[ I N D E P T H | E M E R G I N G M A R K E T S ]
Over time , as more of these sectors start getting traded electronically via different platforms the interest will continue to increase despite the fact that EM is lagging slightly behind developed markets .”
Of course , the extent to which e-trading is prevalent across emerging markets , and the processes which interact with it is yet to reach the same levels . Burke confirms that “ There has also been an increase of alternative liquidity providers within EM , specifically systematics and ETF providers . We ’ ve also seen an increase in portfolio trading activity in the market .”
He adds : “ Clients are turning to our protocols like request-for-market ( RFM ) to execute larger trades . During the recent volatility in early August , our RFM volume was up 103 %.”
“ Bank trading desks continue to add human and algo trading resources to the sector , and that paired with the increase in alternative liquidity providers is proving that EM can provide unrivalled liquidity .”
DAN BURKE , GLOBAL HEAD OF EMERGING MARKETS AT MARKETAXESS
When it comes to trading you must be acutely aware of what you ' re dealing with , and emerging markets require particular focus . The minutiae of each jurisdiction and region in question requires a thoughtful approach .
Speaking to the specifics when it comes to the actual trading itself , David Everson , head of fixed income trading EMEA at Liquidnet , explains : “ EM has always been an important part of our business as our dark pool protocol is well suited for trading those harder-to-trade names . If you look at the more illiquid bonds in the EM market , a dark pool is appropriate as you want to minimise information leakage and get trades done without leaving a footprint .
“ The EM market is so vast . If we consider the more liquid bonds in the EM market , it is full of potential . One of our protocols – Rebalance , our dealer-to-dealer electronic business – is suited for that . We see smaller trades in Rebalance while our dark pool is better suited to less liquid bonds and larger-sized tickets .”
Evidently , the emerging market fixed income sphere is trading . As Nooy adds : “ In our new issue trading platform , our primary trading protocol , we ' ve definitely seen a pick-up in emerging market issuance , which had been quite absent in the last year or two .”
For EM FI teams to be truly successful , what is required is comprehensive support in the form of efficient , up to date , and importantly innovative systems . It is a complex world which requires effective tools for risk management , data and information , to make the most of local processes and to take in relevant regulations and compliance requirements .
Paparella explains : “ This complex set of needs has naturally driven the growth of the vendor industry [...] In line with broader market trends , emerging markets benefit from innovative technology and platforms that enhance visibility and transparency . The increased availability of information is a game-changer .”
As a distinct asset class , EM fixed income is well positioned for a rebound as the investment community seeks alternatives offering higher risk and returns while maintaining appropriate levels of safety and transparency .”
As institutions demonstrably expand their remits through stronger teams and enhanced solutions , the message is clear – we ’ re getting ready .
This asset class is perhaps boundless , as the markets ( and governments ) in question continue to evolve and face increasingly unpredictable times . To maximise opportunities in the space , the time for preparation is now .
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