Market Trends Demonstrate Importance of Technology

Today, we welcome Michael Grieci, Managing Director, Product Strategy and Marketing for Ipreo.

Recently, Michael has observed trends in the U.S. investment-grade primary market, and we’re happy to share his perspective.

Market Trends Demonstrate Importance of Technology

While the continued growth in U.S. fixed income market volumes is widely reported, the actual number of transactions executed tells a more interesting story. This metric has actually trended lower over the past five years, which means the average size of each deal has grown. This has important implications for the way transactions are executed.

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Larger deals typically mean more tranches and more investors, which results in greater volumes of communications between market participants. Further, the time taken to produce a reconciled order book between the banks has increased. These elements are further exaggerated when multiple large deals are run simultaneously.

Within this backdrop, the underwriting banks are keen to ensure they consistently demonstrate to issuers a capacity to manage these intraday workflows, alongside their traditional responsibilities of timing, pricing and distributing a deal properly, all while minimizing risk.

Electronic solutions are not new to the U.S. fixed income primary markets. For years, we’ve been bringing efficiency to all market participants of the new issue deal lifecycle from start to finish for multiple asset classes. But a recent development indicates how banks are benefiting from even greater use of technology.

Over the past year, momentum has grown where most investment-grade new issues in the U.S. are now being run over Ipreo’s IssueNet service, which helps the syndicate desks by matching orders in real time and significantly reduces the need for lengthy syndicate calls. This aligns the market with the workflow practices of Europe and Asia where IssueNet has been a market staple for many years.

The increase in U.S. IssueNet activity has been significant. With 66 unique syndicate banks now utilizing the tool in 2017, this is a four-fold increase from 2016. Similarly, the number of IssueNet deals in the U.S. has soared past the 300 mark, with a total executed volume of $504.7bn after five months. In May, IssueNet deal activity represented 82% of the U.S. countable investment-grade market.

Bringing the market together is at the heart of what we do. It’s been in our DNA for decades, as we have helped facilitate new issue deals through workflow technology, enhanced data and the creation of a global new issuance community.