One year after launching a credit algorithmic trading platform for investment grade corporate bonds, Credit Suisse has extended its scope to high yield, bringing some 1,000 dollar-denominated bonds into the orbit of CSLiveEx. Over time it could bring the same technology to the European market.
Algorithmic trading came to the bond markets later than other asset classes, only really developing in the last four years or so. Corporate bonds in particular are an area where voice has stayed dominant, a reflection of their complexity compared to equities or currencies, or even government debt. But this dominance varies hugely according to size. In the investment grade corporate bond space, only about 20% of the market by volume is electronic; by number of tickets, it is more like 98%.
It's no mystery why electronic is the preserve of small trades: voice broking is still the preferred way of shifting a big position without blasting your intentions out to the broader market. But that volume/ticket discrepancy also highlights the huge inefficiency at the smaller end of the market: after all, it takes much the same time and effort for a credit desk to price a $5 million trade as it does to execute a deal one-tenth of that size.
