Tag Archives: Tradeweb


TradeWeb Cashes In, Broker-Dealer Investors Cash Out via IPO

Bonds and Billions 3.0…Tradeweb Markets, one of the original electronic bond trading pioneers, which first introduced its dealer consortium platform in 1996, proved that patience is a virtue when it comes to monetizing enterprise value. The company raised $1.1billion via its Nasdaq-listed IPO yesterday (NASDAQ:NW). Illustrating investor attraction to owning a piece of the fintech company focused on fixed income trading, the company increased the number of shares they first planned to offer from 27.3 million to 40 million shares and upped the ante for the IPO price from a $24-$26 range to slightly north of $27. The IPO puts a $6bil valuation on the company–whose original investors include a consortium of broker-dealers.

Tradeweb CEO Lee Olesky photo courtesy of BRENDAN MCDERMID/REUTERS

Per snippet from Bloomberg News, Tradeweb intends to use proceeds to buy shares held by eight of the 11 large banks that own stakes in the company, including Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley and UBS Group AG, according to its registration statement filed with the Securities and Exchange Commission.

Tradeweb’s IPO is also the biggest for a financial services company in the U.S. since online lender GreenSky Inc. raised $874 million in May.

The offering follows benefits administrator Alight Inc.’s decision in March to postpone plans to raise up to $800 million in an IPO. Alight and Tradeweb are both owned by private equity firm Blackstone Group LP, which led the $17 billion acquisition last year of Tradeweb parent Refinitiv from Thomson Reuters Corp. Tradeweb, founded in 1996, builds and runs electronics markets for trading government bonds, derivatives, exchange-traded funds and other financial instruments over the counter. It handled an average of $549 billion in daily trades in 2018, according to its IPO prospectus.

Tradeweb posted net income of $160 million on $684 million in revenue last year.

As noted by Liz Hoffman of the WSJ, online venues are gaining ground in bond trading, digitizing orders that were once placed over the phone. At MarketAxess Holdings Inc., Tradeweb’s closest listed peer, trading volumes have more than doubled since 2014.

At $27, Tradeweb’s stock will list at about 30 times the company’s annual earnings. MarketAxess trades at nearly 50 times its earnings, while exchanges such as NYSE ownerIntercontinental Exchange Inc. fetch about 25 times their earnings.

JPMorgan Chase & Co.Citigroup Inc., Goldman Sachs and Morgan Stanley led the offering. Tradeweb will start trading Thursday under the symbol TW on the Nasdaq Global Select Market, according to the statement

Affiliates of Refinitiv will continue to hold about 54 percent of Tradeweb’s outstanding common stock, according to filings.

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TradeWeb Muscles Into ETF Execution Space

Fixed Income trading platform TradeWeb, best known for its dominant role administering OTC government securities trading between global banks and institutional customers is muscling into the world of ETFs. Tradeweb has just launched an electronic over-the-counter marketplace for trading exchange traded funds using a “request-for-quote” aka “RFQ”- based platform that is modeled after a platform Tradeweb successfully launched in Europe in 2012.

Tradeweb’s new U.S. platform is designed to be a fully-automated alternative to phone- and chat-based over-the-counter ETF trading of institutional-sized or less liquid orders. Tradeweb clients can use the platform to send RFQs to up to five dealers at a time, using either one- or two-way price quotes. The platform offers aggregated pre-trade price transparency from liquidity providers and National Best Bid and Offer exchange pricing. The platform can also seamlessly connect to third-party and proprietary order management systems, and risk management systems to enable market participants to fully automate workflows. There are now 11 leading liquidity providers on the platform, according to a company announcement.

In Europe, where ETF liquidity is relatively fragmented, Tradeweb’s platform has become one of the largest pools of ETF liquidity. The European platform supports more than 45 percent of OTC electronic trading and the platform’s daily volume exceeds €500 million (approximately $5.6 million) per day. In the U.S., ETF liquidity that trades on exchanges is more centralized, but Tradeweb’s platform is the first fully-electronic platform for trading institutional-sized or less liquid orders through dealers.

chris hempstead
Chris Hempstead, KCG

“The Tradeweb ETF platform offers a new channel for liquidity and enhances our suite of execution capabilities,” said Chris Hempstead, head of ETF sales for KCG. “The platform represents a novel approach to improving price discovery as well as an innovative way to execute larger-size trades, while reducing the risk of materially impacting pricing.”

Institutions were early adopters of ETF and now hold about 34 percent of U.S. ETF assets, according to November data from State Street Global Advisors and Broadridge. As institutional OTC trading of ETFs continues to grow, market participants say pre-trade transparency into institutional-sized liquidity, and more streamlined, automated workflows are a next step.

“Leveraging electronic solutions to streamline over-the-counter trade workflows is an important step forward for the ETF industry. The combination of a robust exchange traded marketplace with an electronic, transparent OTC market delivers institutional investors choice in how they access liquidity,” said Leland Clemons, managing director at BlackRock iShares.

Tradeweb clients in the U.S. will be able to use the new platform to access all U.S.-listed ETFs, including fixed income ETFs, as well as European-listed ETFs.

Electronic Trading of Corporate Bonds: Not All Rosy as TradeWeb Loses Leader Within Months of Joining

TradeWeb’s Raazi is out after short stint pitching the merits of electronifying the corporate bond market.

MarketsMuse.com has made more than a few mentions about the recent decade’s corporate bond-centric electronic trading platform initiatives and those being spearheaded by the latest generation of altruistic sell-siders, buysiders, and the assortment of those in-between. Today’s MarketsMuse post within fixed income and trading tech sections profiling the surprise departure of e-trading giant TradeWeb’s recently appointed leader of their e-corporate bond strategy is a story that illustrates that even the seemingly smartest folks in the room are encountering the same obstacles that have derailed all but a very short list of ‘innovators’ in the electronic corporate bond trading space. The rapid rise and more rapid resignation of TradeWeb MD Mehra “Cactus” Raazi, who was appointed to the inglorious bastard role of Head of Credit just months ago, leads the rest of us [who are old enough] to hum one of George Gershwin’s great tunes made famous by Fred Astaire and Ginger Rogers .. “Lets Call The Whole Thing Off..” Continue reading

Chapter 5: Electronic Corporate Bond Trading—Do I See a Chapter 6?

Same story, different day..’electronifying the corporate bond market’. . Folks have been looking for this Holy Grail for the past 20 years..That’s right..other than Bloomberg’s 1990’s system, a company named BondNet was the first to launch a web-based platform. That was an independent IDB platform created by some very innovative folks who got put into the penalty box when it was announced they would allow buyside managers to access it.Then Came Market Axess with their corporate bond offering (which was sponsored by a consortium of BDs and provided 2 different levels…one for the wholesale market (BDs) and the other for buyside…no need to guess why there were 2 levels of access…because there were 2 levels of prices displayed…Duh..that’s how the corporate bond market works, silly!

At the same time that BondNet and MarketAxess were getting their feet wet, TradeWeb was already in 2nd gear with their US Treasury bond offering…Great technology..great pioneers……Well, 20 yrs flash forward and TradeWeb..which had judiciously avoided going down a path that was full of torn limbs, is trying to steal corporate bond thunder from MarketAxess. TradeWeb’s focus is on the meat i.e. trade sizes of $1mil bonds and greater—while MarketAxess is somewhat stuck in the odd-lot land…not because they haven’t tried to get larger block orders, but because the culture of the corporate bond landscape is not friendly to trading blocks on a live screen… 

That said, the WSJ thought it only fair to give TradeWeb some publicity via a very complimentary profile their current capo di tutti…Here is the opening of that story:

Can one man drag corporate-bond trading into a new age, where others have failed?

Meet Mehra “Cactus” Raazi, a former salesman from Goldman Sachs Group Inc., who has been working to do just that at fixed-income technology operator Tradeweb Markets LLC.

The New York firm is counting on Mr. Raazi as the frontman for its new electronic bond-trading system, an effort to bring the corporate-bond world into the 21st century. It has charged him with drumming up interest among asset managers and hedge funds for a system it says will enable easier and cheaper trading in U.S. corporate debt.

While trading technology can be humdrum, Mr. Raazi is anything but. Tall and athletic, with chiseled features, a neat crop of salt-and-pepper hair and a taste for custom motorcycles, he sometimes sports an ascot with skulls on it or a leather wristband featuring silver skulls. He practices the combat sport muay thai and has a stake in a lower Manhattan late-night burlesque club, The Box, said people familiar with his activities.

“He comes off very polished,” said Michael Adams, managing director at Sandler O’Neill + Partners LP, who saw Tradeweb’s new platform in the fall.

Whether the new platform, and Mr. Raazi’s efforts to sell it, will succeed still is uncertain, according to traders and analysts. Tradeweb has been silent on any progress it has made so far.

That is despite investors calling for more efficiencies amid shrinking stockpiles of bonds at securities dealers. For years, electronic trading has remained a fraction of the $7.7 trillion U.S. corporate-bond market. Instead, much of the trading is done over the phone.

Only about 15% of corporate-bond trading in the U.S. between investors and dealers is conducted electronically today, up from about 8% in 2010, according to bond-platform owner MarketAxess Holdings Inc., which has the vast majority of that volume.

Appetite is rampant among startups, exchanges and others to find the magic formula that can boost that share of electronic trading, because of the vast sums to be made from becoming the dominant player.

As many as 18 new companies are in various stages of launching competing platforms this year in the U.S., according to researcher Greenwich Associates.

“We’re not coming at this thing with a crystal ball,” said Tradeweb’s Chief Executive Lee Olesky in a briefing with reporters in the fall. Mr. Raazi declined to comment for this article through a spokesman.

Tradeweb’s effort has powerful backers in the 11 banks that co-own the company, including four of the big U.S. bond dealers: Bank of America Merrill Lynch, Citigroup Inc., Goldman and J.P. Morgan Chase & Co.

But it faces significant headwinds, as shown by the failure of numerous recent bond-platform launches, including at least two previous attempts by Tradeweb in the U.S. Past efforts have foundered for a variety of reasons, including that old trading habits are slow to change.

Advancing the workings of corporate-bond trading is the latest challenge facing issuers and investors. A doubling of issuance volumes since the financial crisis has vastly expanded U.S. corporate-debt securities outstanding to $1.46 trillion at the end of 2014, from $707.2 billion at the end of 2008, according to the Securities Industry and Financial Markets Association. Yet liquidity, reflecting the capacity to buy or sell securities quickly at a reasonable price, has retreated, traders say.

Into this breach steps Mr. Raazi, who is 44 years old and was educated in California. In 2007, Goldman praised him for swiftly closing out $1.2 billion of bets against souring mortgage securities. In 2010, a Senate subcommittee probing banks’ role in the U.S. housing crisis released a March 2007 email in which a Goldman executive lauded Mr. Raazi’s timely trading. “Cactus Delivers” was the subject line.

For the entire article from WSJ, click here

Tradeweb to Launch European ETF “Trading Hub” with “RFP” model

Courtesy of IndexUniverse.eu Rebecca Hampson

The electronic trading platform for exchange-traded funds launched at the end of last month by electronic market place provider, Tradeweb, has been backed by ETF issuer, Source who says that it will create a central hub of liquidity in Europe, which the market currently lacks.

Michael-John Lytle, managing director at ETF issuer Source, told IndexUniverse.eu: “In Europe, US$3bn of ETF trades take place on-exchange daily.  This is much less than in the US where, on average, US$50bn is traded. This move has the potential to expose the other two thirds of European market flows which trade over-the-counter (OTC). Transparency can in turn encourage further liquidity and this is vital to a thriving and growing ETF market. Hence, it is a very exciting development.”

He said: “Liquidity in the European ETF market is very fragmented and this platform has the potential to capture a meaningful portion of OTC liquidity in Europe.”

Tradweb’s platform will allows buy-side firms access to 5,000 European-listed ETFs’ prices on request. Because of the transparent nature of the platform it is hoped that it will boost trading and encourage more market participants to join.

Lytle said: “The platform will facilitate large trades that would be challenging to execute on-exchange.  These OTC transactions are currently executed over the phone.  This platform will allow an investor to simultaneously collect prices from up to five market makers.  If it is successful, this will be a big step forward for the European ETF market.”

“Tradeweb already has 11 ETF market makers on board and a couple of dozen clients. It also has a tried and tested technology platform used widely in fixed income. Concentrating flows in one venue has the potential to centralise and expose a meaningful amount of OTC activity.”

“Any e-trading platform that requires multiple mouse clicks in effort to first source block liquidity, wait for responses for bids and offers, and then execute a transaction needs to be populated at the outset with credible and actionable liquidity, otherwise I’m still much better off relying on the new hybrid “high-touch/high-tech liquidity aggregators” who leverage technology and navigate the OTC market-maker ecosystem.”   Continue reading