- MIFID II transparency is still falling well short of what the market needs.
- We can only estimate APA market share using a highly manual process.
- Our team have gathered data from the 5 largest APAs.
- We look at market shares across Sovereign Bonds.
Same old gripes
As we all know, MIFID II transparency is still falling well short of any definition of transparency. We will continue to gripe, moan and point out the failings until we see changes. In light of which, bravo to NEX for improving access to their data (we can now search by trading venue, the so-called “MIC code”). Hurrah! Hopefully any deal with CME will only serve to further improve transparency….!
The Fallback Solution – Hard Graft
So, in an effort to answer the most asked question so far – what is the market share of each APA? – we’ve manually collected data for a one week time period for the five largest* APAs.
*How do we know they are the largest? We don’t. But if you are only going to make “public” data available via proprietary data feeds accessed via physical lines into a data centre, then you aren’t making data public. And you should NOT need to have a relationship with a data vendor to access public transparency data. So I am afraid we have no choice but to ignore those APAs that do require this.
APA Market Share
For European markets, in cut-out and keep small multiples format:
First, let’s look at the data and how much work is involved to create four simple charts for five venues.
- How do we collect the data? In order of difficulty:
- Tradeweb – no option but to ask them directly. The data is therefore very old.
- Trax – we sit on the website at 9am Tuesday morning and wait for the deferred data to be published. We then manually copy and paste the 40 pages of data that is published, using a chrome browser extension that enables copy and paste on any website. This same extension does not work on the Tradeweb public website because the data is published as an image.
- Bloomberg – we have built the ability to collect minute-by-minute slice files.
- Nex – we can export the most recent trading day’s activity, per trading venue, into a file. Nice.
- Nasdaq – pretty much the only APA that really plays by the spirit of the law. Historic files are available to view, manipulate and export. They don’t even have any deferrals. This is true transparency and should be applauded as such.
And now let’s explain how you can actually make sense of the data:
- Remember all data is published by ISIN. ISINs remain useless for the largest OTC Derivative market – Swaps.
- We have therefore concentrated on Fixed Income (“Bond”) data in this analysis.
- To be clear, an ISIN gives no indication to which Asset Class it belongs. You must decipher an ISIN to make any sense of it!
- So collecting raw data is pretty futile as well. You must access some kind of ISIN database to make sense of it.
- How do we know an ISIN is a Sovereign Bond? For this analysis, we have relied on the ISIN description.
I cannot imagine any of this is what the G20 had in mind when thinking about transparency for markets after the financial crisis. Sure, you can pay for a Bloomberg or Reuters terminal and hope that they provide an APA aggregator. But you have to pay $2,000 a month for that privilege. That level of transparency has ALWAYS been available by becoming a data client of ICAP, Tulletts, BGC or Trads. I’m sure they would throw in some volume information as well at that price point.
Transparency is best achieved in markets when useable data is made freely available to the public – the prior examples in the US evidence this with TRACE for corporate bonds and Dodd-Frank for OTC Derivatives.
I’ll stop complaining now and turn to our findings:
Major Currencies – EUR, GBP, USD
- Tradeweb see much larger volumes than any other APA.
- Bloomberg are second, but see volumes of less than 50% of Tradeweb. Of course, you should read our analysis of Bloomberg APA and MTF data as well, because you really need to consider MTF data at the same time.
- NEX are the only other APA that see meaningful volumes in major currencies. I’m surprised that USD volumes are not much larger, given Brokertec is part of NEX and widely considered the largest IDB venue for UST trading. I guess most banks trading USTs use US entities exempt from MIFID reporting….? Shame. One day, we’ll have transparency in USTs!
Scandi Currencies – DKK, SEK and NOK
- This is a great example of where transparency is being introduced to very specific markets.
- And also highlights how specialised some APAs are.
- NASDAQ APA is by far the largest for these currencies, seeing nearly EUR2.5bn in notional reported over the week.
- The split by currency was surprisingly 50/50 DKK vs SEK, with no volumes in NOK.
- I always thought that the SEK bond market was much larger than DKK…..more like the TW split of volumes.
- Thanks to MIFID data, I’m always learning I guess….
CE3 Currencies – PLN, HUF, CZK
- Disclaimer – I used to trade these bonds!
- The data shows that Bloomberg are the largest APA for these reports, with over EUR3bn reported in a week.
- PLN is by far the largest bond market amongst these currencies.
- Reporting is divided amongst four of the five APAs.
Emerging “Europe” – TRY, RUB, RON
- The amazing thing about MIFID data (when you can get it) is how varied it is.
- We see Bloomberg reporting over EUR1bn notional equivalent across these currencies.
- TRY is much larger than the RUB market according to these figures.
In Summary – The League Table of APAs
- Majors – Tradeweb Number One with 62% market share.
- Scandies – Nasdaq Number One with 73% market share.
- CE3 – Bloomberg Number One with 45% market share.
- Emerging Europe – Bloomberg Number One with 42% market share.