Credit Suisse has introduced what they claim is a new form of trading Cash U.S. Treasury securities and is making its product available to customers today. The product, Onyx Streaming, could be the first Treasury trading system that offers an alternative style of trading to the well-accepted Request-for-Quote method.
(Editor's note: This article has been updated to include an offering from a competing investment firm.)
Traditionally, electronic trading of U.S. Treasuries between dealers and clients has been executed using RFQ protocols in which clients manually request a one-sided price and wait for responses from one or more dealers.
Onyx Streaming mimics the equities, FX and futures markets in that it offers a two-sided market where a buy-side trader can see a price, click on it and the trade is executed, says Ryan Sheftel, head of electronic market making for global rates at Credit Suisse. He tells Advanced Trading that prices are firm, unlike in an RFQ environment.
"Execution is important, but it's the ease of execution is what people are searching for," he notes. "We are offering a two-way market. You can now see a price, click trade and you're done. This has not been available before in the rates market."
"This is one of those products when you see it, you wonder how come no one has created it before?" says Kevin McPartland, principal and the director of fixed income research at Tabb Group. "It's the way that the system is put together that makes it unique. The presentation layer is innovative. The bid ask spread changes based on the size of the trade just as it does in other markets," he explains.
The new product has been beta tested with several clients but it is now being made available to all customers through Credit Suisse' Prime Trade futures trading platform. Sheftel notes that this is the first step in distribution. He explains that the goal is to make Onyx Streaming available on many trading systems, in a similar way to how equity-trading products are distributed through access on many platforms. "We have every intention to expand to other platforms," he says.
Another trend Sheftel sees having an impact on the distribution of Onyx Streaming is that many of the more advanced institutions are looking to merge their equity and fixed income groups. As a result, he says, Onyx Streaming could be made available on some of the more traditional equity trading EMSs, if traders so desire.
Credit Suisse is targeting its current Treasury customers as potential users. However, Sheftel says there are probably many FX traders who don't trade Treasuries simply because they aren't traded electronically in a streaming fashion. Instead they focus on FX, equities and futures. Some of these traders could become more active in the Treasury Market now trading can be done in a similar way to those markets.
Why hasn't anyone done it to this point? McParland notes, "It could be a bit of chicken and the egg, where Credit Suisse is now offering a little more transparency as clients demand it, and soon others will follow suit." The Tabb Group analyst notes that "there are, in some cases, disincentives to providing transparency but we've gotten past that tipping point."
Sheftel acknowledges the demand and says that although to his knowledge this is a unique trading system, he has no doubt that other firms will create something similar, or potentially could be working on a similar product.
Update: According to representatives at Barclays Capital, Credit Suisse's Onyx Streaming is not the first platform to offer an alternative style of trading to RFQ; Barclays Capital has had a platform offering this type of service since 2007.
"BARX, Barclays Capital's electronic trading platform, has offered clients live, transparent, executable two-way 'click and trade' streaming prices on US Treasury securities since 2007," says Kristin Friel, a spokesperson for BarCap. She adds that the Barx solution "includes the Turbo Deal feature which allows a client to pre-load a trade size and then execute on a live streaming 2-way price for that size with a double-click."
The BARX FI platform is live with more than 300 clients.
When 15 Seconds Takes Too Long
Some of the demand is coming form the traditional rates traders, but also from traders in other markets that execute multi-leg trades. "They don't want to wait 15 seconds for their RFQ on the Treasury leg, and want to execute the Treasury leg in the same, simple and certain way they execute the FX or leg," Sheftel explains, though he emphasizes that RFQ is still a good option for trading in many of the other segments of fixed income and rates that are not as liquid.
McPartland was impressed with the demo, commenting, "Some of it is standard, ease-of-use stuff but the system also suggests that we are slowly getting a way from spreadsheet look of the trading system."
McPartland adds that the interface will feel familiar to today's tech-savvy traders. "It's almost more like a Web 2.0 feel, where it's not so old fashioned looking," he says. "We're so used to drag and drop everywhere else so why shouldn't that be true on the trading desk?"