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How to deal with a
billion-dollar
credit portfolio trade
Following the launch of the first portfolio trading protocol in
credit from Tradeweb earlier this year, Hayley McDowell breaks
down how these complex transactions are executed and
examines the rise of portfolio trading in credit markets.
L
et’s say a deal lands on a buy-side trader’s
desk. It’s a billion-dollar, market-moving, large
notional trade in aggregate consisting of a high
number of bonds in various sizes, some illiquid and
difficult to price. Where do you start?
Just a few years ago the go-to plan would be to trade
each bond, or CUSIP, individually. The process would
require finding the right counterparty, usually over
the phone, and ensuring pricing is accurate, a task
considered to be notoriously difficult, time consuming
and downright tedious. We’re talking hours of trawling
through spreadsheets, dozens of phone calls, and a
tonne of back-and-forth before the buy-side is able to
fully complete the transaction.
52 // TheTrade // Fall 2019