[ A D V E R T O R I A L ]
Determining
execution quality for
corporate bonds
Constantinos Antoniades, global head of fixed income at Liquidnet,
discusses the firm’s place in the current market structure and
the next frontiers of innovation in corporate bonds.
I
n the new landscape that has
emerged as a result of the in-
dustry drive to make the corpo-
rate bond market more efficient,
Liquidnet has developed a unique
value proposition for its members.
First, it has become one of the
largest pools of buy-side liquidity
in the world in less than four years,
with more than $20 billion in
average daily liquidity 1 . Second, it
has achieved critical mass with 925
users from more than 360 firms
since launch. Third, Liquidnet
has helped address the larger size
liquidity challenges by aggregating
significant buy-side block liquidity,
with an average trade size of $5.4
million in June. Last but not least,
Liquidnet has worked to help its
members save transaction costs,
directly impacting performance; an
independent study conducted by
IHS Markit showed that executing
a trade on Liquidnet with another
buy-side firm saves on average 87%
of transaction costs 2 , when com-
14 // TheTrade // Autumn 2018
pared to the best price available in
the IHS Markit dealer price feed.
How is MiFID II changing the corpo-
rate bond landscape?
Constantinos Antoniades: MiFID
II places significant emphasis on
best execution policy and process,
as well as raising the relevant
obligations on asset managers. Post
MiFID II, asset managers need to
demonstrate a process by which
they can deliver the best out-
come to their investors, with best
“TCA is not meant to
replace best execution,
but it helps asset
managers craft a better
best execution policy.”
execution being a dynamic policy
subject to on-going validation and
periodic adjustments. When craft-
ing and adjusting best execution
policies asset managers must take
into account, among other things,
observed execution quality, access
to electronic liquidity, changing
market conditions, and changes
in their business mix over time.
The combination of policy and
process does not necessarily mean
achieving the best price for every
single trade, but it should consti-
tute a framework by which the best
outcome is consistently delivered
to investors over time.
This becomes more interesting
once you start seeing the new best
execution framework through
the prism of alpha generation, as
opposed to merely a box-ticking
exercise. We have already seen
a number of asset managers that
have crafted best execution policies
that help them deliver additional