Bloomberg Study Finds Automated Fixed Income Trading Boosts Performance

NEW YORK, Nov. 13, 2024 /PRNewswire/ -- Bloomberg today announced the results of a study analyzing performance and execution costs for fixed income trades automated using Rule Builder (RBLD), Bloomberg's multi-asset automated trading solution. The research found that trades utilizing RBLD consistently outperformed manual workflows, pricing 5% more tickets and executing up to 15% more tickets within the Composite Bloomberg Bond Trader (CBBT) spread, also called CBBT-side*. The study also found trades using RBLD receive fewer dealer rejections and a lower number of no quote trade requests.

Improved performance can be attributed to RBLD's rapid response to market fluctuations and systematic approach to dealer selection and execution. A previous Bloomberg study found similar performance improvements when trade automation is applied to equity trades.

The study analyzed the performance of 5.7 million anonymized trades from Bloomberg's electronic trading systems, of which 1.6 million were RBLD trades, from USD, EUR, and GBP sovereign and credit markets. For sovereign markets, the study focused on bonds from the U.S., Great Britain, France, Germany, and Italy for sizes up to USD 10 million. In credit markets, the study looked at orders with ratings greater than BB- and trade sizes of less than USD 1 million. The study examined data from January 1, 2023 to April 30, 2024.

The study found the use of RBLD for European Government Bonds resulted in 15.3% more tickets inside CBBT-mid and 16.4% inside the CBBT-side on average. Similarly, for US Treasuries there were 4.4% more tickets executed within the CBBT-mid* and 6.8% within the CBBT-side. In credit markets, using RBLD resulted in a 3.9% increase within the CBBT-side. However, there was a 0.02% decrease in tickets executed inside the CBBT-mid, indicating that while there is benefit to systemizing the trading processes, traders are better at sourcing liquidity for difficult orders in opaque markets.

When comparing RBLD and manually executed trades, the findings show that RBLD's systematic approach to dealer selection and execution likely leads to better average prices than manually placed tickets. On average, for USTs and major sovereigns, RBLD had 2.8% and 4.0% fewer instances where the dealer did not provide a quote back. Similarly in credit markets, RBLD tickets had 2.0% fewer instances of no quote and moreover, 3.6% more tickets were priced, indicating that rule-based dealer selection chose more responsive dealers.

This can be attributed to user-created automated trading rules within RBLD, which enable rapid responses to changes in the market. This combines with methodical dealer selection and execution instructions, resulting in more trades executing within the CBBT spread when compared to manually routed orders.

"This is an exciting time for the fixed income markets as the adoption of automated trading accelerates, driving measurable results in the form of better performance and improved productivity," said Ravi Sawhney, Global Head of Buyside Execution Services at Bloomberg. "In addition to optimizing the trading process, Rule Builder provides clients with the ability to input rules directly on the Bloomberg Terminal or via API and deploy trading strategies to capitalize on fast moving markets."

RBLD is a multi-asset automated trading solution that offers buy-side execution traders a way to deploy and realize the benefits automation can deliver, including increased speed and accuracy in trading and allowing more time to dedicate to clients and complex workflows.

A full copy of the report can be found here.

For more information about Bloomberg's trade automation solutions, click here.

*The Composite Bloomberg Bond Trader (CBBT) provides a real-time composite price based on the latest executable contributions. Trading better than the side means executing within the spread (CBBT-side), while trading better than the mid means completing a trade better than the midpoint price of the spread (CBBT-mid).

About Bloomberg
Bloomberg is a global leader in business and financial information, delivering trusted data, news, and insights that bring transparency, efficiency, and fairness to markets. The company helps connect influential communities across the global financial ecosystem via reliable technology solutions that enable our customers to make more informed decisions and foster better collaboration.

For more information, visit Bloomberg.com/company or request a demo.

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SOURCE Bloomberg