote and BrokerTec Stream (for the cash market).
The BrokerTec CLOB is a D2D electronic trading platform that covers US, UK and European markets and has been available to trading clients for more than 20 years. Trading on an anonymous basis, clients can execute US treasuries, US repo, EU repo and European government bonds.
BrokerTec Quote is the firm’s D2C trading solution for the European and US repo markets, offering request for quote (RFQ) capabilities which aim to provide clients with an intuitive and efficient means of trading. This is complemented by BrokerTec Stream, a relationship-based streaming platform. Both Quote and Stream were launched within the last five years under CME Group ownership.
“Offering multi-modality execution services via RFQ, order books and streaming services allows us to cater for a diverse set of customer needs when it comes to execution in either repo or cash bonds. Providing tools and connectivity that brings these altogether then becomes a very interesting offering,” says Edwards.
The BrokerTec Quote platform is relatively young in comparison to BrokerTec’s activities within the D2D space. Nonetheless, the firm believes its experience will enable it to develop a wider network of opportunities on the D2C side, especially by leveraging synergies across the larger CME Group post acquisition.
“BrokerTec Quote has gone from strength to strength over the last 12 months,” says Sara Carter, global head of BrokerTec Repo.
“Not only are volumes significantly increasing, but we are also seeing a flurry of sell- and buy-side firms moving to the platform and partnering with us to move the business forward. We expect this growth to continue in H2 2023 as new functionalities and asset classes are brought onto the platform.”
A natural step in development
BrokerTec built Quote to increase liquidity within the repo market, enhance automation while also providing technology to reduce risk when conducting securities financing activity. It is an RFQ platform for securities financing transactions (SFT) within fixed income assets. It provides a full straight-through processing (STP) workflow from pre-trade to post-trade and is designed to meet the challenge with the best execution, manage lifecycle events and reduce settlement time.
The Quote platform also provides a ‘white-glove service’ — which enables the platform to ‘handhold’ sell- and buy-side queries at any point throughout the negotiation of the trade, development or onboarding.
Edwards adds: “As BrokerTec is the largest repo trading platform, it was a natural step for us to look at launching the D2C RFQ service on BrokerTec Quote. We have a network of international and regional banks over our order book and worked closely with these long-established relationships to finalise what Quote should look like. Under Sara's leadership, we are focused on capitalising on opportunities and delivering a streamlined repo service between both D2D and D2C.”
BrokerTec continues to develop the Quote platform to bring new features and products to market, working closely with buy- and sell-side participants to build out BrokerTec’s API solution for order entry, negotiation, lifecycle management and post trade. “We continue our innovative development with new markets and product features added across both 2022 and 2023. An approach which will certainly continue in 2024,” Carter says. “We continue to offer new asset classes in the Asian markets and will expand our white-glove service accordingly.”
Edwards adds: “We have a meaningful demand from a broad number of customers who want to trade additional new instruments as we expand our collateral availability and extend what they can transact via BrokerTec Quote.”
According to Carter, additional “big functionalities” are on route in this domain as the firm has recently gone live with a full suite of SFT transaction functionalities, including the addition of securities lending features. BrokerTec’s Axe Board feature is now live, which aims to reduce negotiation time and allow the sell-side to show positions to selected counterparts — buy-side clients are able to quickly turn into RFQs, Carter indicates.
She adds: “Alongside these functionalities — a key for the buy side and sell side is to manage their up and coming role positions. The first step of this is building a position management tool which is available on the platform.”
She continues: “Given the agile development sprints that we are able to conduct and the production timelines that we are working to, we can work with clients to ascertain their priorities and develop features while pivoting development where required to consider pressure from, for example, regulation.”
Discussing the firm’s new upcoming features, Carter says: “We have added €STR floating rate repo onto our CLOB platform. This is expected to go live in Q4 2023 and will be available across all European countries apart from Italy and Spain — having been only available in France previously.”
Edwards says that by operating on the CME Globex system — a premier electronic trading system providing global connectivity to futures and options across all asset classes — BrokerTec can differentiate its product offering as it seeks to bring correlated and adjacent products of interest to repo and cash bond traders. “Bringing CME Groups' wider products to BrokerTec customers is at the forefront with things like ESTR and SOFR Futures, but also looking to develop better pre trade analytics and order routing capabilities on the D2D platform. This is all about focusing on the value proposition and being able to offer our clients a unique and differentiated service.”
In November 2021, CME Group confirmed a 10-year strategic partnership with Google Cloud to accelerate CME Group's move to the cloud and transform how global derivatives markets operate with technology. Under the agreement, CME Group began to migrate its technology infrastructure to Google Cloud at the beginning of 2022 with data and clearing services, and will eventually move all of its markets to the cloud. Through this relationship, BrokerTec plans to develop additional new tools such as pre-trade analytics and market data products.
BrokerTec, a provider of electronic trading platforms and technology services in fixed income markets, has expanded its team with a number of key appointments over the past 12 to 18 months. The team brings knowledge from a variety of backgrounds including sales, trading, voice-broking, fintech and post trade.
In May 2023, Sara Carter joined BrokerTec, overseeing the continued development of the firm’s global repo business and the BrokerTec Quote platform.
The BrokerTec platform has recorded an increase in volumes over the past few years and, as BrokerTec works to provide additional offerings and expanded functionalities, it remains at the forefront of electronification of the repo market.
With the repo market recording strong organic growth over the past few years, CME Group’s global head of BrokerTec John Edwards indicates that BrokerTec will continue to innovate and develop new features as markets evolve.
“BrokerTec is the largest liquidity pool for repo in the D2D, cleared markets,” says Edwards. “Across our US, European and UK repo products, we transact over 30,000 trades per day, and more than US$750 billion in nominal repo volume. US repo volumes have been particularly strong over the last 12 months, as specials remain in demand in the current environment.”
Moving forward in repo
BrokerTec hosts three defining platforms which cover the D2D market via the central limit order book (CLOB) and the dealer-to-client (D2C) markets via BrokerTec Quote and BrokerTec Stream (for the cash market).
The BrokerTec CLOB is a D2D electronic trading platform that covers US, UK and European markets and has been available to trading clients for more than 20 years. Trading on an anonymous basis, clients can execute US treasuries, US repo, EU repo and European government bonds.
BrokerTec Quote is the firm’s D2C trading solution for the European and US repo markets, offering request for quote (RFQ) capabilities which aim to provide clients with an intuitive and efficient means of trading. This is complemented by BrokerTec Stream, a relationship-based streaming platform. Both Quote and Stream were launched within the last five years under CME Group ownership.
“Offering multi-modality execution services via RFQ, order books and streaming services allows us to cater for a diverse set of customer needs when it comes to execution in either repo or cash bonds. Providing tools and connectivity that brings these altogether then becomes a very interesting offering,” says Edwards.
The BrokerTec Quote platform is relatively young in comparison to BrokerTec’s activities within the D2D space. Nonetheless, the firm believes its experience will enable it to develop a wider network of opportunities on the D2C side, especially by leveraging synergies across the larger CME Group post acquisition.
“BrokerTec Quote has gone from strength to strength over the last 12 months,” says Sara Carter, global head of BrokerTec Repo.
“Not only are volumes significantly increasing, but we are also seeing a flurry of sell- and buy-side firms moving to the platform and partnering with us to move the business forward. We expect this growth to continue in H2 2023 as new functionalities and asset classes are brought onto the platform.”
A natural step in development
BrokerTec built Quote to increase liquidity within the repo market, enhance automation while also providing technology to reduce risk when conducting securities financing activity. It is an RFQ platform for securities financing transactions (SFT) within fixed income assets. It provides a full straight-through processing (STP) workflow from pre-trade to post-trade and is designed to meet the challenge with the best execution, manage lifecycle events and reduce settlement time.
The Quote platform also provides a ‘white-glove service’ — which enables the platform to ‘handhold’ sell- and buy-side queries at any point throughout the negotiation of the trade, development or onboarding.
Edwards adds: “As BrokerTec is the largest repo trading platform, it was a natural step for us to look at launching the D2C RFQ service on BrokerTec Quote. We have a network of international and regional banks over our order book and worked closely with these long-established relationships to finalise what Quote should look like. Under Sara's leadership, we are focused on capitalising on opportunities and delivering a streamlined repo service between both D2D and D2C.”
BrokerTec continues to develop the Quote platform to bring new features and products to market, working closely with buy- and sell-side participants to build out BrokerTec’s API solution for order entry, negotiation, lifecycle management and post trade. “We continue our innovative development with new markets and product features added across both 2022 and 2023. An approach which will certainly continue in 2024,” Carter says. “We continue to offer new asset classes in the Asian markets and will expand our white-glove service accordingly.”
Edwards adds: “We have a meaningful demand from a broad number of customers who want to trade additional new instruments as we expand our collateral availability and extend what they can transact via BrokerTec Quote.”
According to Carter, additional “big functionalities” are on route in this domain as the firm has recently gone live with a full suite of SFT transaction functionalities, including the addition of securities lending features. BrokerTec’s Axe Board feature is now live, which aims to reduce negotiation time and allow the sell-side to show positions to selected counterparts — buy-side clients are able to quickly turn into RFQs, Carter indicates.
She adds: “Alongside these functionalities — a key for the buy side and sell side is to manage their up and coming role positions. The first step of this is building a position management tool which is available on the platform.”
She continues: “Given the agile development sprints that we are able to conduct and the production timelines that we are working to, we can work with clients to ascertain their priorities and develop features while pivoting development where required to consider pressure from, for example, regulation.”
Discussing the firm’s new upcoming features, Carter says: “We have added €STR floating rate repo onto our CLOB platform. This is expected to go live in Q4 2023 and will be available across all European countries apart from Italy and Spain — having been only available in France previously.”
Edwards says that by operating on the CME Globex system — a premier electronic trading system providing global connectivity to futures and options across all asset classes — BrokerTec can differentiate its product offering as it seeks to bring correlated and adjacent products of interest to repo and cash bond traders. “Bringing CME Groups' wider products to BrokerTec customers is at the forefront with things like ESTR and SOFR Futures, but also looking to develop better pre trade analytics and order routing capabilities on the D2D platform. This is all about focusing on the value proposition and being able to offer our clients a unique and differentiated service.”
In November 2021, CME Group confirmed a 10-year strategic partnership with Google Cloud to accelerate CME Group's move to the cloud and transform how global derivatives markets operate with technology. Under the agreement, CME Group began to migrate its technology infrastructure to Google Cloud at the beginning of 2022 with data and clearing services, and will eventually move all of its markets to the cloud. Through this relationship, BrokerTec plans to develop additional new tools such as pre-trade analytics and market data products.
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